Energy Prospectus

Opening Prices;
> WTI is up 94c to $40.16/Bbl, and Brent is up 94c to $42.23/Bbl.
> Natural gas is up 1.9c to $2.634/MMBtu.

Notes below are from Aegis Energy
Crude Oil
Oil prices rose Tuesday morning on growing optimism for more U.S. fiscal stimulus and the return of President Trump to the White House
Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi will resume talks on Tuesday on another round of pandemic stimulus
Trump returned home from Walter Reed where he will continue to recuperate after his COVID-19 diagnosis last week sent markets roiling
Libyan oil production rises to 290 MBbl/d (Reuters)
Libya has reopened the Marsa El Hariga, Brega, and Zueitina terminals, though damage sustained during the shutdown may prevent the terminals from operating at full capacity
Production rose 20 MBbl/d from last week, as exports have ramped up, with the October export total estimated to be near 3.8 MMBbl this month
The National Oil Corporation said it would only resume operations at oilfields and terminals the rebel militants have vacated

Natural Gas
Hurricane Delta upgraded to Category 2 as it nears Mexico, U.S. Coast
The hurricane is forecasted to strengthen, reaching a category three by the time it makes landfall
Hurricane Delta will likely make landfall in the U.S. somewhere between Louisiana and the Florida panhandle by Friday
Delta would be the fourth hurricane to strike the Gulf in 2020, and the 10th storm to hit the U.S. It’s also this year’s 25th named system, only the second time that mark has been reached in records going back to 1851
Cameron LNG loads its first vessel since shutdown caused by Hurricane Laura (Bloomberg)
The SK Audace vessel left Cameron on October 5, 2020, with an increased draft, signaling it was loaded with LNG
Flows to the Cameron LNG have increased, from 150 MMcf/d on October 5 to 440 MMcf/d on October 6
Total U.S. flows of LNG are forecast to be at around 7.77 Bcf/d < LNG exports ramping up at the same time winter approaching.
Prices at Henry Hub were up 7.3%, or 17.7c yesterday, settling at $2.615/MMBtu. JKM prices were up 2.5c (0.5%), settling at $5.050/MMBtu, while the TTF prompt-month contract was up by 13.7c (3.1%), settling at $4.606/MMBtu
Natural gas for 2021 is only $0.07 shy of $3.00 observed a month ago – a multi-year high
The sharp $0.09 rally in the strip Monday helped recover most of the $0.13 loss booked last week
2021 will be a interesting year for the gas markets. We expect a very tight S&D early in the year and expect gas production to be mostly flat as oil-directed shale plays have reduced activity
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Bloomberg -- Oil advanced to the highest in two weeks as Hurricane Delta heads toward the energy-producing Gulf of Mexico region.

Both U.S. benchmark crude futures and gasoline futures climbed over 4% on Tuesday. Hurricane Delta is forecast to become a Category 4 and is expected to move through the U.S. Gulf before hitting Louisiana. Companies in the region are preparing for the storm and Bristow Group began to remove workers from oil and natural gas platforms.

Meanwhile, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will resume talks on Tuesday on another round of pandemic relief funding, boosting the prospect for energy demand to also improve. Still, Federal Reserve Chair Jerome Powell warned of a weak U.S. recovery without sufficient government aid.

“Gasoline is higher because of potential for an increase in demand,” and the rally “is driving crude oil with it to a certain degree,” said Bob Yawger, head of the futures division at Mizuho Securities. At the same time, while the storm may end up disrupting refiners that contribute to demand for crude, “the knee-jerk reaction is to the likelihood of rigs and production being shut down in the gulf.”

Crude was swept up in a broader market rally Monday and was aided by a strike in Norway that has shut fields and is curbing flows. Still, the outlook for global oil demand remains patchy with stricter lockdowns coming into force in parts of Europe. Germany’s new coronavirus cases jumped the most since mid-April and Italy’s government is set to order stricter rules, including a decree that masks be worn outdoors.

“The rally today is a continuation of yesterday’s bounce-back, which was built on a trifecta of bullish factors,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. That includes “the rapid recovery of President Trump, the strike in Norway’s oil sector and improved technicals as oil’s price moved back to its 100 day moving average.”

Moves in the oil futures curve were more circumspect on Monday, signaling underlying weakness. The nearest timespread for Brent, which helps gauge the health of the market, gained only 1 cent and later contracts remain more expensive than nearer ones, showing oversupply. There have also been a flurry of options trades that would profit a buyer from lower prices in recent days.

With a storm heading toward the U.S. Gulf attention is once again focusing on American oil balances. The American Petroleum Institute will release its weekly oil inventory update later Tuesday, while U.S. government data will be published Wednesday.