Energy Prospectus

Opening Prices:
> WTI is up $1.40 to $54.95/Bbl, and Brent is up $1.45 to $57.80/Bbl.
> Natural gas is up 13.6c to $2.986/MMBtu.

Aegis Morning Notes
Crude Oil

WTI touched $55/Bbl in overnight trading for the first time in over a year

OPEC Joint Technical Committee paints bullish outlook in yesterday’s meeting
January OPEC production comes in below estimates as turmoil in OPEC nations disrupts output

OPEC+ Joint Technical Committee estimates global stockpiles will go below the five-year average in 2Q2021 < This the PRIMARY DRIVER for crude oil prices.
The committee estimate that global oil stockpiles will diminish at an average rate of 1.1 MMBbl/d in 2021
The JTC estimates assume that OPEC+ production will rise by 0.5 MMBbl/d each month from April to June
OPEC’s output increase was smaller than expected in January, with Bloomberg reporting that output only increased by 190 MBbl/d, in contrast with the planned hike of 250 MBbl/d
Disruptions in Nigeria and Libya were primarily responsible for the lag
OPEC output from OPEC 13’s members averaged 25.6 MMBbl/d in January, according to Bloomberg

China demand growth is poised for a slowdown (Platts)
China’s crude demand growth to slow in 2021
After importing 10.86mmbbl/d of crude, a growth of 707mbbl/d in 2020 and a 7 percent y-o-y growth rate, analysts do not expect this growth to continue with prices rebounding and few plans for capacity growth (Platts)
China’s crude storage hit record highs in 2020, touching over 940mmbbl

Natural Gas

Natural gas prices continue bullish price action on Tuesday morning with the March contract up 13c to nearly $3.00/MMBtu
Weather models showed another round of strong demand gains over the past 24 hours with the GFS ensembles gaining 50 HDDs (~100 Bcf) while the European gained 31 HDDs, according to Commodity Weather Group. The variety of models are now in better agreement which gives the cold forecasts better validity
To better understand what the weather pattern is doing go to https://www.weatherbell.com/premium/ and watch the Saturday Summary.

The Summer 2021 strip (Apr-Oct) at $2.95 is the highest since November 2
The Winter 2021/2022 strip (Nov-Mar) at $3.12 the highest since November 13
Prices are as of 6:45 AM

China edged out Japan as the top destination for U.S. LNG in January for the second month in a row (Platts)
The flurry of vessels heading to China came amid record-high Asian spot prices even as the Panama Canal had delays
Deliveries last month of 14 cargoes (~36 Bcf) to China tied China’s December number as the most cargoes ever delivered from the U.S. in a single month to one country
LNG arbitrage for early February show incentives for U.S. LNG to flow toward Europe versus Asia right now, especially with Canal constraints, according to Platts

Chart Of The Day: This Trading Pattern Shows Oil Is Heading Toward $60

https://www.investing.com/analysis/char ... -200557874

Global Economy rebound is another big key to oil demand

OPEC crude production increased in January, according to a Reuters survey, with the group producing 25.75 million barrels per day, up 160,000 bpd from December.

However, this growth was smaller than had been expected, and indicated that these top producers were showing some restraint, despite higher prices, after they had agreed earlier in January to ease supply curbs further.

Earlier Tuesday, OPEC's Joint Technical Committee stated that world oil demand is likely to have decreased by 9.72 million bpd in 2020 but is expected to increase by 5.60 million bpd this year.

Growth data from the eurozone, released earlier Tuesday by the European Union's statistics office Eurostat, showed that the region’s economy contracted less than expected in the fourth quarter of 2020 amid pandemic-induced lockdowns.

While Eurostat sees a steeper decline in the first quarter of this year, the European Union predicted a surge in the domestic supply of Covid-19 vaccines during the second quarter, thus increasing the potential for a sharp rebound in growth.

The U.S. reported 4.0% annualized growth in the final quarter of 2020 last week, while China’s GDP expanded 6.5% in the fourth quarter of 2020.

NOTE from the Oil & Gas Journal webinar: Israel has the highest percentage of their population that has received both doses of the Covid-19 vaccines and they are reporting a significant decline in Covid-19 cases.

Closing Prices:
> WTI prompt month (MAR 21) was up $1.21 on the day, to settle at $54.76/Bbl.
> NG prompt month (MAR 21) was down $0.005 on the day, to settle at $2.845/MMBtu.

There has been a "Paradigm Shift" in the Wall Street Herd. One of the Leaders of the Herd, Goldman Sachs, comes out on Sunday and pushes up their $65/bbl Brent forecast from December, 2021 to July, 2021. Today Morgan Stanley increases their 2H2021 Brent forecast to $60/bbl and says that "we recognize prices may overshoot".

MY TAKE: Every major oil price cycle overshoots the mark and ends up causing an oil shortage.