Energy Prospectus

Opening Prices:
> WTI is up 50c to $56.73/Bbl, and Brent is up 53c to $59.37/Bbl.
> Natural gas is up 10.0c to $3.035/MMBtu.

Closing Prices:
> WTI prompt month (MAR 21) was up $0.62 on the day, to settle at $56.85/Bbl.
> In contrast, NG prompt month (MAR 21) was down $0.072 on the day, to settle at $2.863/MMBtu. < Per the Weather Channel website, the next ten days are very bullish for ngas demand.

Aegis Morning Notes
Crude Oil

Oil approaches $60/Bbl as global supplies continue to decline

The head of Gunvor group said oil gains would likely be capped at $60/Bbl, as the major psychological marker would trigger an avalanche of shuttered supply
Kazakhstan implements compensatory cuts in January to reach the January quota
Gunvor group forecasts production to return at a rapid pace if prices continue rising
According to Gunvor, nearly all oil production is profitable at $60 (Brent), and if prices reach that level, production will return quickly
The group says, “oil demand will come down to China, as Europe is clearly the worst hit by the pandemic. The U.S. is much more stable, only down a couple of million barrels.”

Kazakhstan’s compliance with the cuts stood at 111% in January, according to the country’s energy ministry
Kazakhstan produced 1.4 MMBbl/d of oil, in contrasts with its quota of 1.417 MMBbl/d
Kazakhstan can raise its crude production by 10 MBbl/d above its February and March quota

Natural Gas

Natural gas for March has rallied over 22c in the past 24 hours to trade at $3.01/MMBtu on Friday morning

The rebound in gas prices comes amid a sharp cold increase in weather forecast that showed a 26.4 HDD (~50 Bcf) gain over the past day (CWG)
An artic surge that will dip all the way down into Texas and parts of the Southeast is strongest within the 6-10 day time frame (2/10-2/14)

The EIA reported a 192 Bcf withdrawal in underground storage for the week ended January 29
The draw fell close to most analysts’ estimates. Total gas in storage now stands at 2.689 Tcf
< Could we see a withdrawal over 300 Bcf for the week ending Feb 12? After looking at the 10-day weather forecast for Chicago it sure looks possible.

The next four weeks of gas withdrawals are poised to make a dramatic year over year reversal and end the heating season more than 600 Bcf below the five-year average, according to Platts < The five-year average end of winter storage level is 1,698 Bcf, so I think they mean 600 Bcf below last year's winter ending storage level.
Prior to the cold snap, Platts was forecasting a 1.79 Tcf end of winter exit, however, estimates could trend closer to 1.5 Tcf < Because I expect LNG exports to remain near capacity (~11 Bcfpd) well into Q2, I now expect draws from storage to continue during April. If so, we should see natural gas prices much higher than $3.00.

AEGIS notes that the gas market is undersupplied in 2021 and starting the injection season with 1.5 Tcf should cause price inflation this summer in order to call up more supply or kill off demand. Please watch our webcast recording (1/28) where we discuss gas fundamentals < We emailed a link to the AEGIS Jan 28th webinar to all EPG members last week. I URGE YOU TO WATCH IT CAREFULLY. This weather is setting up a very bullish year for our gassers.


On Friday, wind chill advisories were hoisted for parts of the Northern Plains and the Upper Midwest where values were forecast to dip to 30 to 50 degrees below zero during the upcoming weekend. This is a life-threatening cold and frostbite can set in within 10 minutes. The air mass responsible for dipping temperatures 20-30 degrees below average is coming from thousands of miles away over Siberia, Russia. This air mass origin is why meteorologists so often term arctic outbreaks like this as the "Siberian Express."

While this arctic outbreak won’t be record-shattering with just a few spotty record lows possible, what worries meteorologists most is the duration. Some locations, like Bismarck, North Dakota, could see five days or more with wind chills 15 degrees below zero or colder. On Saturday morning, Minneapolis will wake up to air temperatures below zero, with a bone chilling wind chill of 20 degrees below zero. Chicago will manage low temperatures just above zero, but their wind chill will still make it feel like 12 degrees below zero.

Below are this morning's notes from Dan Flynn, a commodities market analyst for The Price Futures Group.

On the crude oil front the market is rolling along with prices above $55 a barrel. And American oil producers and investors expect that shale firms will keep their promise and stay disciplined on spending. But as we know with one stroke of the pen, even that option to save the industry may be off the table. The industry wants to show it learned its lesson and OPEC+ is moving in the same direction as certain countries are chomping at the bit to inherent U.S. market share if the Keystone Pipeline goes down without a fight to this debacle.

Disillusioned investors punished oil stocks and Shell's (NYSE:RDSa) oil profits fell 87% in 2020. Large firms such as Occidental (NYSE:OXY), Pioneer Natural Resources (NYSE:PXD), and Devon Energy (NYSE:DVN) promised no reckless races to record production. Last year operators in the Permian Basin did not outspend their upstream cash from operations, with plenty of hurdles to go in 2021 and beyond. In the overnight electronic session, the March crude oil is currently trading at $56.85 which is 62 points higher. The trading range has been 5709 to 5643.

On the natural gas front, we will need plenty of natural gas to keep the heat on and producing electricity. Speaking with a customer yesterday he was so eloquent and sounded like a prophet when he spoke about the new administration’s policies and regulations being brought to bear. His slant was solar power will not cut it this winter, days are not long enough, wind power is Ok on a windy day. But between the two of those sources, they will not provide enough electrons to serve the power grid when there is a surge in demand uses with weather factors and other acts of God that come into play when energy is most needed.

At this point coal and natural gas is the only viable answer and those who do not believe and push through these regulations will only be opening Pandora’s Box. Look what happened in California last summer. And they still have not learned their lessons to this day. Heat wave in L.A. with air-conditioning units on full only the power grid could not fulfill the surge, so you had brownouts and rolling blackouts. The fires in Northern California could not keep the pressure to flow water to fight those fires. The answer is a simple one, the technologies of solar and wind are not even close to being reliable. In the overnight electronic session, the March natural gas is currently trading at 3.022 which is .087 higher. The trading range has been 3.057 to 2.953.
Have A Great Trading Day!

From OilPrice.com

Brent is closing in on $60 per barrel for the first time since January 2020. Crude inventories in both China and the U.S. declined this week, offering more evidence of a tightening market. “The physical market is also looking increasingly tight,” said Eugen Weinberg, head of commodities research at Commerzbank AG.

Shell profits drop, but boosts dividend. Royal Dutch Shell (NYSE: RDS.A) reported a $4.8 billion profit for 2020, down 71% from the year before. The oil major hiked its dividend for the first quarter, following a sharp cut last year. “We are coming out of 2020 with a stronger balance sheet,” Chief Executive Ben van Beurden said in a statement.

Shell sees oil demand back to “normal” in 2022. “I believe 2022 is going to be sort of back to normal” regarding global oil demand, CEO Ben van Beurden said. However, that depends on the aviation sector experiencing a full recovery.

Oil surges as OPEC+ keep cuts in place. Saudi Arabia kept oil shipments to Asia unchanged even as the market has tightened, sending oil prices higher this week. “It looks like, at every turn, Saudi seems to want to support the market,” Michael Hiley, energy trader with LPS Futures, told Bloomberg. “If demand really picks up, we could be short oil pretty quickly, because U.S. production isn’t going to come back fast.” At the same time, division may increase between OPEC+ members as prices continue to rise. < But .... lack of upstream investment will keep production of oil below where it was pre-pandemic for many more years.