Energy Prospectus

Opening Prices:
> WTI is up 72c to $57.57/Bbl, and Brent is up 75c to $60.09/Bbl.
Aegis Hedging Solutions: "Buyers are firmly in Control above $54.50. Continue with Market Driven hedges in Bal 2021 and Cal 2022. Only a weekly close below $51.64/Bbl will change the Trend to DOWN."

> Natural gas is up 4.7c to $2.910/MMBtu.
Aegis Hedging Solutions: "The Trend changed to UP for the first time in 12 weeks. Buyers and Sellers are vying for Control at $2.88. Only a close below $2.50 will change the Trend to DOWN Market Driven hedges are available at Current prices in Bal 2021.

AEGIS Morning Notes:
Crude Oil

Crude oil in floating storage fell by 22% last week, according to Bloomberg < This is very bullish, as falling global inventories is the primary support for higher prices.
Crude in floating storage fell from 113.3 MMBbls, to 88.7 MMBbls during the week ending February 5
Inventories saw the largest decrease in the Asia Pacific, with inventories falling by 21 % week-over-week to 67.5 MMBbls

Iran: Khamenei says U.S. must make first move on Iran Nuclear Deal ~ JCPOA (Bloomberg)
In an interview on “Fareed Zakaria GPS”, Irania Foreign Minister Javad Zarif said his country expects the U.S. to return to full compliance to the deal, and to “break with failed policies of President Trump”
President Biden has said that he would not lift sanction until Iran stops enriching Uranium, or to reduce enrichment activity to within the accord limits

Natural Gas

Polar vortex causes price surge across U.S.
Gas prices spiked as a major cold weather formation is expected to increase heating demand significantly, along with accompanied production freeze offs.
Algonquin city-gates jumped $4.05 to settle to $11.47/MMBtu, while Iroquois Zone 2 rose $2.93 to settle to $9.91/MMBtu for Feb. 6-8 flows (Platts)
Despite the price increases, production in Appalachia (Marcellus & Utica) is down roughly 2%, owing largely to freeze-offs, as temperatures have been below freezing in the area and are likely to remain there (Platts)

Weather runs remained consistent over the weekend with February 2021 projected to be the eighth coldest February of all time, according to the Commodity Weather Group
The prompt-month natural gas contract is up ~$0.34/MMBtu since last Sunday with a last print of 2.91/MMBtu
The Summer ‘21 and Winter ’21/’22 strips have also seen some improvement printing $2.95/MMBtu and $3.10/MMBtu, respectively

From Celsius Energy:
"As of 10:00 AM ET on February 8, the population-weighted nationwide temperature is 33.8°F which is 1.0°F colder than yesterday and 6.6°F colder than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 10:00 AM EDT tally 14.5 GWDDs which is 0.8 GWDDs greater than yesterday through the same time and 3.1 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand."
Add this to your favorite websites list: https://www.celsiusenergy.net/p/intraday-weather.html

The Weather Channels ten day forecast is extremely bullish for natural gas. See: https://weather.com/maps/tendayforecast

Extremely cold nights in the upper half of the country will cause a lot of well freeze offs in the Bakken, Powder River Basin and Appalachia (Marcellus/Utica). My guess is that the ngas storage report for the week ending Feb 12 will show a draw more than 100 Bcf above the 5-year average draw.

NGI: EIA predicts ‘record-high’ U.S. oil, natural gas output through 2050 .
Oil prices will form the trajectory of U.S. oil and natural gas production moving forward, but supply is on track to maintain record levels through 2050, according to the Energy Information Administration’s (EIA) latest long-term projections. Under the baseline reference case in the agency’s Annual Energy Outlook 2021 (AEO2021), published Wednesday, U.S. oil and natural gas production would remain at record-high levels from 2023 through 2050. < This will only happen if WTI averages over $65/bbl.

See slide 3 of my Saturday podcast: U.S. oil production won't get back to pre-pandemic volumes (~12.9 million BOPD) until the active rig count more than doubles. The return of GOM shut-ins after the end of hurricane season and a surge in DUC completions caused the rise in U.S. production from 10.4 to 11.1 million BOPD from October to November. Production is now back under 11.0 million BOPD and likely to go lower with lots of well freeze offs in February.

Closing Prices:
> WTI prompt month (MAR 21) was up $1.12 on the day, to settle at $57.97/Bbl. < Oil moved over $58/bbl in after-hours trading.
> NG prompt month (MAR 21) was up $0.019 on the day, to settle at $2.882/MMBtu. < If February weather is as cold as the current forecast, gas in storage should move below the 5-year average within a few weeks and gas prices will firm up over $3.00.

Investing.com: Brent Oil Hits $60/Barrel; Trades at Highest Since January 2020
Feb 08, 2021 03:55PM ET

The front-month Brent futures contract traded past $60 a barrel early Monday for the first time in over a year, boosted by hopes for further U.S. economic stimulus measures as well as output discipline by top oil producers that has driven global stockpiles steadily downward over recent weeks.

The international benchmark Brent contract for April delivery settled up $1.22, or 2.1%, at 60.56 per barrel after earlier hitting a peak of $60.63, its highest level since January last year. U.S. West Texas Intermediate crude futures for March gained $1.2, or almost 2%, to settle at $57.97. WTI's peak was $58.15, also the highest since January 2020.

Helping the crude market push higher is the expectation of additional U.S. fiscal stimulus, after the House of Representatives on Friday followed the Senate in passing a budget resolution, starting the process that would allow President Joe Biden’s $1.9 trillion rescue package to be approved. < This "helicopter money" = inflation, which is going to support higher commodity prices.

Additionally, Saudi Arabia, the world's largest exporter of crude, pledged last month to make additional supply cuts in both February and March on the back of reductions by other members of the Organization of the Petroleum Exporting Countries and its allies, including Russia. This move is aimed at balancing the crude market, and thus support prices, given the severe hit to demand caused by the measures taken by governments around the world to limit mobility in the wake of the Covid-19 pandemic.

The Organization of Petroleum Exporting Countries now expects OECD stockpiles to be back in line with their five-year average by the middle of the year. < This is the basis for Goldman Sachs' forecast of $65/bbl Brent by July.