Energy Prospectus

Opening Prices:
> WTI is down 22c to $58.02/Bbl, and Brent is down 11c to $61.03/Bbl.
> Natural gas is up 8.9c to $2.957/MMBtu.

AEGIS Morning Notes
Crude Oil

WTI is trading slightly lower this morning, after snapping its longest streak of gains in over two years yesterday
Bank of America comes out with bullish oil demand forecasts; Says oil demand will increase by 9 MMBbl/d, its fastest recovery since the 1970s
Shipping data shows that China-bound tankers fell by 11 this week, while vessels headed for the U.S. increased by three

Oil demand may rise by its fastest since the 1970s as markets recover from the COVID-19 pandemic, according to Bank of America (BAML)
Last year, oil demand lost 8.7 MMBbl/d nearly overnight as widespread lockdowns restricted demand for transportation fuels. In the next three years, oil demand may rise by 9 MMBbl/d, according to BAML < Unless the price of oil goes a lot higher, I doubt that the U.S. will ever get back to the 12,860,000 bpd that it produced in November, 2019.
Demand is currently pegged at around 92-93 MMBbl/d or 7 MMBbl/d below its 2019 levels

Crude shipments headed toward China fall; U.S. bound cargoes increase (Bloomberg)
Crude tankers headed for China in the next three months dropped by 11 tankers from its six-month high of 127 reached last week to 116 vessels
Vessels bound for the U.S. increased by three to a total of 20 tankers

Natural Gas

Natural gas prices in the Midcontinent surged to new record highs on Thursday
One Oak Gas Transmission spot prices reached record highs of around $85/MMBtu yesterday (Platts)
The combination of freeze-offs and a spike in heating demand tightened balances around the Central U.S.
Other Midcont. prices also soared. ANR OK, Panhandle, and NGPL Midcont. hit their highest level in seven years, at around $12-$16/MMBtu

Cheniere Energy has asked FERC to approve an in-service request for a third train at its Corpus facility (Reuters)
Train 3 has already been operating for the past few months as Cheniere tested operations
The new train has the capacity to produce about 0.66 bcf/d of natural gas
U.S. LNG export capacity stands around 10.5 Bcf/d and is expected to grow to 11.9 Bcf/d through 2022 < LNG exports have been exceeding design capacity on a regular basis.

Gas in underground storage fell 171 Bcf to 2.518 Tcf for the week ended Feb. 5 as reported on Feb. 11 by the EIA
The withdrawal was about 10 Bcf below what many analysts were forecasting
Storage volumes now stand at 9 Bcf below last year’s levels of 2.527 Tcf and 152 Bcf above the five-year average of 2.366 Tcf

As of 10:00 AM ET on February 12, the population-weighted nationwide temperature is 33.2°F which is 3.6°F colder than yesterday and 7.7°F colder than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 10:00 AM EDT tally 14.0 GWDDs which is 1.3 GWDDs greater than yesterday through the same time and 2.8 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand.

Israel cannot and will not allow Iran to get a nuclear weapon. Biden cannot lift sanctions on Iran (unless he's gone insane) and there must be a response to the knowledge that Iran is much closer to having weapon's grade nuclear material.

Investing.com -- Crude oil prices reversed overnight losses by mid-morning Friday in New York, as faith in the global demand rebound revived and concerns mounted about a looming in the stand-off between the West and Iran.

By 11:30 AM ET (1630 GMT), U.S. crude futures were up 1.2% at $58.89 a barrel, while Brent crude futures were up 1.3% at $61.92 a barrel, a new 13-month high.

Earlier in the week, the International Atomic Energy Agency had confirmed that the Islamic Republic has now resumed making uranium metal, in violation of the UN-backed accord that President Joe Biden has said he wants to revive. The European parties to that accord, the Joint Comprehensive Plan of Action, issued a joint statement on Friday warning that “Iran has no credible civilian justification for these activities, which are a key step in the development of a nuclear weapon."

Iran’s increasingly aggressive revival of its nuclear activities not only complicates any chance of lifting U.S. sanctions on Iran’s oil exports, but also raises the broader risk level around the Persian Gulf region, still the most important chokepoints for world oil supply.

It does so at a time when crude storage is falling increasingly quickly around the world, tightening the market in the short term. The premium for front-month Brent futures over the subsequent contract rose to $2.80 earlier this week, its highest in over a year.

On Thursday, the International Energy Agency had pointed out that the pace of global stock drawdowns had increase in the fourth quarter – to some 2.24 million barrels a day from 1.56 million in 3Q - despite a resurgence of the Covid-19 virus in key demand centers such as Europe and North America.

Many analysts remain skeptical that the move to the upside can continue, given the ongoing threat to energy demand from new strains of the Covid-19 virus, which are causing numerous governments (such as Germany and the U.K.) to go slow on their reopening plans.

Another risk is that higher prices tempt major producers into abandoning the output restraint that has supported prices so far. Prices are now well above what the Russian government needs to balance its budget, a situation that typically shifts Russian attention more toward defending its global market share.

However, there are plenty of factors also still supporting prices, not least the drastic cut to global upstream investment, needed to sustain production in the future. According to RBC research global upstream investment fell by nearly a third to $141 billion last year and is set to rebound by less than 6% this year.

Closing Prices:
> WTI prompt month (MAR 21) was up $1.23 on the day, to settle at $59.47/Bbl.
> NG prompt month (MAR 21) was up $0.044 on the day, to settle at $2.912/MMBtu.