Energy Prospectus

Opening Prices;
> WTI is up 44c to $61.94/Bbl, and Brent is up 53c to $64.95/Bbl.
> Natural gas is down 2.8c to $2.743/MMBtu.

AEGIS Morning Notes
Crude Oil

OPEC+ faces pressure to dampen rally by returning output
Global inventories are declining at their quickest pace in the last two decades, according to Morgan Stanley. This has translated to price, with crude futures having their best start to a year in over 30 years

The OPEC cartel is currently curtailing around 7.1 MMBbl/d, or around 7% of global supply, according to Bloomberg < The amount of excess capacity is always a "guess".
Kazakhstan crude production jumps to 10-month high
According to Bloomberg, Kazakhstan liquids production was around 1.77 MMBbl/d in February, up 122 MBbl/d from January
Kazakhstan’s quota is set at 1.427 MMBbl/d, which will increase by 10 MBbl/d in March. Excluding condensates, the country produced 1.51 MMBbl/d, or around 83 MBbl/d more than its quota

The Baker Hughes oil rig count gained four rigs to bring the total rig count to 309 < Still way below what we need to stabilize U.S. oil production.
Four rigs were added in the Permian basin, while the Eagle Ford and DJ-Niobrara basins remained unchanged

The CFTC reported that managed money net positioning has decreased to (+) 386,855 contracts
Long positions increased by 419 contracts to a total of 431,756
Short positions also increased by 3,456 contracts to a total of 44,901

Natural Gas

A strong natural gas production recovery after winter storms in the Permian and Texas side of the Haynesville helped the Lower 48 output reach 92.7 Bcf/d on February 26 (Platts)
Following the recent freeze-off induced lows, gas has recovered nearly 18 Bcf/d to its highest level since late March 2020 according to S&P analytics
The V-shaped recovery and string of moderate weather forecasts have taken the natural gas contract for April from a high of $3.03 on February 17 to now near $2.75
Weakness in the front of the curve has also translated into weakness in the Winter 2021/2022 strip
Next winter (Nov-Mar) has given up nearly 20c since February 17 to now trade at $3.05
AEGIS believes this may be unfounded and the combination of strong fundamentals and amount of gas in storage implies higher Nymex strip pricing

Note from the Raymond James Equity Research Team 3-1-2021

What a difference one month makes! At the end of January, amid relentless lockdown doom-and-gloom, we made a clear-cut prediction that January would mark the trough for global economic reopening, with sequential improvement in February and again in March. Thus far, things are tracking much as we predicted, even leaning a bit better: our reopening tracker (with all the underlying data included in the appendix) is currently at the highest level since October 2020, just before the wintertime COVID surge. To be sure, there are still 545 million people around the world currently in lockdown - strikingly, 77% are in Europe - but it is clear that the tide has turned: COVID case count metrics have substantially and broadly improved over the past month, concurrent with vaccination gaining pace.

Continuing our collaboration with Raymond James' biotech analyst who has closely followed COVID vaccine development, today we explain why the stage is set for further improvement into the spring and beyond. In this context, we continue to be perplexed by the persistent backwardation of the oil futures curve: by contrast, we envision oil prices ending 2022 meaningfully higher from current levels.

Bloomberg: Goldman Sees Brent Oil at $75 as Supply Response Trails Demand

Oil prices will rally sooner and higher than previously thought as the global energy demand recovery outpaces the supply response from the OPEC+ alliance, shale and Iran, according to Goldman Sachs Group Inc.

Consumption will get back to pre-virus levels by late July, while output from major producers is likely to remain “highly inelastic” to the rising prices, the bank said in a note. Goldman raised its Brent forecasts by $10 a barrel, to $70 next quarter and $75 in the following three months.

“This faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,” bank analysts including Damien Courvalin said in the note.

Closing Prices:
> WTI prompt month (APR 21) was down $0.86 on the day, to settle at $60.64/Bbl.
> NG prompt month (APR 21) was up $0.006 on the day, to settle at $2.777/MMBtu.