Energy Prospectus

Opening Prices:
> WTI is down 15c to $64.90/Bbl, and Brent is down 1c to $68.23/Bbl.
> Natural gas is down 3.0c to $2.634/MMBtu.

AEGIS Morning Notes:
Crude Oil

WTI is down 15c to $64.90/Bbl, and Brent is down 1c to $68.23/Bbl
Largest U.S. refinery returns to normal operations after Texas freeze
Motiva, Port Arthur, the 607,00 MBbl/d refinery resumed normal operations after being shut down on February 15
The refinery has been ramping up operations since February 24. Among the plants which could still see delayed restarts are ExxonMobil’s Beaumont and Baytown refineries, Total’s Port Arthur plant, and Marathon’s Galveston Bay refinery, according to Platts
PADD 3 refining ADU capacity outages still total 1.3 MMBbl/d, an improvement from 3.8 MMBbl/d at the freeze’s peak

Oil finds support after losing ground yesterday as Treasury Yields, U.S. Dollar pullback
The U.S. Dollar Index (Ticker: DXY) retreated from its five-month high of $92.313 by 26 pips to $92.048
Treasury Yields have whipsawed back and forth over the last several weeks. Most tenors reached a high on February 25 before retreating to finish the month of February. Since then, they have rebounded to approach or surpass their recent highs
2Y Treasury Yield: 0.1587% (03/08) up 31% since reaching 0.1211% on March 2
3Y Treasury Yield: 0.3283% (03/08) up 34.3% since reaching 0.2444% on March 2
5Y Treasury Yield: 0.8164% (03/08) up 23.8% since reaching 0.6594% on March 2
7Y Treasury Yield: 1.2282% (03/08) up 16.1% since reaching 1.0576% on March 2
10Y Treasury Yield: 1.5385% (03/08) up 10.6% since reaching 1.3914% on March 2

Libya’s state-owned NOC vows to increase production, work in cooperation with the government
Libya has increased output from almost zero in September to 1.3 MMBbl/d. Further increases in output are likely to be stymied by ailing infrastructure in the war-torn country
The goal is to increase daily output to 1.45 MMBbl/d by the end of 2021, to 1.6 MMBbl/d within two years, and 2.1 MMBbl/d within four years

Natural Gas

March weather, in terms of HDDs, continues to trend close to the 10-year normal, according to Commodity Weather Group
With only one week left outside the 1-15 day forecast window, March is forecasted to produce about 600 HDDs
The mild weather for March is expected to push Midwest storage withdrawals lower and tighten the year-on-year inventory losses, according to Platts

NextDecade targets a financial investment decision (FID) on at least two trains in 2021 (Platts)
The company extended contractor pricing through December 31 to allow more time to secure sufficient commercial support for its up to 27 million mt/year Rio Grande LNG export project in South Texas
The so-called “second wave” U.S. LNG projects were having issues securing enough commercial support or long-term contracting to finance their projects even before the coronavirus pandemic started in early 2020
Back in January, NextDecade scrubbed a plan to build a second LNG export facility near Galveston

On several of my podcasts over the last year I have said that it will be a long time and maybe never before U.S. oil production gets close to 13 million bpd again. Here is an article that explains why:
https://www.forbes.com/sites/davidblack ... b7cbea37e7

U.S. oil production will continue to drift lower until this summer. If WTI stays over $65/bbl we will see a few companies add a few drilling rigs, but it won't be anywhere close to a doubling of the active rig count.

Energy Report: Houthi Pop
By Phil Flynn Mar 08, 2021 09:43AM ET

An attempted drone strike on Saudi Arabia’s Ras Tanura export terminal was thwarted when Saudi Arabian forces shot down the drown, but it was enough to give the oil market an incredible ride.

Global oil prices that are already being supported by the OPEC+ decision last week to roll over production cuts, were already trading at the highest price since January of 2020 and extended those gains with a pop and then a drop. There was no damage or loss of life from the attack and the oil market calmed, yet the underlying bullish factors still exist. Sometimes when we have an event like the failed strike on the Saudi facility, it could add to speculative volatility.

With stimulus hopes rising and the re-opening trade underway, the crude oil market should continue to get a bid. We are seeing from an oil demand standpoint that things are already on track to see demand exceed pre-covid levels later this year. In the U.S., gasoline demand is starting to snap back. My buddy Patrick De Hann at Gas Buddy says that according to GasBuddy data, U.S. gasoline demand jumped 5.9% for the week ending Saturday, pushing demand to the highest since the pandemic started for the second straight week. Now with the possibility of more stimulus checks getting mailed out, that number could go higher.

Oil Inventories should start to fall again this week with an expected 4-million-barrel drop. Gasoline supplies should also fall by 2.0 million barrels and distillates by 2.5. Refinery runs should uptick by 3.0. We have predicted a massive tightening supply and that has come.

Natural gas is holding up well. Andrew Weissman of EBW Analytics says that despite a bearish storage miss last week, with EIA reporting a 98 Bcf draw (35-40 Bcf below most estimates) and forecasts for much warmer-than-normal weather this week, natural gas largely held its ground, with the April contract suffering only modest losses. This week’s price movements, like last week’s, will depend heavily on near-term weather forecast shifts. Mid-day model runs call for slightly cooler-than-normal weather during the 6–15-day period. If this cooler trend persists, natural gas prices could stabilize or post small gains.
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I just check the Weather Channels 10-day forecast maps (that I showed you in my Saturday podcast) and it looks like 75% of the U.S. will be back in winter again by March 12 and it will spread to 90% of the country over the next five days. We should get a larger than normal draw from storage for the week ending March 19.

Closing Prices:
> WTI prompt month (APR 21) was down $1.04 on the day, to settle at $64.01/Bbl.
> NG prompt month (APR 21) was down $0.002 on the day, to settle at $2.662/MMBtu.