Energy Prospectus

Opening Prices:
> WTI is down 96c to $64.43/Bbl, and Brent is down 105c to $67.83/Bbl.
> Natural gas is up 0.9c to $2.493/MMBtu.

AEGIS notes

Crude Oil

Iranian oil threatens OPEC+ efforts to tighten supply
China is buying close to 1 MMBbl/d of sanctioned crude, and condensate according to estimates by traders and analysts
Chinese imports of Iranian crude will average 856 MBbl/d this month, its highest in over two years, according to data-intelligence firm Kpler

Azerbaijan meets commitment to cut output further in February
The country pumped 741 MBbl/d of crude and condensate, producing 593 MBbl/d of crude oil vs. the quota of 595 MBbl/d

Shale output will lag as producers exercise newfound capital discipline despite rally in WTI
Next month, production is expected to decline by 47 MBbl/d to about 7.46 MMBbl/d, according to the EIA
Output will be slightly lower in all basins except for the Permian Basin of West Texas and New Mexico, which is expected to grow a meager 11 MBbl/d

Natural Gas

The prompt-month natural gas contract settled below $2.50/MMBtu, the lowest level since late January
The summer 2021 strip has fallen from a high of $3.08/MMBtu to approximately $2.60/MMBtu over the last month
The winter 2021/2022 strip has followed a similar pattern, falling from a high of $3.21/MMBtu to $2.85/MMBtu over the same time period
Despite recent price weakness, AEGIS still maintains a bullish outlook on this summer as the current summer strip price does not reflect our perceived tightness in the market < See Natural Gas Price Forecast that I posted on March 15

The winter storm that continues to barrel through the Rockies region has forced up to 1.3 Bcf/d offline, according to PointLogic data
Production in the region sank to 7 Bcf on Monday March 15, and most of that loss has been limited to the Denver-Julesburg (DJ) producing area as output has dipped below 1 Bcf
On Sunday March 14, Colorado Interstate Gas (CIG) issued operational underperformance alerts for the Denver-Julesburg producing area. CIG supplies have declined by almost 1.1 Bcf over the last three days from it’s previous levels of 2.1 Bcf/d, causing the pipeline to declare force majeure

Closing Prices:
> WTI prompt month (APR 21) was down $0.59 on the day, to settle at $64.80/Bbl.
> In contrast, NG prompt month (APR 21) was up $0.078 on the day, to settle at $2.562/MMBtu.

Oil analysts turned bullish in recent weeks, and some are pondering a stronger rally ahead. “Further price strength is very feasible,” Tamas Varga, an analyst at PVM Oil Associates Ltd., told Bloomberg. An increase to $80 later this year “has now become more than just wishful thinking.”

However, prices dipped on Tuesday on renewed demand fears in Europe due to the temporary suspension of vaccinations in multiple countries. “There are no silver linings for oil prices this week,” Bjornar Tonhaugen of Rystad Energy said in a statement. “The positivity that helped prices reach and stay close to $70 per barrel earlier this month has now evaporated, giving way to concerns over vaccination campaign setbacks and crude stock levels.”

U.S. gasoline demand back to normal. U.S gasoline demand is just about back to pre-pandemic levels. As the vaccination campaign accelerates and economies shift towards further reopening, the rebound is kicking into a higher gear.

OPEC+ bet is paying off. U.S. oil firms focused exclusively on the shale patch are expected to only marginally increase their combined production this year compared to 2020, according to Bloomberg Intelligence data of listed companies—a sign that OPEC+ could be right, at least for now, that $70 oil would not unleash a massive production increase from the United States.