Energy Prospectus

Opening Prices:
WTI is up 72c to $60.04/Bbl, and Brent is up 80c to $63.75/Bbl.
The Trend remains UP and Buyers are attempting to take Control above $59.60.
There is strong support at $57.60.

Natural gas is up 5.8c to $2.584/MMBtu.
The Trend is UP and Buyers are attempting to take Control above $2.54. Noisy Spring shoulder trading continues, so price signals are less helpful.

AEGIS Notes
Oil

Yemen’s Houthi Rebel Group (backed by Iran) claims drone attack on Saudi Aramco oil facilities (Bloomberg)
The Houthis attacked sites in the eastern oil terminal of Jubail, and the western city of Jeddah
The recent escalation in attacks by the rebel group has prompted the kingdom to seek more help from the U.S. in defending its oil facilities

Morgan Stanley says bullish oil view losing steam on a rebound in Iran, U.S. production
The bank sees an oil market deficit of 650,000 barrels per deay in 2H2021, in contrasts with its previous estimate of a 1 MMBbl/d deficit
Iran oil production is expected to be around 2.7 MMBbl/d in 3Q2021
Iran output will reach 3 MMBbl/d by year-end, up from 2.5 MMBbl/d in its previous forecast, according to Morgan Stanley
Morgan Stanley said U.S. shale production could grow a few hundred thousand barrels per day in 2022 as the rig count in the Permian Basin is following a recovery trajectory nearly identical to 2016

U.S. Army Corps allows Dakota Access Pipeline (DAPL) to stay open during its environmental review
District Judge Boasberg gave the pipeline operator until April 19 to make its case for keeping the pipeline in operations while the environmental assessment is underway
AEGIS notes DAPL is the largest crude artery out of North Dakota’s Bakken, transporting up to 570 MBbl/d of crude. If the pipeline is taken out of service, in-basin pricing could significantly weaken as producers have to transport crude via more expensive forms of transportation < Trains and Trucks create much more air pollution than a pipeline, so Team Biden is not doing this for the environment. Buffet owns railroads that move oil out of North Dakota.

Natural Gas

Prompt month natural gas edged higher Monday morning, partly due to cooler weather patterns that created additional heating demand
Weather models added 8.7 heating degree days (HDDs) over the weekend (CWG). Most of the below-average temperatures are concentrated in the Midwest and Central US
Despite the overall cooling trend, the month of April is tracking warmer than normal and is forecast to land as the 10th warmest April since 1950, according to Commodity Weather Group (CWG) < See https://www.weatherbell.com/premium/'s Saturday Summary for details on this week's weather pattern and their fresh hurricane forecast for this summer.

Atlantic and Pacific LNG shipping rates have rebounded from a year-to-date low of mid-$20,000s/d on March 8 (Platts)
Very high rates for LNG shipping of $120k/d and $105k/d for the Atlantic and Pacific regions, respectively, were seen on February 1. Peak levels were observed on January 8, with prices at $300k/d and $175k/d, respectively
The recent rise in shipping rates, from this year’s lows, “is due to higher TTF and JKM prices,” a shipbroker told Platts
Shipping typically accounts for about 5-20% of the delivered price ex-ship of LNG. This can be a substantial portion if rates are high.
Demand for U.S. LNG remains near peak capacity of over 11 BCF per day.

On April 6 Reuters reported jet fuel demand is picking up, according to a senior refining executive, which could give refiners some hope after the global pandemic boosted distillate inventories and sank margins. Refiners have been mixing jet fuel into diesel inventories for the last several months, since they have been unable to sell the product due to the sharp decline in air travel. "Jet fuel demand numbers are starting to improve and show signs of life, allowing refiners to drop less jet into diesel which will eventually provide well-needed relief on distillate stock," said Joe Israel, chief executive officer of Par Pacific (PARR-NC), a West Coast refiner. Last month, the Transportation Security Administration said it screened 1.36 million U.S. airport passengers, the highest number since March 15, 2020.

On April 6 Reuters reported U.S. crude oil production is expected to fall by 270,000 b/d in 2021 to 11.04 million b/d, the U.S. Energy Information Administration (EIA) said on Tuesday, a steeper decline than its previous forecast for a drop of 160,000 b/d. The agency said it expects U.S. petroleum and other liquid fuel consumption to rise 1.32 million b/d to 19.44 million b/d in 2021, compared with a previous forecast for a rise of 1.41 million b/d.

On April 7 Reuters reported U.S. oil and gas exploration and production deals rose fivefold in the first quarter over a year-ago, according to consultancy Enverus, in a foreshadowing of recent blockbuster shale mergers. Some $3.4 billion in deals were struck in the first quarter, compared with $600 million a year-ago, as the coronavirus pandemic slammed the brakes on fuel demand and the oil market. Deal-making has accelerated this quarter versus last year as oil prices recovered, but is down from $27.8 billion in the fourth quarter of 2020. All top five first-quarter deals involved a private company, according to Enverus, a trend it expects to continue this year, including Pioneer Natural Resources Co's (PXD-NC) purchase of privately-held DoublePoint Energy LLC for $6.4 billion earlier this month. "We’re going to continue to see activity trend upwards,” said Andrew Dittmar, a senior analyst with Enverus. Private companies are more willing to make deals as public companies divest non-core assets and stock prices rise, he said. Deal activity slowed sharply in the second quarter of last year, with just $2.8 billion in asset sales and mergers, as producers grappled with historically low oil prices, pulled back on drilling and shut wells to avoid losses.

On April 10 Reuters reported Saudi oil producer Aramco (2222.SE-NC) has agreed a $12.4 billion deal to sell a 49% stake in its pipelines to a consortium led by U.S.-based EIG Global Energy Partners. Announced late on Friday, it is the company's largest deal since its record $29.4 billion initial public offering in late 2019. The lease and leaseback agreement includes a 49% stake of newly formed Aramco Oil Pipelines Co and rights to 25 years of tariff payments for oil carried on Aramco's pipelines, it said in a statement. Aramco will retain a 51% stake in the new company. EIG, which has invested more than $34 billion in energy and energy infrastructure, was the deal's underwriter and will work with Aramco in the coming days to decide on other parties for the consortium, a source familiar with the deal said. Abu Dhabi state investor Mubadala is in discussions on being part of it, a spokesman said. Aramco will retain operational control of the pipeline network and assume all operating and capital expense risk, the companies said. The deal will have no impact on Aramco's oil production. Aramco will also offer so-called "staple financing" which the buyers can use to back their purchase, sources have told Reuters. "We will continue to explore opportunities that underpin our strategy of long-term value creation," CEO Amin Nasser said.

Energy Report: Snap Attack
By Phil Flynn (Apr 12, 2021 08:38AM ET)

Oil prices are snapping back on news of another Houthi attack on a Saudi oil facility during a weekend where geo-political risk factors for oil are rising.

Oil prices, that were floundering on the night session, rallied after Reuters reported Yemen’s Iran-aligned Houthi movement said on Monday it had fired 17 drones and two ballistic missiles at Saudi targets, including towards Saudi Aramco (SE:2222) refineries in Jubail and Jeddah. There was no immediate Saudi confirmation.

Yet that is not the only geo-political risk factor that could move the range bound oil market. Iran blames Israel for a power outage. Reuters reports that, “Iran blames regional arch-foe Israel for a sabotage incident at its key Natanz nuclear site and will exact revenge, state TV quoted its foreign minister as saying, in what appeared to be the latest episode in a long-running covert war. Reuters says that Iran’s semi-official Nour news website said the person who caused an electricity outage in one of the production halls at the underground uranium enrichment plant had been identified. “Necessary measures are being taken to arrest this person,” the website reported, without giving details about the person. The incident occurred amid diplomatic efforts by Iran and the United States to revive Tehran’s 2015 nuclear deal with major powers, an accord Israel fiercely opposed, after former U.S. President Donald Trump abandoned it three years ago.

Last week, Iran and the global powers held what they described as “constructive” talks to salvage the deal, which has unraveled as Iran has breached its limits on sensitive uranium enrichment since Trump reimposed harsh sanctions on Tehran. Iranian authorities described the incident a day earlier as an act of “nuclear terrorism” and said Tehran reserved the right to act against the perpetrators, according to Reuters

In the meantime, oil demand signals are rising and OPEC plus still seems to be ready to withhold supply. Strong compliance to the OPEC plus cuts seems to suggest the inventories will still tighten.

Covid vaccine distribution concerns in Europe still weigh but the demand outlook is on a strong trajectory.

While we predicted the strong OPEC+ compliance and the tightening of supply, more people are coming to that realization. The oil market is in the calm before the storm and make sure you are hedged.

Closing Prices:
> WTI prompt month (MAY 21) was up $0.38 on the day, to settle at $59.70/Bbl.
> NG prompt month (MAY 21) was up $0.035 on the day, to settle at $2.561/MMBtu.