Energy Prospectus

Opening Prices:
> WTI is down 47c to $68.83/Bbl, and Brent is down 43c to $72.17/Bbl.
> Natural gas is up 1.2c to $4.926/MMBtu.

Trading Economics: "US natural gas futures for October delivery touched almost $5 per million British thermal units for the first time since February 2014 on Wednesday boosted by strong demand and tight supply. Temperatures over the next two weeks are estimated to be warmer than usual for this time of year. The level of gas in storage is the lowest since 2014 and in the Gulf of Mexico, about 78% of gas production remains offline more than a week after offshore crews fled to safety ahead of Hurricane Ida’s arrival. Meanwhile, natural gas in Europe has been trading at record highs above $18/Btu, as Europe is facing a shortage. Gas flows at Mallnow station in Germany, dropped to their lowest in 2 weeks after a fire in the Gazprom facility in Russia early in August. Meanwhile, offshore production continues to slowly return in the US Gulf Coast after Hurricane Ida."

I have just confirmed that a natural gas market expert from Raymond James Equity Research Team will be joining me on my next LIVE Oil & Gas Market Update which we are moving to Friday, September 17.

AEGIS Notes
Oil

WTI futures near $69/Bbl as 76% or 1.4 MMBbl/d remain offline in the Gulf of Mexico
China releases national crude oil reserve for the first time, causing oil prices to pare early morning gains (Bloomberg)

The U.S. government became more pessimistic that shale operators will increase production in 2022
The EIA reduced its monthly forecast for 2022 crude output to the lowest since February (Bloomberg)
There have been five estimate cuts in six months
The agency expects 2021 U.S. oil production to average about 11.3 MMBbl/d and 11.7 MMBbl/d in 2022 < As I have been telling you for months in my weekly podcasts, I don't see the US ever getting back to 13 million bpd of oil production. It will only happen if we see sustained triple digit oil prices and a doubling of the number of rigs drilling for oil.

EIA crude oil inventories are due at 10:00 AM CST
Bloomberg survey
U.S. crude oil inventories: - 4,364 MBbl
U.S. gasoline inventories: -4,431 MBbl
U.S. distillate inventories: -3,423 MBbl
U.S. refinery utilization (change): -3.96%

Natural Gas

The prompt-month Henry Hub contract is up by 1.2c, after gaining 34.6c during yesterday’s trading session
The gas-weighted cooling degree day count for September increased by 9, from 184 to 193
The EIA revised its 2021, 2022 Henry Hub price forecasts upwards by 6%, 12.7% to $3.63 and $3.47/MMBtu, respectively

The EIA is expected to report a 33-Bcf injection for the week ending September 3, which would be less than the 65-Bcf build in the corresponding week of last year. Analysts estimates ranged from a build of 25 Bcf to 48 Bcf
A build within this range would bring total stocks near 2.904 Tcf and the deficit to the five-year average near 254 Bcf
The current end-of-season storage number settled at 3.505 Tcf on ICE

Cheniere Energy predicts a 40% plunge in natural gas prices over the next eighteen months
Anatol Feygin, Cheniere’s EVP and Commercial Officer, expects gas prices to fall to the $3 range in the next 18 months as the rally reverses in response to normalized inventory levels
Cheniere expects natural gas prices to mirror the 2018-2019 winter season, where gas reached a high of $3.92 in November 2018 before dropping to below $3 by the end of January 2019
The current forward curve has futures printing above $3 through April 2023

EIA Expects Higher Natural Gas Prices Due to Production Reductions Following Hurricane Ida
9/8/2021

The U.S. Energy Information Administration expects that natural gas prices will remain higher in the coming months following Hurricane Ida.

In its September Short-Term Energy Outlook (STEO), EIA forecast fourth-quarter Henry Hub spot prices to average $4.00 per million British thermal units (MMBtu), a 16% increase from its August forecast. < EIA is already too low for Q4.
EIA also revised its 2022 forecast of the average U.S. natural gas price to $3.47/MMBtu, a 13% increase over its previous forecast.
"Hurricane Ida affected natural gas production at a time that the United States was already experiencing higher natural gas prices due to growth in exports, strong domestic natural gas consumption, and relatively flat natural gas production," said EIA Acting Administrator Steve Nalley. "Lost production from the storm combined with these current market conditions has limited our ability to build up natural gas inventories, and we expect that will keep prices higher in the short term than we had previously thought."

Hurricane Ida led producers to close more than 90% of natural gas and crude oil production capacity in the Gulf of Mexico region as the storm approached. Significant production and refining capacity remains offline in the region. EIA expects that production and refining activity will gradually be brought back online through September.

U.S. natural gas prices ended August at $4.33/MMBtu, bringing the monthly average to $4.07/MMBtu, a 77% increase over August 2020.

Also:
* Brent crude oil prices averaged $71 per barrel in August, down $4 per barrel from July, but up $26 per barrel over August 2020. EIA expects Brent crude oil to average $71 for the fourth quarter of 2021 and $66 in 2022.
* EIA forecasts small-scale solar capacity-primarily from residential rooftop solar panels-to increase by more than 11.5 gigawatts (GW) in 2021 and 2022. Small-scale solar capacity increased by 4.5 GW in 2020.
* EIA estimates that U.S. energy-related carbon dioxide (CO2) emissions decreased by 11% in 2020 because of less energy consumption related to reduced economic activity and responses to COVID-19. For 2021, it forecasts energy-related CO2 emissions will increase about 8% from the 2020 level as economic activity increases and leads to rising energy use. EIA expects energy-related CO2 emissions to rise in 2022 but at a slower rate of 2%.

Closing Prices:
> WTI prompt month (OCT 21) was down $1.16 on the day, to settle at $68.14/Bbl.
> In contrast, NG prompt month (OCT 21) was up $0.117 on the day, to settle at $5.031/MMBtu.

Remember that the oil market and natural gas market are totally different. This region is heading toward winter "short gas".