Energy Prospectus

Opening Prices:
> WTI is up $1.13 to $69.27/Bbl, and Brent is up 115c to $72.60/Bbl.
> Natural gas is down 0.5c to $4.981/MMBtu.

AEGIS Notes
Oil

Oil prices rise Friday morning while a majority of Gulf of Mexico oil production remains offline
Nearly three-fourths of U.S. Gulf oil output was still offline as of Thursday

Havard University will cease investing in fossil fuels and instead use its endowment to support the green economy (Bloomberg)
Endowment managers said it does not have any investments in companies that seek or develop fossil fuels and “does not intend to make such investments in the future,” President Larry Bocow said in a letter

U.S. crude inventories fell last week as offshore production shut-ins continue following Ida
Crude stocks fell by 1.5 MMBbl to 423.9 MMBbl in the week ended September 3 (EIA)
U.S. refinery utilization dipped 10% to 14.3 MMBbl/d of crude processed last week
Total gasoline inventories tumbled by 7.2 MMBbl to 220 MMBbl compared wit the previous week

Political strife in Libya is putting the OPEC nation’s oil output at risk (Bloomberg)
Libya’s Oil Ministry is fighting with National Oil Corp. for influence
Protesters have disrupted shipments from important oil ports
AEGIS notes that Libya’s oil production has been steady at 1.2 MMBbl/d

Natural Gas

The prompt-month contract is trading 0.5C lower this morning, but is up 31c on the week
The rally impacted the entirety of the curve with the Winter 21/22, Summer 22, Winter 22/23 strip prices gaining 34.5c, 24.6c, and 23.6c to $5.07, $3.80, $3.92/MMBtu, respectively

Weather forecasts have turned warmer over the past week, and the total gas-weighted degree day count increased by 23 days from last Friday’s total

Nearly 77% or 1.7 Bcf/d of U.S. Gulf of Mexico (GoM) dry gas production is still offline
The total outages account for 23.1 Bcf of gas so far

The EIA announced a 52-Bcf injection for the week ending September 3
Total stocks now stand at 2.923 Tcf, which is 235 Bcf below the five-year average
The end-of-season storage number settle on ice was at 3.525 Tcf following the latest injection report, an increase from 3.505 before the report
Futures extended gains despite the “bearish” injection number. Most analysts were expecting a build between 24 -48 Bcf. However, the build was still below the five-year average build of 65 Bcf during the corresponding week < We are now in the period of the year were storage builds get larger. Over the next 7 weeks (thru Oct 22) the 5-year average storage builds are 79, 81, 68, 79, 81, 69 and 63 Bcf. With LNG exports high and lots of GOM production still shut in, I doubt that actual builds will meet or exceed the 5-year average. So, we are on a path to begin the winter with storage ~250 Bcf below the 5-year average.

Trading Economics: "WTI crude futures surged more than 2% to above $69.5 a barrel on Friday, attempting to rebound from a 1.7% plunge in the previous session, and erasing weekly losses on supply concerns and as trade talks between the US and China supported riskier assets. About three-quarters of US Gulf of Mexico offshore oil output remains halted due to disruptions caused by Hurricane Ida. Also, US crude oil inventories fell by 1.529 million barrels to 423.9 million barrels last week, the fifth straight decline and the lowest level since September 2019. Meanwhile, a phone call between President Biden and President Xi Jinping boosted hopes for more global trade and warmer relations."

The Organization of the Petroleum Exporting Countries and the International Energy Agency both reveal their revisions to the oil demand outlook for 2022 next week, and the market will study them carefully for their views on the impact of the spread of the delta variant of the Covid-19 virus on future demand levels.

From OilPrice.com rec'd at 12:09 PM CT

Friday, September 10th, 2021

With three-quarters of crude production still shut in the Gulf of Mexico, Hurricane Ida remained one of the key factors determining price movements this week. In addition to tight US supplies, with the EIA reporting a 1.5 million b/d week-on-week drop in total production, Friday provided some additional bullish sentiment as the Xi-Biden phone call sparked hopes of a smoother US-China relationship, offsetting downside factors like the Chinese strategic stock auction. As of today, Brent traded around $73 per barrel, whilst WTI was just south of $70 per barrel.

China Releases Strategic Reserves of Crude. For the first time ever, China’s Strategic Reserves Administration will hold an auction on SPR volumes to be provided to integrated refiners and chemical plants (i.e. state-owned firms) in a bid to tame increasing feedstock prices.

US Natgas Futures Hit $5/mmBtu For First Time Since 2014. US natural gas futures soared this week as expectations of warmer-than-anticipated weather coincided with Hurricane Ida-induced production outages, with October-delivery prices surpassing the $5 per mmBtu mark for the first time since February 2014.

Libyan Export Terminals Blocked by Protesters. Libya’s Es Sider and Ras Lanuf terminals were blocked by protesters who forced vessels to halt loading operations as calls for the dismissal of NOC head Mustafa Sanalla gained strength, in what might trigger another prolonged period of infighting in the North African country. < Just a reminder that OPEC cartel members still have lots of problems.

Gazprom Waits for German Nod on NS2. Having completed the construction of the Nord Stream 2 gas pipeline, Russian gas giant Gazprom (MCX:GAZP) is now waiting for an approval from Germany’s regulator, a process that could take several months. < The natural gas situation in Europe could get a lot worse. I see natural gas prices for LNG cargos hitting record highs this coming winter as Asia and Europe get into a bidding war for LNG cargos. We will see ngas prices in Europe and Asia over $20/MMBtu for sure and maybe over $30.

PEMEX Impacted by KMZ Explosion After All. Despite PEMEX claiming to have fully recovered from the Ku-Maloob-Zaap platform explosion in late August, Mexico’s Finance Ministry revised its 2022 crude production estimate downwards by some 50,000 b/d to 1.826 million b/d. The draft version of Mexico’s 2022 budget also has PEMEX’s profit-sharing duty dropping from the current rate of 54% to 40%.

I am extremely bullish on copper and nickel prices. Why? These two metals are essential to electric vehicles and the expansion of the electricity grids around the world. It is shortages of these metals that will slow down the expansion of EVs and renewable energy from wind and solar. This is why I am adding Ero Copper (ERO) to our Small-Cap Growth Portfolio.

BHP Teams Up with Billionaire-Backed Firm. Australian miner BHP (NYSE:BHP) signed a partnership deal with Kobold Metals, a recently launched AI exploration company that is backed by Bill Gates, Michael Bloomberg, and Jeff Bezos, in a bid to find more battery metals like copper and nickel in Australia.

Nickel Prices Soar Despite Chinese Stock Releases. Nickel prices rose to their highest level in 7 years – going beyond $20,200 per metric ton - as continuously robust demand has started to reduce global stockpiles. Most notably Shanghai warehouse stocks have decreased by 80% year-on-year, standing at less than 6,000 tonnes.

Closing Prices:
> WTI prompt month (OCT 21) was up $1.58 on the day, to settle at $69.72/Bbl.
> In contrast, NG prompt month (OCT 21) was down $0.093 on the day, to settle at $4.938/MMBtu.