Energy Prospectus

EPG Webinar starts at 10AM CT

Opening Prices:
> WTI is down 33c to $72.28/Bbl, and Brent is down 20c to $75.47/Bbl.
> Natural gas is down 10.0c to $5.235/MMBtu.

AEGIS Notes
Oil

Oil prices are headed for a fourth weekly gain
WTI is up by $10, or 16%, over the past month
Global oil supplies remain tight and are expected to remain so through 4Q
Gulf of Mexico producers had 500 MBbl/d capacity still shut in on Thursday (BSEE)

LPG prices outpaced crude oil’s rise this year, leading to multi-year highs for propane (Bloomberg)
Propane prices in Asia have surged to the highest level since 2016, amid a rush to build stocks ahead of winter
Strong international LPG pricing has been pulling Mt. Belvieu prices along with it
Mt. Belvieu propane is currently trading at $1.33/gal, up from $0.80/gal this past spring
AEGIS notes that due to low U.S. propane inventories, propane prices this winter could be highly reactive to below-average temperatures

Natural Gas

The Commodity Weather Group is currently forecasting that October Heating Degree Days (HDD) will fall around 250 HDDs, which happens to be the ten-year normal. They note that cooler risk equates to roughly +20 HDDs, while warmer risk adds up to nearly -50 HDDs given the current forecast’

The EIA reported an 83-Bcf build for the week ending September 10, this was larger than the median estimate of 76 Bcf
Inventories now stand 585 Bcf lower than last year and 231 Bcf lower than the five-year average
Inventories on ICE are currently projected to end at 3,540 Bcf by mid-November

Permian gas flows heading west continues to be limited due to ongoing force majeure on El Paso Natural Gas pipeline (Platts)
On Aug. 15, El Paso declared force majeure on its Line 2000 in Arizona
El Paso is a key transit line for gas leaving the Permian and ultimately serving the West Coast and U.S. Southwest
Combined with elevated demand, some West Coast basis hubs like SoCal Gas city-gate breifly saw prices soar more than $20/MMBtu

Trading Economics:
"US natural gas futures eased to $5.3 US natural gas futures on forecasts for slightly lower demand next week and after the Energy Information Administration reported a bigger than expected storage build last week. The EIA said utilities added just 83 billion cubic feet of gas into storage during the week ended September 10th, above market forecasts for a 76-bcf build. Still, prices remain not far from an over 7-1/2-year high of $5.5/mmBtu amid soaring demand for US exports as global prices surge while almost 40% of gas production in the Gulf of Mexico remains shut-in due to Hurricane Ida. In the UK, gas futures jumped about 18% on Wednesday to break another record after a fire shut down a major cable bringing power from France. Elsewhere, gas in Europe was trading around $25/mmBtu as flows from top supplier Russia and Norway have been limited, and there is a competition with Asia, where prices near $19/mmBtu, to catch liquified natural gas cargoes."

Oil set for fourth weekly gain with high energy prices in focus. Bloomberg.
Oil headed for a fourth weekly gain supported by signs of a tighter market and a wider rally in energy prices. West Texas Intermediate, which dipped on Friday, has still climbed about 4% this week. Investors have been tracking strong rallies in other energy commodities, especially natural gas, which has surged by about 45% so far this quarter and spurred the prospect of fuel switching.

How much will natural gas production grow? Seeking Alpha.
The level of shale gas production growth will be largely dependent on how US shale producers (oil and gas) spend excess free cash flow. IHS is projecting +3 Bcf/d of production growth from Dec 2021 to Dec 2022. The sensitivity around this forecast is dependent on how much free cash flow producers return to shareholders. IHS is estimating ~35%, while we think it's likely closer to ~50%.

North American natural gas buyers eyeing certified supplies for ESG-minded customers. NGI.
Designating natural gas as certified or “responsibly sourced” may do little to reduce its carbon intensity, but as U.S. and overseas customers question how their fuel is produced, the branding is growing in importance to ensure conformity and transparency, according to industry experts. A conundrum of challenges is facing natural gas buyers today, as many are boosting their environmental, social and governance (ESG) credentials.

Closing Prices:
> WTI prompt month (OCT 21) was down $0.64 on the day, to settle at $71.97/Bbl.
> Also, NG prompt month (OCT 21) was down $0.230 on the day, to settle at $5.105/MMBtu.

Pullbacks are healthy and oil and gas prices are above what I've used in all of my valuation models. Natural gas and NGL prices are way above what I've been using. Q4 could be very good for all of our gassers.