Energy Prospectus

Opening Prices:
> WTI is up $1.52 to $75.50/Bbl, and Brent is up $1.49 to $79.58/Bbl.
> Natural gas is up 30.8c to $5.448/MMBtu.

AEGIS Notes
Oil

Oil prices rallied at the start of the week, with Brent reaching the highest level since Oct. 2018
Oil prices are set to continue rallying as supply struggles to catch up with fast-rising demand, according to Trafigura Group’s co-head of oil trading Ben Luckock (Bloomberg)
Goldman Sachs said Brent could hit $90/Bbl by year-end as the market is in a bigger deficit than many realize
AEGIS notes that while the near-term may be tight, many analysts are forecasting 2022 to be oversupplied

Fuel switching to be a boon for oil this winter (Bloomberg)
Vitol, the world’s largest independent oil trader, expects fuel switching to boost oil demand by 500 MBbl/day this winter
Analysts at Facts Global Energy see a similar increase
OPEC sees a slightly smaller impact, estimating the additional demand over the next six months to be 370 MBbl/d
High natural gas prices in Asia and Europe is starting to have effects on the oil market as consumers seek to switch away from gas

Natural Gas

The prompt-month Henry Hub contract is up nearly 30c this morning, trading near $5.45/MMBtu, its highest seasonal level since 2008
The BSEE has stopped providing updates on offline Gulf of Mexico (GoM) production. However, according to Bloomberg, GoM output is at around 1.7 Bcf/d, a 150 MMcf/d improvement from Friday’s level
Weather Forecasts have cooled off for the 1-5 day range, while in the 6-10 day range, cooler weather in U.S. Midwest and West coast offsets temperature gains on the U.S. East coast

Feedgas demand at U.S. LNG facilities is currently around 10.7 Bcf/d, which sounds disappointing, but considering that Cove Point (0.75 Bcf/d) is offline, that number is near capacity

U.S. industrial demand for natural gas is expected to rise through the end of 2022
The EIA said they expect industrial consumption of natural gas to rise through the end of this year into 2022 and will exceed pre-pandemic levels
If industrial consumption reaches 23.8 Bcf/d, that would be just shy of the total annual consumption record set in the early 1970s
U.S. industrial gas consumption averaged 22.9 Bcf/d in 1H2021, and this number is expected to be around 23.5 Bcf/d for 2H2021

Goldman Sachs hike its oil price forecast from $80 to $90 (year-end Brent)

Goldman Sachs on Brent crude, saying the next leg higher for the price of oil is "from a cyclical to a structural bull market"
Brent oil prices have reached new highs since October 2018
We forecast that this rally will continue, with our year-end Brent forecast of $90/bbl vs. $80/bbl previously.
While we have long held a bullish oil view, the current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above consensus forecast and with global supply remaining short of our below consensus forecasts.

GS looking for $90 in December - January. < MY TAKE: Part of this is that with a BIG natural gas shortage in Europe, demand for home heating oil will be much higher this winter. U.S. oil and gas production will not get back to pre-hurricane Ida level by year-end because some offshore production facility will take months to repair.

On September 22, Reuters reported European gas storage levels are at their lowest in at least 10 years ahead of the crucial winter heating season, exacerbating the risk of further price spikes from already record-high levels. In European countries and Britain combined, storage sites are currently around 72% full, compared with 94% full at the same time last year, and 85% full on average over the past 10 years by the end of September, based on the latest Gas Infrastructure Europe data. Gas storage is used as a buffer at times of high demand and tight supply. The low levels seen now - shortly before the end of the re-stocking phase in Europe's gas market - are a cause for concern, market observers say.

The winter gas season, when prices are typically higher and more gas is withdrawn from storage to meet demand, begins on October 1 and continues until the end of March. "We're forecasting European inventories to be about 78% of normal from Oct. 1 when we reach the winter season and that loss of inventories is unsettling the market," said Russell Hardy, chief executive of energy trading firm Vitol.

Gas storage was emptied last winter due to strong demand, exacerbated by relatively weak renewables generation and strong underlying power demand, James Huckstepp, manager of EMEA gas analytics at S&P Global Platts, told Reuters. "Power and gas demand has also been strong in Asia which pulls LNG away from Europe. This has combined with a global supply crunch and limited injections this summer, resulting in record-low stocks as we enter the heating season," he added. This in turn has seen benchmark gas prices in Britain and at the Dutch TTF hub - the key European gas market place - spike to record highs. Several small UK retail energy companies, caught between promises of bargain prices and the need to cover high purchase costs, have gone bust. The main bullish factors over the past two months have been Russian supply disruption and global LNG liquefaction issues. Supply from both sources should remain relatively tight over the rest of this year, regardless of any potential startup of the Nord Stream 2 pipeline, S&P Global's Huckstepp said. Gas flows through the pipeline carrying Russian gas to Europe could start in the fourth quarter, S&P Global expects.

If World oil demand is projected to exceed supply in late 2022 why is Raymond James estimating prices of $80 1st qtr declining to $70 in 4th qtr? Can you refer me to or point me to a graph showing two curves - World Supply vs. World Oil Demand?

RJ's oil price forecast is dated August 2, 2021. Global supply/demand has gotten a lot tighter since then due to Hurricane Ida and the dire situation in the global natural gas market, which will increase demand for home heating.

I can tell you that Marshall Atkins at Raymond James thinks WTI will go over $100/bbl, but that is not RJ's "official forecast".

Send me an email and I will send you the full Raymond James forecast explanation which includes a lot of supply/demand charts.
Send the email to dmsteffens@comcast.net

"If you aren’t bullish on oil prices yet, you should be. As you know, one of the greatest catalysts for oil price moves is the precarious balance between supply and demand. Recently, Reuters reported that OPEC+ increased output in August, yet its actions were curtailed a bit due to underinvestment and maintenance work on its fields. In fact, several OPEC+ members were unable to raise oil production at all. Throw in tighter supply and an influential hurricane season in the United States, and you have a recipe for higher crude prices."

Keith Kohl
Energy Investor
9-27-2021

Closing Prices:
> WTI prompt month (NOV 21) was up $1.47 on the day, to settle at $75.45/Bbl.
> Also, NG prompt month (OCT 21) was up $0.566 on the day, to settle at $5.706/MMBtu.

If WTI can hold over $75 and EIA reports another draw from crude oil inventories, it could move quickly over $77. Mother Nature is now in charge of the natural gas prices. The natural gas shortage in Europe has gone from Bad to Terrible. The Green New Deal experiment has failed and Europeans are going to pay very high home heating bills this winter because their idiot leadership believed that crap. Our leaders are just as stupid, but we have an abundant supply of natural gas in the ground. We just need to quickly add 30-40 rigs drilling for gas to keep our furnaces on. Governments getting involved in energy supply never ends well.

That's one way to combat Global Warming, no heat for your homes this winter.