Energy Prospectus

Opening Prices:
> WTI is up 73c to $80.19/Bbl, and Brent is up 72c to $82.71/Bbl.
> Natural gas is up 9.2c to $3.904/MMBtu.

AEGIS Notes
Oil

Oil is set for a third weekly gain as demand has been resilient to Omicron and global supply outages persist
> WTI has gained nearly 7% this week
> Kazakhstan’s biggest oil producer has altered output at the giant Tengiz field following protests in the country, while Libyan production has also been hampered (BBG)

Global supply outages have likely helped oil’s market structure firm in a bullish backwardation structure, signaling growing supply tightness
> Brent’s prompt-timespread has widened to 70c/Bbl as of Thursday. The spread is now most bullish since mid-November.

EOG Resources is ready to ramp up output as soon as this summer if the market demands it (BBG)
> The company has yet to return to pre-Covid levels of production, but that could change this year under certain macroeconomic conditions, EOG CEO Ezra Yacob said at a virtual conference hosted by Goldman Sachs
> In contrast to EOG, Executives from Diamondback Energy and Devon Energy, also speaking at the conference, said they would need to see a firm nod from shareholders before they’d increase output again
I am updating my EOG forecast/valuation model today. The Company previously gave guidance that their plan for 2022 was to increase oil production by 9% and total Boepd by 11% YOY.

Natural Gas

The prompt-month Henry Hub contract is up by 9.2c this morning, near $3.904
> This week, weather forecasts continued to show even more volatility. The January gas-weighted heating degree day forecast decreased by 7.4 HDDs to 945.2 HDDs
> Natural gas production has stayed in the 92-93 Bcf/d range through most of the week, with many blaming freeze-offs. Based on the weather forecast, some of those volumes should be back online by next week
> LNG feedgas demand has also hovered near 12.2 Bcf/d for most of the week, failing to come close to its record-high of 13.1 Bcf/d reached in late December

The EIA reported a draw of -31 Bcf for the week ending 12/31/2021, which was well below where analysts were expecting
> Inventories for the US are now at a deficit of 154 Bcf to last year, and the surplus to the five-year average ballooned to 96 Bcf
> Gas prices largely shrugged off yesterday’s stat as the last week of the year is more prone to show volatility as gas operators pay more attention to their end-of-year gas balance numbers
> Freeze offs and cooler weather suggests that the next few weeks' stats will trend tighter and draws from storage are estimated to be in the 150 Bcf to 210 Bcf range

Gas gap in Europe drives U.S. LNG exports to record high. Reuters.
Sky-high European demand drove U.S. liquefied natural gas (LNG) exports to a record in December, Refinitiv data showed, with winter supply worries set to sustain orders for the fuel. About half of the record U.S. LNG volumes shipped last month went to Europe, up from 37% earlier in 2021, data from Refinitiv and the U.S. Energy Information Administration showed. The gains reflected soaring demand for the home heating and industrial fuel that pushed prices in Europe and Asia to record highs. The United States has ample and cheap supplies as its shale oil and gas boom in the last two decades led to domestic production that has exceeded U.S. demand by about 10%.

Op-Ed: U.S. natural gas is critical to strengthening America’s national security. The Center Square. Opinion.
In recent months, European gas prices have risen as much as 700%, leaving millions of citizens vulnerable to a dangerously unstable grid and burdened with high electricity costs heading into this winter. Disruptions from this energy crisis have been felt by households and many industries that rely on affordable power to provide goods and services. Until the recent escalation of Russia’s confrontation with NATO over Ukraine, the Biden administration’s solution to Europe’s energy crisis had been to implore Russia to send more gas to Europe. EU member states are already dependent on Moscow for roughly 40% of their gas supply. Initially, the White House made a deal with Germany, letting the Nord Stream 2 gas pipeline move forward.
MY TAKE: With Climate Change Wackos running the European governments you get higher utility bills and you do really stupid stuff like depend on Russia for home heating fuel.