Energy Prospectus

Opening Prices:
> WTI is up 16c to $82.28/Bbl, and Brent is up 31c to $84.78/Bbl.
> Natural gas is down 7.9c to $4.191/MMBtu.

AEGIS NOTES

Crude oil prices are on track for their fourth consecutive weekly gain. The Feb ’22 contract is up by $3.46 or 4.4% on the week
Oil prices have continued to recover this week as global consumption proves resilient, despite the Omicron variant

The EIA reported a 4.5-MMBbl draw this week, which now places inventories at their lowest level since 2018

The U.S. Dollar also weakened by around 1% this week, with the DXY falling from 95.8 to 94.8

I TOLD YOU SO:
Risk of supply shortages in the crude oil market are growing – ABN Amro
The bank says global spare oil reserves have fallen to 2 MMBbl/d versus 6 MMBbl/d in early 2021
The risk of rising prices has increased over the next five years as demand growth exceeds supply growth
Most of the demand growth is expected to come from emerging markets

Ngas

Gas prices are continuing to retreat as warm weather forecasts trickle in. Feb '22 gas is down by 7.9c, near $4.191
The gas-weighted heating degree day total forecast fell by 14.2 HDDs to 977. The shift was the largest loss of HDDs since January 2
Lower-48 dry gas production is still down at around 92 Bcf/d. Appalachian production has been most to blame for the slow recovery in supply. The region's production is at its lowest since mid-September, at 33.5 Bcf/d

Natural gas prices led to coal generation growth in 2021, according to the Rhodium group
For the first time since 2014, coal's share of the power stack increased as high gas prices led to gas-to-coal switching.
The increase in coal-fired power generation also led to a rise in greenhouse gas emissions
The EIA reported on Tuesday that 12.6 GW of coal-fired generation capacity, which is around 6% of what was used in 2021
Henry Hub prices doubled in 2021, according to the EIA

(Bloomberg) -- Oil headed for a fourth straight weekly
gain, the longest winning streak since October, on signs that
the market is tightening as global consumption withstands the
impact of the omicron virus variant.
Brent crude pared earlier gains on Friday, but is still on
track for a 4% increase this week. The global oil benchmark has
made a strong start to the year, which has been underscored by
lower U.S. inventories.
Crude has now clawed back most of its losses late last year
that were driven by omicron and the White House-led releases
from national oil reserves. Although it has proved to be fast-
spreading, the variant also appears to be milder, particularly
in vaccinated people, lessening the impact on energy
consumption. Major user India is poised to weather the latest
scare. The International Energy Agency said earlier this week
that global oil demand has turned out to be stronger than
expected.
Oil prices are finding support from physical markets --
where real barrels are bought and sold -- as supplies change
hands at healthy premiums. There’s also global strength in the
diesel sector. With prices climbing higher, traders are watching
whether the Organization of Petroleum Exporting Countries and
its allies will be able to deliver their planned monthly
production increases in output in full.
Also see: Diesel Markets Are Soaring All Over the World in
Boost for Oil
“The price slide that was triggered by the emergence of the
omicron variant has been reversed completely,” said Carsten
Fritsch, an analyst at Commerzbank AG. “Omicron’s impact on oil
demand has been considerably milder so far than initially
feared.”

Optimism about the demand outlook is reflected in the
market’s bullish backwardated pricing structure, with near-term
futures above those further out. The spread between West Texas
Intermediate’s two nearest contracts is now well above $6 a
barrel, up from less than $3 in early December.
Despite the broadly positive mood, there are notes of
caution. China has maintained its strict approach to the virus,
while India and some other Asian countries have introduced
partial curbs which has caused a drop in mobility. On Monday,
China is likely to confirm its weakest economic growth in more
than a year, after reporting a drop in annual crude imports on
Friday.