Energy Prospectus

Opening Prices:
> WTI is up $1.84 to $92.11/Bbl, and Brent is up $1.72 to $92.83/Bbl.
> Natural gas is down 8.1c to $4.807/MMBtu.

AEGIS Notes
Oil

West Texas Intermediate eclipsed $90/Bbl for the first time since late 2014 on Thursday
> Oil prices are continuing to rally Friday morning due to a host of bullish catalysts

Demand for diesel, one of the clearest signs of strength in refined fuels, is close to the highest level seasonally in at least 30 years (Bloomberg)
> Stockpiles of diesel in the Eastern U.S. are low, as well as inventories in Europe, according to data from Insights Global
> “Refinery runs haven’t kept pace with the recovery in demand, so stocks have been drawn down and are tight,” said Jonathan Leitch, an oil market analyst at Turner, Mason & Co (BBG) < Refiners cannot make diesel from the ultra light shale oil.

The average retail gasoline price in the U.S. has reached its highest level since September 2014
> Regular gasoline rose to $3.423/gal, according to data from AAA
> The surge in prices comes despite efforts from the Biden administration to tackle inflation < By now we should all know that Team Biden is clueless when it comes to oil and gasoline prices. All they can do is get on their knees and beg OPEC and Russia for more oil. We live in a country with lots of oil reserves and we elect idiots.
> Oil released from national reserves have done little so far to influence prices at the pump

Natural Gas

The prompt contract (March '22) is down this morning by 8.1c, trading near $4.807
> The February gas-weighted heating degree day forecast lost 11 HDDs to 776 HDDs on the week
> LNG feedgas demand is back above 13 Bcf/d

The EIA reported a 268-Bcf withdrawal for the week ending January 28, its largest since Winter Storm Uri
> U.S. natural gas storage inventories decreased to 2.323 Tcf, and storage volumes now stand 393 Bcf below last year’s level and 143-Bcf deficit to the five-year average of 2.466Tcf. The stat was slightly below analysts’ expectations
> The ICE end-of-season number being traded on ICE settled 75 Bcf lower at 1.30 Tcf < It will be very bullish news for the "gassers" if end of heating season gas in storage is this low. The 5-year average end-of-season inventory is 1,662 Bcf. If we get to April with only 1,300 Bcf in storage it should support higher gas prices all the way thru Q2 at least.

Trading Economics:
"US crude prices hit $93 per barrel, the highest since September 2014, after a massive winter storm swept across the US and disrupted some oil production in the Permian Basin region. Meanwhile, OPEC and its allies stuck with their plan to release more barrels into a strengthening market gradually. In March, the oil cartel agreed to increase oil output by 400,000 barrels per day, even as data showed that some members struggled to keep up with the production quotas. The US benchmark is now on track for its seventh straight weekly gain, as demand recovery combined with falling stockpiles and supply disruptions have been pushing prices higher."

"Natural gas futures consolidate at $5.0 per million British thermal units on Friday and are on track to end a volatile week 8% higher, underpinned by output woes. A large winter storm is sweeping through most of the US, leaving oil and gas rich Texas covered in ice and snow amid freezing temperatures, which is already causing blackouts and freeze-offs at its natural gas wells. Other constraints include icy roads, mechanical issues and strong winds, with early indicators showing 5% of national gas production is offline and it could take up to five days to come back online. Meanwhile, EIA data showed utilities pulled the largest amount of natural gas from storage since February 2021 last week, sending domestic inventory levels 5% below the 5-year average."

It is so unfortunate that the market is tanking, or energy stocks would now be approaching their true value. Perhaps after reporting they will start to do so in spite of the market.

I think it is a "process" of building up trust in the commodity prices. The average investor and fund manager doesn't realize how tight the global oil market is. Most of them think OPEC+ can just run out and turn some valves to ramp up production.

In Q2 demand for transportation fuels will go up at least 2,000,000 barrels per day and inventories keep falling. diesel is a serious problem today.

U.S. oil production is falling as it does each Q1.

Strong Q4 results and updated guidance for 2022 should help.

I now believe the chance of WTI going over $100/bbl is about 70%. OPEC+ is tapped out of spare capacity, but they won't admit it.