Energy Prospectus

Opening Prices:
> WTI is up 62c to $90.28/Bbl, and Brent is up 51c to $92.06/Bbl.
> Natural gas is down 8.9c to $3.920/MMBtu.

AEGIS Notes
Oil

WTI moved back above $90/Bbl Thursday morning following declining U.S. inventories
> U.S. crude stockpiles fell to the lowest since 2018, the EIA reported yesterday
> Iranian and U.S. nuclear talks remain in focus

Strong demand and lower imports helped reduce oil inventories by 4.8 MMBbl last week
> Stocks at the key Cushing storage hub fell for the fifth week to the lowest level since November, according to data from the Energy Information Administration
> U.S. refiners processed about 15.6 MMBbl/d of crude last week, up by 328 MBbl/d from the previous week

Plains All American Pipeline expects major Permian growth
> The U.S. midstream operator is forecasting volumes on its crude pipelines to grow by 15% in 2022 from a year earlier, driven mainly by the Permian
> Output from the Permian could grow by 600 MBbl/d annually for the “next several years,” Plains chief executive Wilfred Chiang said

Natural Gas

Gas prices are down again as weather forecasts for February continue to tilt warmer
> The prompt-month contract (Mar ’22) is trading 8.9c lower at $3.92
> Lower-48 dry gas production is pushing higher and is now back above 94 Bcf/d, a year-to-date high, driven by record-high production in the South Central region, particularly the Permian
> Appalachian production is still 2.2 Bcf/d removed from its December peak of 35.5 Bcf/d
> The February gas-weighted heating degree day forecast lost 11 HDDs to 732 HDDs, its lowest mark yet

The EIA is expected to report a 221-Bcf draw for the week ending February 4
> The draw would mark the fourth consecutive above 200 Bcf
> The deficit to the five-year average currently sits at 143 Bcf and has been widening since the start of January
> If a 221-Bcf draw is reported, total gas in inventories will reach 2,102 Bcf, which would be 237 Bcf below the five-year average.

The Energy Report: Numbers Speak for Themselves
By Phil Flynn (Feb 10, 2022 10:11AM ET)

The Energy Information Administration reported that U.S. crude supply is at the lowest levels since 2018. The tool that the Biden administration is relying on to bring down prices, the Strategic Petroleum Reserve, saw supply fall to the lowest level since 2008. So what will be the Biden administration’s plan to lower gasoline prices when the SPR runs out of supply? Or maybe the more important question is, what will they do if they have a real emergency that would require an emergency release of supply? < IMO draining the SPR for political reasons is insane and a national security risk.

The Biden administration is convinced that they are on the verge of having a real emergency, still suggesting that a Russian invasion of Ukraine is imminent even as those in Ukraine and other parts of the world are not so sure. Is Putin playing this up to spike oil and gas prices so he can cash in, or is he just reminding the world that he holds all the energy cards in Europe? Whatever it is, Russia says their war games have commenced.

Yesterday for oil, the back end of the oil curve showed most of the strength where the front end seemed to falter. This could be due in part because the spread between the front and the back end is near a record distance, or it could be because the market is suggesting that a release from global strategic reserves would only have a short-term impact on price and would actually be more bullish down the road.

The market knows what the Biden administration should learn: releasing oil into a hot market will keep the market hot, increase demand, and continue to reduce supply. < Phil thinks they actually do learn. I think Team Biden is clueless.

The Biden administration feels they have no choice because their policies have played a big part in rising energy prices, and they know that they are getting the blame. It can be argued about all of the side issues that are causing the prices to go up, but as everybody knows that reads The Energy Report, we predicted that this was going to happen before the president took office. There is no one policy that the Biden administration has done to encourage U.S. oil and gas production. In fact, everything that they have done has discouraged oil and gas investment. Even their plan to supply Europe with oil and gas in the event of war leaves out U.S. energy producers. The Biden administration refuses to engage U.S. oil and gas producers because they view them basically as the enemy of their green energy agenda.

According to Deputy Bureau Chief & Chief OPEC Correspondent at Energy Intel, Amena Bakr, President Biden called King Salman overnight. Regarding the oil markets, King Salman stressed the importance of maintaining balance and stability in the oil markets, highlighting the role of the OPEC+ agreement in this regard and the importance of maintaining the agreement.

Yet he should have called the Crown Prince Bin-Salman because he is the guy running the show. Biden does not want to deal with the Crown Prince because he is a murderer, so why can he deal with Russian President Vladimir Putin, who he says is a murderer? Just another example of Bidens’ disjointed and conflicted foreign policy.

Reuters reported that global diesel supplies are dwindling as refiners struggle to keep pace with rapid post-pandemic demand recovery, exacerbating an acute global energy shortage that has already sent the prices of gas, coal, and crude oil soaring. The U.S. and Asian diesel imports on which Europe relies have been limited in recent weeks due to higher domestic consumption for manufacturing and road fuel purposes. < Diesel inventories are too low to support a Post-Pandemic surge in economic activity.

According to the data, regional stocks were at their lowest level for this time of year since 2008, while Singapore’s onshore inventories of middle distillates also sank to multi-year lows of 8.21 million barrels. Gasoil inventories, including diesel and heating oil, held in independent storage in Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area fell last week by 2.5%, data from Dutch consultancy Insights Global showed.

Back to the numbers for a bit and why they are so bullish: the EIA said that crude stocks fell by 4.8 million, with Cushing stocks down 2.8MB. The SPR released 1.4MB, and crude demand increased 1M bpd. Ready to use ‘gasoline’ stocks fell 1.9MB. Total gasoline stocks fell 1.6MB. Production increased 740k bpd. Domestic demand increased 900k bpd a new 5-yr high for this time of year. Distillates ULSD stocks fell 1.7MB. Higher sulfur stocks increased 762KB.