Energy Prospectus

Happy Valentines Day? I actually remembered to get my wife a V-card this year.

Opening Prices:
> WTI is down 60c to $92.50/Bbl, and Brent is down 69c to $93.75/Bbl.
> Natural gas is up 12.3c to $4.064/MMBtu.

AEGIS Notes
Oil

Brent traded over $96/Bbl Sunday evening before paring gains Monday morning
> Oil prices remain volatile as geopolitical tensions over Ukraine brings uncertainty
> Presidents Joe Biden and Vladimir Putin talked over the weekend in an effort to calm tensions

The U.S. has warned a Russian attack on Ukraine may be imminent, although Russia has denied plans to invade < Do armies usually tell the enemy when they are going to invade?
> The tensions have helped elevate oil prices in an already tight crude market
> “I can see the risk premium building together with the tensions in eastern Europe,” said Hans van Cleef, an economist at ABN Amro Bank

OPEC+ members producing below their oil output quotas need to pump more to balance the oil markets, said IEA head Fatih Birol (Bloomberg) < Does Fatih really believe the OPEC+ countries that are producing oil below their quotas are intentionally holding it back? How could the IEA not see this coming? Maybe they forgot that every oil well ever drilled goes on decline soon after it is completed.
> Increasing production from the U.S., Canada, and Brazil hasn’t been enough to ease high energy prices, Birol said at a conference in Cairo

Natural Gas

The prompt month Henry hub (Mar ’22) gas contract is trading 12.3c higher $4.064, despite promising weather runs over the weekend
> The February gas-weighted heating degree day forecast gained 20 HDDs to 745 HDDs, its highest mark since Tuesday, February 8
> Lower-48 dry gas production is slightly below last week’s year-to-date high of 95 Bcf/d, at 94.3 Bcf/d
> South-Central gas production is holding near its record-high of 47.5 Bcf/d
> U.S. LNG feedgas demand is near 12.4 Bcf/d, with Calcasieu Pass flows near 0.329 Bcf/d

European gas prices surge as Russia-Ukraine tensions flair
> U.S. National Security Advisor Jake Sullivan said intelligence indicates Russia may attack its neighbor before the Beijing Olympics end in a week
> Europe is already facing an energy crisis as Russia has been limiting flows since last summer, and the continent also faces a slew of nuclear outages
> Recent U.S. LNG cargoes have helped ease market tightness, but there has been little progress in obtaining additional flows in case a conflict emerges
Europe and the World needs to wake up to the reality that the more any nation relies on wind & solar the more unreliable their energy flow will be.

Note from Keith Kohl 2-14-2022

Will Iran Spoil the Party for $100 Oil?

We all saw it coming, didn’t we?

One of the worst-kept secrets in the global oil industry is that China has been more than willing to buy Iranian crude off the books. However, we may start to see Iranian oil exports ramp up again if a new nuclear deal is struck between Iran and the United States.

If Iran returns its oil exports to pre-sanction levels, we could see another 1.5 million barrels per day enter the global market; that’s roughly 2.5 million barrels per day in total.

Given the fact that President Biden has no authority over U.S. drillers scrambling to pump more oil out of the ground or control over OPEC and Russia’s output, helping Iran may be one of the few ways he can prevent oil from rising over $100 per barrel.

Don’t hold your breath on this one. Even with more Iranian crude being sold, $100/bbl oil appears inevitable at this point, especially since the supply/demand fundamentals will remain tight in 2022.
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MY TAKE: If Team Biden lifts all of the sanctions against Iran tomorrow (another stupid move that is also extremely dangerous), Iran will not immediately send 1.5 million barrels of oil into the global market. The announcement will lower oil prices, but not much. Plus, every drop will be needed just to stabilize the oil price in Post-Pandemic World. It will also increase geopolitical risk because I do not believe that Israel will allow Iran to speed up their nuclear enrichment.

No one ever mentions Venezuela and Team Biden as allowed China to move into the country.

U.S. oil rigs jump most in 4 years as shale revival accelerates. Bloomberg.
The number of rigs drilling for oil in U.S. basins jumped the most in four years this week, the latest sign that the shale patch is booming again as crude prices soar. Oil rigs in the U.S. rose by 19 to 516 this week, the biggest gain since February 2018, according to Baker Hughes data released Friday. While the expansion was seen across several regions, Texas added a combined 13 rigs in the Permian, Eagle Ford and Barnett plays. U.S. drillers’ pledges of financial restraint are being tested like never before as crude prices march higher, with Raymond James seeing $125 a barrel by mid-year as demand outpaces supply.

Another wild ride in the oil market. From 1:50 to 2:00 ET the MAR22 contract gained over $1.30/bbl on a spike to $95.25/bbl.

Trading Economics:
"WTI crude futures traded close to $94 per barrel on Monday, after hitting almost $95 earlier in the session, underpinned by supply disruption woes. The US warned that the Kremlin was planning an imminent invasion of Ukraine, which would lead to harsh sanctions being slapped on Russian energy exports. At the same time, OPEC+ nations continued to struggle to meet output targets despite monthly pledges to increase production by 400,000 barrels per day until March. Last week, the IEA said the shortfall of OPEC+ output from its target widened to 900,000 bpd in January. Meanwhile, investors continued to monitor developments in a possible revival of the 2015 Iran nuclear deal, but a senior Iranian security official said Monday that progress in talks was becoming “more difficult”.