Energy Prospectus

Opening Prices:
> WTI is down $2.33 to $93.13/Bbl, and Brent is down $2.23 to $94.26/Bbl.
> Natural gas is up 15.9c to $4.354/MMBtu.

AEGIS Notes
Oil

Oil prices retreated from seven-year highs as traders digested a possible de-escalation in the Ukrainian crisis
> Some Russian military units will begin returning to their permanent bases on Tuesday after completing drills, Interfax reported, citing the Defense Ministry (BBG)
> Crude has been particularly volatile surrounding the news around Russia and Ukraine
> In an interview with Bloomberg, Citi’s Ed Morse said oil prices could rise 10% if there is Russian military action in Kyiv, Ukraine

OPEC’s Secretary-General Mohammad Barkindo said OPEC is focused on keeping the oil market well-supplied, even as the group continues to struggle with underinvestment
> Despite steadily increasing previously halted production, OPEC has struggled to meet its supply targets
> OPEC’s shortcomings, combined with geopolitical tensions in Eastern Europe, have helped push oil prices higher. “The world will continue to be thirsty for oil for the foreseeable future,” Barkindo said

Natural Gas

The prompt-month Henry Hub (Mar ’22) contract is up by 15.9c this morning, near $4.354
> Lower-48 dry gas production is holding above 94 Bcf/d, and warmer weather in the Northeast will help production rebound from the effects of freeze-offs
> U.S. LNG feedgas demand is above 13 Bcf/d, with Calcasieu Pass leading the gains, setting a new record-high of 377 MMcf/d
> Over the last two weeks, Canadian imports have backed off as lower-48 dry gas production has staged an impressive recovery. Current imports from Canada are around 6.25 Bcf/d, down from its recent high of 8.7 Bcf/d < The US imports gas from western Canada and exports gas to eastern Canada.
> The February gas-weighted heating degree day forecast gained 3 HDDs to 749 HDDs

U.S. LNG export cargoes to Europe surge as Russia-Ukraine situation intensifies - WSJ
> Demand for U.S. LNG is so high that the U.S. recently set a new record for LNG exports of 13.3 Bcf/d, as all seven U.S. LNG terminals had tankers docked or loading for the first time
> According to Bloomberg, of the five dozen or so U.S. LNG tankers on the water, more than two-thirds are headed for Europe
> U.S. LNG will be even more vital if Russia invades Ukraine and Russia’s Nord Stream 2 pipeline is scrapped, as President Biden has promised

I know lots of you want oil prices to go up each day. That will never happen. Avoiding a war in Ukraine is a "Good Thing" and will get oil traders back to focus on the supply/demand fundamentals, which are EXTREMELY TIGHT.

OilPrice.com: "Oil prices very nearly hit the $100 per barrel threshold on Monday as supply disruption fears spiked due to reports of Russia potentially invading Ukraine. At its peak, the backwardation in the futures market was so steep that the Brent M1-M2 spread surpassed $2 per barrel - the last time markets saw such a discrepancy between spot assessments and forwards was back in 1993. The end of Russia’s military drills next to the Ukrainian border eased concerns somewhat, nudging Brent back into the lower 90s. Yet the market is still struggling to find a good bearish story to believe in - OECD inventories remain unprecedentedly tight and OPEC+ seems reluctant to ramp up production, just as the windfall revenues started to flow in."

There are still analysts that believe OPEC+ has a lot of shut-in oil production. THEY DON'T.

OPEC Secretary-General Mohammad Barkindo told reporters that OPEC+ is trying to ensure they will be able to supply oil to global markets. The political pressure will grow for OPEC+ to hit their quotas and to promise more output, but it doesn’t seem like anything will get them to pump more except if the US shale booms back.

Crude prices are headed higher as demand continues to improve while global inventories remain at depressed levels. An Iran nuclear deal still seems far from happening, and that should suggest any oil dips that emerge will quickly be bought.

Oil’s supply and demand fundamentals are very bullish right now, so it might not take much to trigger the move towards $100 for Brent crude.