Energy Prospectus

Opening Prices:
> WTI is up $1.81 to $117.49/bbl, and Brent is up $3.08 to $121.19/bbl.
> Natural gas is down -5.0c to $4.966/MMBtu.

AEGIS Notes
Oil

Brent crude shot up to $139.13/Bbl Sunday evening as chances of a Russian oil ban spurred supply shortage fears
> Oil pared gains Monday morning, with oil benchmarks trading up only a few dollars from Friday’s close after Germany said it opposed a push to block Russian imports
> The Biden Administration is mulling whether to sanction Russian oil imports without the participation of allies in Europe

U.S. Secretary of State Antony Blinken told NBC over the weekend that the White House is in “very active discussions” with Europe about a ban to tighten the economic squeeze on Putin (Bloomberg) < My concern is that Team Biden, which has screwed up just about everything they get involved in, is not smart enough to realize the impact all of these sanctions are going to have on the U.S. and other OECD countries. The spike in oil prices is probably helping Russia. BTW Russia is "helping" Team Biden with the new "Give a Nuke to Iran Plan" and Putin will probably get some of the $billions going to Iran when the deal closes.

The International Monetary Fund warned Russia’s war with Ukraine and accompanying sanctions will have a “severe impact” on the global economy
> JPMorgan economists cut their outlook for global growth this year by about a percentage point and raised their inflation estimate by a similar amount
> “Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses,” the IMF said

Gas Prices

The prompt-month Henry Hub contract is down by 5c this morning, near $4.966
> Canadian imports hit a 30-day low of 4.38 Bcf/d over the weekend as U.S. gas demand remains mild, and production recovers
> Lower-48 dry gas production has held between 93.5 – 94 Bcf/d over the last couple of weeks
> LNG feedgas demand is back up above 12.8 Bcf/d, as Calcasieu Pass recently set a new all-time high of 0.55 Bcf/d
> Wind-powered electricity generation has returned to around 70 G.W., while total demand has retreated, which has weighed on gas-fired power generation

European gas prices surge as the U.S., E.U. mulls new sanction on Russian oil, gas exports
> The prompt-month TTF contract extended its record and is now at around $88/MMBtu, up from $65 on Friday, March 4 < Last year at this time, the TTF (Europe's futures contracts for natural gas) was trading at around $6/MMBtu. Europe will be totally screwed if they are cut off from Russian oil & gas. We can keep sending them LNG, but they don't have the facilities to handle much more than they are getting now.
> Many governments are starting to get plans in place to ration supplies in the event Russian oil, gas exports are sanctioned.

Reuters:
US Secretary of State Antony Blinken (AP)
Sunday, 06 March 2022 11:16 PM

The United States and European allies are exploring banning imports of Russian oil, U.S. Secretary of State Antony Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.
Europe relies on Russia for crude oil and natural gas but has become more open to the idea of banning Russian products in the past 24 hours, a source familiar with the discussions told Reuters on Sunday.

Meanwhile, U.S. House of Representatives Speaker Nancy Pelosi also said in a Sunday letter that the chamber is "exploring" legislation to ban the import of Russian oil and that Congress intends to enact this week $10 billion in aid for Ukraine in response to Moscow's military invasion of its neighbor.

The White House is also talking with the Senate Finance Committee and House of Representatives Ways and Means Committee about a potential ban, the source said.

Still, Blinken also stressed the importance of maintaining steady oil supplies globally. < So why does Team Biden try to block every pipeline???

"We are now in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course, at the same time, maintaining a steady global supply of oil," Blinken said in an interview on NBC's "Meet the Press" show.

Blinken, who is on a trip across Europe to coordinate with allies the response to Russia's invasion of Ukraine, also said he discussed oil imports with President Joe Biden and his cabinet on Saturday. < I wonder what the average IQ was in that room?

Japan, which counts Russia as its fifth-biggest supplier of crude oil, is also in discussion with the United States and European countries about possibly banning Russian oil imports, Kyodo News reported on Monday.

Asked about a potential embargo on Russian oil imports at a regular news conference on Monday, Japan's top government spokesperson Hirokazu Matsuno declined to comment on its communication with the United States.

Oil prices have soared over the past week after the United States and its allies sanctioned Russia over the invasion.

A bipartisan group of U.S. senators introduced a bill on Thursday to ban U.S. imports of Russian oil. The bill is getting fast-tracked and could ultimately become the vehicle for the sanctions. < I sure hope Congress is reminding Team Biden that they do not have the authority to make these types of decisions on their own.

After Russia invaded Ukraine, the White House slapped sanctions on exports of technologies to Russia's refineries and the Nord Stream 2 gas pipeline, which has never launched.

So far, it has stopped short of targeting Russia's oil and gas exports as the Biden administration weighs the impacts on global oil markets and U.S. energy prices.

Asked if the United States has ruled out banning Russian oil imports unilaterally, Blinken said: "I'm not going to rule out taking action one way or another, irrespective of what they do, but everything we've done, the approach starts with coordinating with allies and partners," Blinken said.

He said there were a series of additional measures that the United States was looking at to increase the pressure on Russia, but he did not provide any details on what the new measures would be.

The United States imported more than 20.4 million barrels of crude and refined products a month on average in 2021 from Russia, about 8% of U.S. liquid fuel imports, according to the Energy Information Administration (EIA). < So, why did Team Biden stop the Keystone XL pipeline construction? With that pipeline in place, we would not need a drop of Russian oil. My point is that Team Biden's knee jerk reactions and desire to reverse everything Trump did have put us in this situation of being more dependent on oil from Russian and other OPEC+ countries.

going to be a lot of railed Canadian crude to the US in the intermediate future

>I wonder what the average IQ was in that room?

Below 100

Dan,
Are you planning to update the forecasts with updated Oil & Gas Forecasts.
You mentioned adding $20-$30 to WTI.
Are you waiting for a new Raymond James forecast?
I know everything is up in the air right now, but it seems pretty certain extreme tightness will prevail.
Thanks
Kevin

Yes, I will update all of the valuations before my April newsletter.

We will publish my March newsletter tomorrow. Working on it now.

You can download any of the forecast models from our website and adjust the oil, gas and NGL price assumptions at the bottom to see how higher prices impact revenues, net income and operating cash flow. The models are Excel spreadsheets that are "macro driven" so they update future periods automatically when you change production volume or commodity price assumptions at the bottom. The spreadsheets also update stock valuations automatically. Keep in mind that the Wall Street Gang's valuation multiples will increase to more than what I am using if their paridigm changes to the reality that triple digit oil prices are going to be the new normal for awhile.

I believe the forecast models are the most valuable tool on our website. They are really easy to use and understand. Remember that operating cash flow is the Key Stat for these companies.

For oil, as of today I would assume that oil will average $100/bbl for the remainder of 2022 and 2023. It all depends on what Putin does next, but I think the "Right Price" for oil is around $100/bbl. Just based on the fundamentals, we should see a spike to $110/bbl in Q3. The geopolitical risk premium is very high now, but FEAR related spikes seldom last long.

I agree the forecast models are of great value and easy to use.
I will do my own tinkering.
Thanks Dan!

Closing Prices:
> Prompt-Month Henry Hub (Apr 22) was down $-0.183 on the day, to settle at $4.833
> Prompt-Month WTI (Apr 22) was up $3.72 on the day, to settle at $119.40