Energy Prospectus

Opening Prices:
> WTI is down $5.77 to $108.13/bbl, and Brent is down $6.01 to $114.64/bbl.
> Natural gas is down -10.2c to $5.469/MMBtu.

Volatility is here to stay. Oil price is going to be headline driven all year, but fundamentals point to a much higher oil price.

AEGIS Notes
Oil

China’s Covid virus resurgence is causing worries about oil demand
> Shanghai will lock down half of the city in turns for mass COVID-19 testing
> About 62 million people in the country are either in lockdown or facing one imminently, according to Bloomberg < 4.4% of China's population

Russian oil supply is getting squeezed as many western buyers avoid purchases (Bloomberg)
> Some crude is working its way into Asia as east-bound exports of a few grades from the Baltic and Black sea rose to the highest in almost two years in March (Vortexa)
> Russia is still able to sell its crude due to steep price discounts, Deputy Prime Minister Alexander Novak said last week
> Tankers carrying Russian oil chemicals and oil products are increasingly concealing their movements, a move that experts say could signal attempts to evade sanctions < This is a BIG DEAL. Large / well-known shipping companies will stop transporting Russin goods, including oil because of fears that they may be sanctioned. This may have more impact on Russian oil exports than the sanctions against Russia.

Natural Gas

U.S. gas futures are down this morning, with the prompt contract trading 10.2c lower near $5.469
> U.S. lower-48 dry gas production held above 93 Bcf/d over the weekend, but its still 2 Bcf/d below the 2022 high reached in early February
> U.S. LNG feedgas demand is at around 13.1 Bcf/d < Close to U.S. LNG export capacity. Including pipeline exports, U.S. ngas exports are over 20 Bcfpd.
> Tellurian announced today that it has issued a limited notice to proceed under its EPC contract to begin construction of phase 1 of the Driftwood LNG terminal. The site will be constructed near Lake Charles, Louisiana

Totalenergies CEO says decision to attract investment needed to calm European gas prices – Reuters
> Totalenergies CEO Patrick Pouyanne said on Saturday European gas prices would keep rising until a decision is made that Europe will use the fuel for the long term, which would lure investment
> He added it was inevitable Europe, which is around 30% to 40% dependent on Russian gas, would seek other suppliers, necessitating costly investments in infrastructure such as liquefied natural gas (LNG) terminals
> MY TAKE: Most European countries cannot afford to build more wind and solar power projects. The Green Bad Deal and Woke Leadership is killing Europe. We can't let it happen to the U.S. or Canada.

The NYMEX strip for MAY22 to FEB23 is over $5.50/MMBtu. If this is what natural gas trades for in the "Real World", it will give big revenue boosts to companies that have a lot of unhedged gas and NGLs to sell.

The 10-day forecast (See it here: https://weather.com/maps/tendayforecast ) is VERY BULLISH for natural gas prices. Last week, EIA reported that natural gas in storage was 293 Bcf below the 5-year average. My guess is that the deficit to the 5-year average will increase by another 126 Bcf during the three week period ending April 8 to 419 Bcf. If the weather patten you can see on the April 6th forecast holds through April 15th, we may see the deficit to the 5-year average expand to more than 450 Bcf in mid-April. That will make it difficult to refill U.S. natural gas storge before the next winter heating season and keep shipping LNG to Europe as Joe Biden has promised.

If we have a major hurricane that takes Gulf of Mexico offline for even a week, we could see another "Mother of all Bidding Wars" for our most important space heating fuel. A scenario that leads to double-digit natural gas prices is looking more likely each week.

Closing Prices:
> Prompt-Month WTI (May 22) was down $-7.94 on the day, to settle at $105.96
> Prompt-Month Henry Hub (Apr 22) was down $-0.063 on the day, to settle at $5.508

MY TAKE: Oil is now very "headline driven" and we can expect lots of volitivity to continue. Q1 average WTI is above what I used in all of my forecast model. Q1 results are going to be very good. Plus, nothing happened over the weekend to solve the significant transportation fuel shortages that we have all over the world. The shortage of diesel in the U.S. is a MAJOR PROBLEM for farmers and trucking companies that push inflation even higher.

As I posted earlier, the U.S. natural gas and NGL markets are extremely tight . I cannot see much chance that natural gas storage will refill before next winter. The refill season will start two months late this year with winter still hanging tough in NE quarter of the U.S. Check out Chicago. Sub-freezing with wind out of the north. I now expect that storage will fall at least 350 Bcf below the 5-year average by April 15.