Energy Prospectus

Opening Prices:
> WTI is down $0.79 to $100.91/bbl, and Brent is down $0.56 to $104.43/bbl.
> Natural gas is up 7.1c to $6.921/MMBtu.

AEGIS Notes
Oil

WTI is trading down $0.79c at $100.91 per barrel
> U.S. oil production was at 11.9 million barrels per day as of April 15, still somewhat lower than pre-pandemic levels. Meanwhile, the number of Baker Hughes oil-directed rigs jumped to 695 compared to 438 last year < For reference, U.S. oil production was 12.9 million bpd pre-pandemic in Nov 2019.
> Crude inventories, excluding the SPR, decreased by 8 MMBbls for the week ending April 15, according to the EIA
> API reported an increase in crude stocks of 4.784 million barrels for the week ending April 22, in contrasts with the Bloomberg survey estimate of -225 MBbls

Diesel futures hit reaches an all-time high
> NYMEX’s ultra-low sulfur diesel futures finished at $4.4679 per gallon, breaking the previous high set since the United States formally sanctioned Russian oil
> New York Harbor inventories are at their lowest in more than two decades
As I have been highlighting in my weekly podcasts, the diesel shortage in the U.S. and Europe is a VERY BIG DEAL. Our economies run on diesel and we cannot solve the supply chain problems if trucks and trains have trouble getting diesel.

Germany's Economy Minister, Robert Habeck, stated that the country's dependency on Russian oil has been reduced to the point where a full ban would be "manageable." (BBG)
> Crude imports from Russia have dropped to 12% of overall imports, down from 35% before the invasion of Ukraine
> The EU is still considering a possible continent-wide ban on Russian crude

Natural Gas

The prompt-month (May ’22) gas contract is up by 7.1c this morning, near $6.921 as it heads for expiry
> Lower-48 dry gas production is down by 1.1 Bcf/d, at 91.5 Bcf/d, with the northeast region accounting for 0.82 Bcf/d of the fall
> LNG feedgas demand is at around 12.9 Bcf/d. Freeport LNG flows are still reduced due to maintenance on T1 but should be concluded today
> AEGIS notes that there will likely be more maintenance in the coming weeks that will limit LNG feedgas demand

Russian energy giant Gazprom has told Poland and Bulgaria it will halt gas supplies beginning Wednesday
> Russian President Vladimir Putin has demanded that countries he terms "unfriendly" agree to a scheme under which they would open accounts at Gazprombank and make payments for Russian gas imports in euros or dollars that would be converted into roubles, thereby skirting sanctions
> According to Bloomberg, four European buyers have already paid for supplies in Roubles, and ten have opened an account at the Gazprombank
> The EU Commission President, Ursula von der Leyen, warned companies that Rouble payments for Russian gas breach sanctions
> Poland and Bulgaria are the first to have their gas cut by the international pariah, but it is uncertain whether more will follow, and if so, it will not likely take place until the second half of May, when the next round of payments is due
> The Dutch TTF benchmark price jumped by $3.89 (10.5%) to $32.24 in response to the news

Dan: your thoughts on the Russian natgas cutoff for Poland & Bulgaria?

Since winter is over, it is not that big of a deal for Europe. Just Putin sending a message. Europe's bid for LNG did spike higher this morning.

Keep an eye on coal prices. Without a lot of fuel switch from gas to coal for power generation this summer, it will be IMPOSSIBLE to refill U.S. storage before the next heating season begins in November. The price of coal today is why the JUNE22 futures contract for HH gas is trading at $7.18 at the time of this post.

Closing Prices:
> Prompt-Month WTI (Jun 22) was up $0.32 on the day, to settle at $102.02
> Prompt-Month Henry Hub (May 22) was up $0.417 on the day, to settle at $7.267 < This is CRAZY for the last week of April. The JUN22 contract will be the front month in a few days and it closed today at $7.407.

Tomorrow's ngas storage report could increase the deficit to the 5-year average and push it back over 300 Bcf. If we get to the end of May and storage is still more than 300 Bcf below the 5-year average, I predict that we see the futures contracts for DEC22 to MAR23 move over $10.00 by the end of October.

>was up $0.417 on the day, to settle at $7.267 < This is CRAZY

It is crazy..The hedgers are going to get screwed again like back in Feb. May gets settled at 7.267. So anyone that hedged the downside at 2.50 will have to pay the counter party (7.267-2.50) 4.767. For the back end payment of 4.767, they got downside protection of 2.50. The worst is it goes to 0, so wtf did it get for the 4.767 back-end payment? 30 bcf at 4.767 is a big check to write 143 MILLION for one month!!!

Antero stated in their press release this:

"The premium to NYMEX was negatively impacted by the sharp increase in the natural gas price on the final trading day for the February natural gas contract, resulting in a settlement price
of $6.27 per Mcf, followed by a subsequent decline in natural gas daily prices for the month."

Today at 2:30 the NG contract was at 7.07 , the next half hour it climbs to 7.267, 20 cents!!!! Someone is manipulating the close to the detriment of the hedgers some who settle on a point in time price. Recall when oil went -35 buck in March 2019

To protect themselves from this BS, the hedger needs to pair a basis swap which offsets the price rise. Aegis did a briefing on this which I posted on this site. One other thing they can do is write the contract to settle on the average price for the month. So the devil is in the details.

I wondered out loud who would be getting screwed on this. Well AR was one victim

1 bcf hedged for a month is 30 bcf and extra 20 cents is 6 m bucks in 30m minutes

As of me, I'm greedy, i want the whole thing. NG could be double digit soon. Costless swaps and writing calls is foolish, imho., Let the upside run and if you have to, just buy puts