Energy Prospectus

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Opening Prices:
> WTI is down $2.23 to $89.41/bbl, and Brent is down $3.31 to $96.00/bbl.
> Natural gas is down -2.8c to $9.014/MMBtu.

AEGIS Notes
Oil

Oil is set to post a third consecutive monthly decline of nearly 10%
> WTI fell by $2.29 this morning to trade below $90/Bbl amid China's renewed Covid lockdowns
> China's "zero Covid" policy weighed on the market amid anticipation of weaker fuel demand

Iran says it is evaluating the U.S. response to the European Union draft proposal aimed at restoring the 2015 nuclear deal while stressing the importance of "stronger guarantees" from the American side to seal the deal (BBG) < I cannot believe the U.S. congress will guarantee anything for Iran, which is just playing Team Biden while they move closer to weapons grade uranium.
> Iran's Foreign Minister stated today that the nuclear agreement is "not out of reach" but that it may request the U.S. for stronger terms
> The statement follows yesterday's conflicting reports that claimed a deal had been reached but were later refuted by a representative for the U.S. State Department

Russian seaborne crude exports to Asia have decreased by more than 0.50 MMBbl/d over the last three months, reaching their lowest levels since late March (BBG)
> Shipments in the week ending August 26 lost most of the prior gains on a weekly and four-week average basis, according to Bloomberg's ship tracking data
> Total flows decreased to 3.04 MMBbl/d for the week of August 26 compared to the previous week's 3.62 MMBbl/d

Natural Gas

Prompt month gas prices are down from yesterday’s settlement, trading around $9.00
> While the front of the curve is trading down, prices are largely flat to positive beyond Apr’23
> Weather forecasts continue to shift warmer for the next two weeks, with above-normal temperatures expected
Reminder: All of the EPG forecast models are based on HH natural gas prices averaging $8.00 in Q3 and $9.00 in Q4.

As prices rise, shale oil firms increase the output of natural gas (Reuters)
> Several years of low prices led many oil producers to ignore natural gas
> "Two or three years ago, oil companies would not even set a hand in natural gas... it was a negative, it was a nuisance, but it's not today," said Jay Allison, chief executive of Comstock Resources (CRK)
> U.S. shale gas production is expected to reach 93.84 Bcf/d in September, up 67.15 Bcf/d from a year ago, according to the EIA

Nordstream 1 gas flows to Europe halted again (Reuters)
> Russia slashed supply via the pipeline to 40% of capacity in June and to 20% in July
> While the latest supply cut is being attributed to maintenance, it has exacerbated fears of further cuts to gas flows in Europe
> The EU has filled 80.17% of its storage capacity, ahead of its target of 80% by October < Yesterday's natural gas price in Europe was $77.99/MMBtu.

ng Q3 settled at 8.197 + 19.7 to Dan's models

Trading Economics

WTI crude futures are down more than 6.5% to $90 per barrel in August, their third consecutive monthly drop after a 70% rally between December and May as investors came to terms that a global economic slowdown will heavily impact energy demand, offseting tight supplies. Major central banks around the world continue to aggressively tight monetary policy and fresh Covid outbreaks in major Chinese cities of Shenzhen, Guangzhou, and Dalian placed millions under strict lockdowns, compounding worries of weak economic activity in the world’s largest oil importer. On the supply side, clashes in Iraq kept markets on edge, but oil output in the OPEC member remains largely unaffected. Investors now await OPEC nations to meet on September 5th to decide on production policy, after the Saudi Energy Minister stated the cartel could cut production should Iran clinch a nuclear deal with the West and restore exports.

US natural gas futures fell to below $9/MMBtu, the lowest in over two weeks (have rebounded this afternoon to $9.15), tracking a decline in the European benchmark and as domestic supplies were seen rising. Gas output in the US Lower 48 states rose to 98.1 billion cubic feet per day (bcfd) on Monday, its highest since August 8th, according to data provider Refinitiv. Meanwhile, European natural gas prices extended a decline from record levels despite the shutdown of the Nord Stream pipeline until at least September 2nd, as Germany almost reached its target of gas inventories being 80% full. Still, prices remain not far from an over 14-year high of $10/MMBtu touched last week. A series of heatwaves this summer across the US has sent demand from gas-fired power plants to all-time highs and expectations of increased demand for US LNG exports amid growing concerns of European shortages have been supporting prices. Meanwhile, Freeport LNG announced that it would delay the restart of its Quintana export plant to November.

Closing Prices:
> Prompt-Month WTI (Oct 22) was down $-2.09 on the day, to settle at $89.55
> Prompt-Month Henry Hub (Oct 22) was up $0.085 on the day, to settle at $9.127

MY TAKE: The global oil market and the U.S. natural gas market are much different. The paper traders and geopolitical risk factors have much more impact on the oil prices. The weather and ngas storage reports have the most impact on HH natural gas prices.