Energy Prospectus

Opening Prices:
> WTI is up $0.44 to $86.05/bbl, and Brent is up $0.58 to $92.21/bbl.
> Natural gas is down -38.8c to $6.065/MMBtu.

AEGIS Notes
Oil

WTI is trading near $86/Bbl this morning amid concerns about weaker demand
> Fears of economic slowdown and weak Chinese demand continue to weigh on crude prices
> Major Chinese cities, including Shanghai, Shenzhen, and Zhengzhou, ramped up COVID testing and introduced new curbs amid a spike in infections
> China reiterated its stance on a strict Covid zero policy
> Chinese President Xi praised the nation's Covid zero policy during his speech at the 20th Communist Party congress, sending a message that China will keep up the policy despite its detrimental impact on the economy
> China is expected to release 3Q22 trade and economic data this week, which should provide further insight into how the policy has affected the country's economy and crude demand

OPEC+ member states endorsed the group's decision to cut output after the White House accused Saudi Arabia of coercing other member nations into supporting the decision (Reuters)
> The UAE's energy minister said in a tweet that the decision was "unanimously approved" and a "pure technical decision, with no political intentions whatsoever"
> Iraq's state oil marketer also made a statement saying there is "complete consensus among OPEC+ countries"
> Kuwait Petroleum Corporation's CEO, Nawaf Saud al-Sabah, also said that the country was eager to maintain a balanced oil market

Natural Gas

Natural gas prices are down 6.5% in the prompt month
> The Summer ’23 strip is down 16 cents to $4.98, and the Winter ‘23/’24 strip has fallen 14 cents to $5.54
> Weather forecasts have shifted warmer over the weekend, with most of the changes coming from the Northeast, Midwest, and South Central regions

China to stop reselling LNG to foreign buyers (BBG)
> China's state-owned gas importers will no longer be reselling LNG to ensure adequate domestic supplies
> China has been reselling additional cargoes of LNG to Europe due to the sustained premium of Dutch TTF to JKM
> The decision was likely caused by forecasts of a small gas supply deficit in China

BP to buy US renewable natural gas producer for $4.1 billion (BBG) < This seems very expensive for just 30,000 mcfpd.
> BP announced it would purchase Archea Energy for $26 per share, as BP looks to invest more in low-carbon energy sources
> Archea Energy produces pipeline-quality natural gas from biogas captured in landfills or farms
> In its most recent production guidance, Archea said that it plans to produce 10.9 Bcf of natural gas per year

From ScotiaBank: Global Oil & Gas Market Outlook – 4Q22 Edition

OUR TAKE: Positive. Global oil prices followed a downward trend in the third quarter due to a combination of bearish factors both on the demand and supply side. Looking forward into the future, we think the global oil market will remain in a tug of war but with a tilt of upward bias. However, large daily price swings will continue to be a rather common occurrence as investors’ sentiment and focus shift between demand concern and supply tightness.

We are lowering our 4Q2022 Brent price assumption to $100 from $110 previously, but modestly raise our 2023 assumption to $100 from $98.67. Importantly, we raise our Brent price assumption from 2024 to 2026 by $5/bbl reflecting potentially lower production growth in the U.S. shale and more supportive actions from the OPEC plus alliance.

Canadian Oil Outlook. In our view continued capital discipline (ie minimal volume growth) and improving egress have laid the groundwork for robust Canadian liquids prices. We expect demand for Canadian oil to increase as SPR releases end (although they may be extended) and the impending EU embargo on discounted Russian oil comes into effect. Further, the completion of TMX in late 2023 will add additional egress and support Canadian liquids differentials.
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My forecast/valuation models are based on WTI averaging $95/bbl in Q4 2022 and $100/bbl in 2023.

Closing Prices:
> Prompt-Month WTI (Nov 22) was down $-0.15 on the day, to settle at $85.46
> Prompt-Month Henry Hub (Nov 22) was down $-0.454 on the day, to settle at $5.999