Energy Prospectus

Opening Prices:
> WTI is down $1.83 to $74.45/bbl, and Brent is down $2.23 to $81.40/bbl.
> Natural gas is down -42.3c to $6.601/MMBtu.

AEGIS Notes
Oil

WTI dropped to the lowest level since December 2021 on Monday morning
> Many commodities came under pressure as protests in China erupted over draconian anti-virus curbs
> The protests were a rare show of defiance and are raising the threat of a government crackdown (Bloomberg)
> In Beijing, traffic was down 45% from a year ago

AEGIS notes that China’s oil demand growth is key to the overall demand picture for 2023. Many analysts have China accounting for about half of the world's total petroleum demand growth next year

Money managers slashed net-long positions in Brent by the most since March (ICE)
> The pullback in positions was the sixth largest since ICE began publishing data in 2011
> Speculator net-longs in ICE Brent were cut by 71k lots last week
> CFTC data report is due later Monday, delayed by the US holiday
> AEGIS notes that speculators do not often lead price movements, but they can exacerbate moves to the downside and upside

Natural Gas

Natural gas prices have fallen 6% to $6.60
> The Summer ’23 strip is lower by 7 cents to $5.15 and the Winter ‘23/’24 strip is down 4 cents to $5.70
> Weather forecasts have warmed over the weekend < Big shot of Artic air to arrive in Chicago on Dec 6 not yet being picked up by most forecasts.
> The forecast for Lower 48 average temperatures has shifted warmer by 5.8°F for the 1-15 day period
> Most of the change occurred in the forecast for the South Central region, which has warmed by 23.7 °F, mostly in the 6-10 day period
> If these temperatures materialize, it should lead to gas demand for space heating of about 90 Bcf/d over the next few weeks, up from 65 Bcf/d reported at the beginning of November

Europe’s LNG import capacity to increase to 34% by 2024 (EIA)
> By the end of 2023 Europe will have the capacity to import an additional 5.3 Bcf/d from 2021 levels, and by the end of 2024 an additional 1.5 Bcf/d
> Many of the import terminals which will come online are floating storage and regasification units, which are smaller but faster to build and deploy than onshore facilities
> An increase in European import capacity will be met by a planned buildout of US LNG export capacity over the next several years

U.S. oil prices have fallen to their lowest level since December 2021 on fears that protests in China against Covid-19 lockdowns will dent demand.
West Texas Intermediate crude oil futures, the North American benchmark, slid 3.2% on Monday morning to trade close to $74 a barrel, a level last reached in late December.
Futures for Brent crude, the global benchmark, also dropped 3.3% to trade close to $81 a barrel. That’s its lowest level since January.
Global oil prices have fallen about 35% since June as strict coronavirus restrictions in China have kept demand weak, and as some of the world’s major economies have signaled they are heading toward a recession. < Per IEA's November "Oil Market Report", demand for oil will increase by 1.6 million bpd year-over-year in 2023 even if we do have a recession.

Lots of NOISE and mixed signals are keeping a lid on oil prices.

Weather will determine U.S. natural gas prices and a MAJOR blast of cold air is arriving in the region that draws the most ngas from storage a week from tomorrow, December 6.

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $0.96 on the day, to settle at $77.24.
> Prompt-Month Henry Hub (Dec 22) was down $-0.312 on the day, to settle at $6.712.

This morning's selloff of WTI made no sense. Protests in China over the Covid lockdowns seem very bullish to me.

JAN23 gas contract should spike to at least $8.00 within a week. Super Cold air is heading deep into the U.S. early next week.