Energy Prospectus

Opening Prices:
> WTI is up $1.45 to $78.69/bbl, and Brent is up $1.80 to $84.99/bbl.
> Natural gas is up 6.4c to $7.26/MMBtu.

AEGIS Notes
Oil

Oil extended gains on Tuesday morning following rumors that OPEC+ will discuss production cuts at its December 4
> The news (rumor) of a possible OPEC+ cut yesterday overpowered bearish sentiment surrounding Chinese oil demand growth. China is experiencing record Covid cases and anti-lockdown protests, stirring fears of more draconian measures from the Chinese government. < I heard yesterday that there have been very few deaths from Covid in China and very few people that test positive go to a real hospital. Many are sent to what I would call a prison.
> China is refining its approach to dealing with Covid-19 by boosting vaccinations (Bloomberg)
> Oil prices rose as Beijing said it would bolster vaccination among seniors, a move is seen as crucial to China reopening its economy
> The moves come as the Chinese populous erupted in protest over Covid Zero mobility curbs

“ The structure of the market seemingly justifies a deeper reduction,” by OPEC+, RBC Capital Markets analysts including Helima Croft said in a note to clients (Bloomberg)
> “The same dynamics that OPEC had voiced concerns about nearly two months ago are now visible in the forward curve.”

Natural Gas

Natural gas prices are up slightly this morning, trading around $7.28 in the prompt month JAN23
> The December contract expired yesterday, with the January contract now the prompt month

Shell purchases renewable natural gas producer for $2 billion (Reuters)
> Nature Energy produces pipeline-quality natural gas from industrial, agricultural, and household waste, which is converted into biogas
> Nature energy is the largest RNG producer in Europe with 14 plants in operation
> The company plans to produce up to 9.2 million MMBtu per year by 2030

US looking to limit methane emissions from flaring and leaks (Reuters)
> Rules proposed by the Biden administration on Monday call for producers to limit methane emissions from leaks, or flaring when drilling on public lands
> The regulations would place a monthly limit on flaring, and require leak detection programs
> The Bureau of Land Management estimates that the rule would cost oil and gas producers $122 million per year to implement but would give them $55 million per year in recovered gas < All costs will be passed on to consumers.

Trading Economics:
Oil
WTI crude futures were up more than 2% to above $79 a barrel on Tuesday morning, prompted by hopes that China would soon relax some of its covid restrictions, which could boost oil demand. At the same time, speculations that OPEC+ may agree on another production cut in its December 4th meeting also pushed oil prices higher. Last month, the cartel announced a 2 million barrel-a-day output reduction and further cuts could also be an option this time. Meanwhile, EU governments failed to agree on Monday on the Russian price cap which is due to come into effect on December 5th. Both the G7 and European Union have been discussing a cap of between $65 and $70 a barrel but some countries like Poland advocate the cap should be lower. < MY TAKE: The price cap on Russian oil is joke. It is not going to be enforceable, and it will just set a price floor. Regardless, it will have zero impact on Brent or WTI.

Natural Gas
US natural gas futures were trading around $7.3/MMBtu, remaining below an almost two-month peak of $8.2/MMBtu hit on November 23st, on expectations of lower demand. Forecasts released recently are pointing to milder weather over the next two weeks. Still, prices are due to remain elevated amid prospects of robust heating demand during the winter months. Meanwhile, investors remained concerned about possible coal supply disruptions. Workers at the largest US rail union voted against a tentative contract deal reached in September, raising the possibility of a year-end strike that could disrupt coal deliveries and force power generators to burn more gas. At the same time, the Freeport LNG export plant in Texas, forced to go offline in June following a fire, expects to begin bringing operations back online in mid-December, while Europe is clamoring for US exports after Russia threatened to cut supplies even further.
MY TAKE:
> Winter Storm Beck will be the first wave of seriously cold air moving into Chicago.
Watch: https://weather.com/news/weather/video/ ... =hp-slot-2
> A week from today an even colder blast of Artic air will arrive in Chicago and spread sub-freezing temperatures across the Great Lakes Region. I expect this one to result in the first triple digit draw from U.S. ngas storage for the week ending December 9.