Energy Prospectus

Opening Prices:
> WTI is down $1.11 to $75.82/bbl, and Brent is down $1.19 to $81.49/bbl.
> Natural gas is down -12.6c to $5.451/MMBtu.

AEGIS Notes
Oil

Oil extends losses after yesterday’s sell-off
> WTI fell by over $1 to trade around $75/Bbl
> Crude futures saw their biggest daily decline in two weeks following signs of a strong US economy from the US services industry < This is causing more "FEAR of the FED".
> The USD Index (DXY – a proxy for US Dollar strength against a basket of other international currencies) recovered slightly from its recent five months lows. A stronger dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods
> China: Beijing also followed Shanghai and Shenzhen in easing strict Covid curbs. Many major cities have reduced mass testing as optimism grows over China’s reopening plans

Chevron to officially assume control of an oil project in Venezuela this week (BBG)
> The first shipment, which might include 1 MMBbl, will be loaded later this month and follows the Biden administration's granting of permission for Venezuela to resume crude production
> Chevron is the last major company still functioning in Venezuela, with a production capacity of about 0.200 MMBbl/d

The Biden administration is expected to meet with oil and gas executives on Thursday to discuss US’s capabilities to bolster Ukrainian energy infrastructure as Russia targets Ukraine's energy sources (Reuters)
> The US DOE advocated focusing on providing "steady and reliable energy" to customers at home in addition to "supporting allies abroad"
> "As you know, Ukrainian energy assets are being aggressively targeted in an effort to take advantage of the winter's coldest temperatures and harshest weather conditions. Together, we can help to boost Ukrainian resilience," wrote David Turk, US Deputy Secretary of Energy, in a letter to oil and gas executives

Natural Gas

Prompt month gas prices are down 2% this morning to $5.47 after yesterday’s 10% decline
The Summer ’23 strip is down 8c to $4.64, and the Winter ‘23/’24 strip is lower by 5c to $5.28
Weather forecasts have shifted warmer again today
The Lower 48 forecast gained 20 °F in the 1-15 day period, while the Midwest gained 41 °F over the same period

Mountain Valley Pipeline permitting bill may get another chance (BBG)
Efforts by Senator Joe Manchin to accelerate the permitting process of energy infrastructure have so far been unsuccessful
Manchin’s provisions may be included in the National Defense Authorization Act, a defense spending bill that will be voted on in December
The White House has said that it supports attaching Joe Manchin’s energy bill to the defense bill,
The White House Press Secretary said, “The President believes we should pass the defensive authorization bill and that the permitting bill should be included in that legislation”.
However, some Democrats in congress have already vowed to block the defense bill if the permitting reform is included

European LNG imports could decline in 2023 (BBG)
According to analysts from Jefferies, Europe may require fewer LNG cargoes during the 2023 gas restocking season due to demand destruction caused by higher prices
Europe is showing more signs of permanent demand destruction than Asia, which has seen its LNG imports reduced this year
However, the global market for LNG is expected to remain tight for several years, especially with China's covid-zero policy expected to end

OilPrice.com

- Oil prices have been in freefall this week with WTI back to trading slightly above $75 per barrel, as markets remain unimpressed by the G7 oil price cap that has not led to any anticipated supply shortage.

- Both the EU and the United States have agreed to a 45-day transition period when parties can still legally purchase crude, provided it is delivered to the end destination by 19 January 2023.

- In addition, physical traders that usually wait weeks until they learn the final price have raised their reservations, saying the price cap is impelling them to take unnecessary risks without having any impact on Brent or WTI quotes.

- Most oil cargoes across the planet are priced on a forward and floating basis, implying that if G7 buyers would want to make sure they comply with the price cap, they would need to buy at a fixed price, a rarity in the markets.

Trading Economics

WTI crude futures dropped more than 4% to below $74 per barrel, the lowest since December 2021, as sentiment remained clouded by concerns about weak global demand.
Lots of NOISE for traders to digest:
> Advanced economies, especially the US and Europe, are witnessing a drop in manufacturing activity due to tightening financial conditions.
> On top of that, better-than-expected US services and jobs data stoked worries that the Fed will need to remain aggressive for longer.
> Still looking for the demand side but putting a floor under prices, China has been dialing back virus curbs following widespread protests, with several cities scrapping testing requirements that have hindered movement in the world’s top crude importer.
> On the supply front, OPEC+ decided to stick to their existing policy of reducing oil output by 2 million barrels a day from November through 2023.
> Investors were also assessing the impact of the latest sanctions on Russia, including a price cap and a European Union embargo on seaborne imports of Russian oil.

US natural gas futures extended losses to below $5.5/MMBtu, the lowest since July 6th on expectations of higher supply and milder weather across the US over the next two weeks.
> The restart of the Freeport LNG export plant due to take place in the mid of December was pushed until the end of the month as the company is still waiting for regulatory approval, leaving more gas in the domestic market.
> Also, average gas output in the US Lower 48 states rose to a record 99.5 bcfd in November, up from 99.4 bcfd in October. Meanwhile, warmer-than-usual temperatures should allow utilities to leave more gas in storage which is now around 2.4% below the five-year (2017-2021) average for this time of year.
> Still, US gas futures are up nearly 75% so far this year as overseas demand for LNG remains strong especially from Europe after the war in Ukraine has disrupted the gas supply.

Closing Prices:
> Prompt-Month WTI (Jan 23) was down $-2.68 on the day, to settle at $74.25
> Prompt-Month Henry Hub (Jan 23) was down $-0.108 on the day, to settle at $5.469

EIA's weekly reports and IEA's monthly report should help settle down the oil & gas prices. This world is still short oil & gas.