Energy Prospectus

Opening prices:
> WTI is up $0.58 to $71.60/bbl, and Brent is up $0.19 to $76.29/bbl.
> Natural gas is up 66.1c to $6.906/MMBtu.

AEGIS Notes:
Oil

Oil continues to trade near YTD lows after plunging by 11% last week
WTI gained 58c this morning to trade around $72/Bbl
Despite efforts to ease restrictions, the number of Covid cases in China as winter approaches continues to put pressure on crude prices
Many businesses in Beijing were shuttered over the weekend, and infected people are rushing to already overcrowded hospitals
The 0.622 MMBbl/d Keystone Pipeline is still shut, and TC Energy has not announced a restart date

Putin threatened to cut Russia's oil production on Friday in response to the G-7 price cap (BBG)
Putin said, "I'm not saying now that this is a decision, but, if necessary, we'll think about possible production cuts" and that he has "already said that we simply won't sell oil to those countries"
He also said that a response would be announced in a presidential decree within the next several days
The remarks come after both the EU and G-7 set a $60/Bbl cap on Russian crude

Turkey's oil tanker standoff starts to ease (BBG)
Turkish authorities allowed oil tankers to pass through the Bosphorus shipping strait after refusing to do so without proof of insurance, indicating that tensions over the restrictions are easing
As of Friday, twenty-six tankers from Kazakhstan carrying more than 23 MMBbl of oil were stuck in transit in the Turkish waterways
Turkish maritime authorities reiterated the need for proof of insurance, warning that if tankers in transit don't have it, "all" travel in the nearby Dardanelles strait will be suspended while they are removed

Natural Gas: W

Natural gas prices are up 10.5% to $6.90 this morning
The Summer ’23 strip is up 26c to $5.26, and the Winter ‘23/’24 strip is higher by 22c to $5.71
Weather forecasts shifted cooler over the weekend, with the Lower 48 forecast falling 12 °F in the 11-15 day period
The Midwest regions forecast fell 37 °F in the 1-15 day period, and the South Central region's forecast fell 29 °F

California natural gas prices rise 52% amid cold weather (BBG)
Natural gas for next-day delivery at SoCal city Gate was 52% higher to $47/MMBtu on Friday, the highest price since February 2021
A winter storm impacting the Western US has caused blackouts and flooding, leaving 49,000 people without power, and increasing demand for space heating
Natural gas storage in the Pacific region is significantly lower than the average level for this time of year, with a deficit of 24% to the five-year average

IEA says the EU may face a shortage of gas in 2023 (Reuters)
The agency said that while Europe likely has enough gas in storage for this winter, building inventories back up will be more difficult in 2023 and could lead to a gas shortage
If Russian flows are further curtailed and Chinese LNG demand increases, then Europe could face a shortfall of 953 Bcf, according to the IEA’s analysis
The EU will meet this Thursday to begin preparing for next winter as they also attempt to place a price cap on the small amount of Russian gas that is still flowing into Europe

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $2.15 on the day, to settle at $73.17
> Prompt-Month Henry Hub (Jan 23) was up $0.342 on the day, to settle at $6.587

Hang on to those gassers. Weather turning very bullish for gas this week and for remainder of December.

Watch Joe Bastardi's Saturday Summary at https://www.weatherbell.com/premium

U.S. natural gas futures have extended their rally, jumping nearly 10% on Monday’s session following forecasts for much colder weather as well as higher heating demand through late December than previously expected.

Colder weather is likely to force utilities to pull more gas from storage, with storage levels already ~1.5% below the five-year average for this time of year.

The cold snap is expected to start next weekend and peak right on Christmas in the bulk of the country.

Meanwhile, the deep freeze in Europe shows no signs of abating, although much of that may have already been priced in. The period from Dec 19 through Boxing Day is now tracking towards moderately higher-than-normal temperatures, which should offer some relief for TTF.

“The weekend weather data held a series of frigid cold shots advancing out of Western Canada and into the U.S. during this time frame, resulting in chilly low temperatures and strong natural gas demand nationally. What makes the pattern strongly to the bullish side is the end of the weather model runs teased cold Canadian air continuing to advance into the Lower 48, suggesting strong national demand will last through the end of the month,” NatGasWeather has said.

The January Nymex contract was up 62.7 cents to $6.872/MMBtu at around 8:50 a.m. ET. February was up 56.7 cents to $6.649. On the west coast, spot gas prices extended their recent surge to the highest in nearly two years as freezing temperatures and snow raised demand for scarce supplies of the fuel.

According to NaturalGasIntel.com, spot prices at Northern California's PG&E Citygate reached as high as $36/MMBtu; on Friday, the highest price hit $55/MMBtu, with offers up to $60, the highest daily price since December 2000.

Two weeks ago, U.S. nat gas prices fell sharply following Freeport LNG's announcement that the planned restart of its export plant in Texas was postponed from mid-December to the end of the year.

By Alex Kimani for Oilprice.com