Energy Prospectus

Opening Prices:
> WTI is up $1.18 to $76.57/bbl, and Brent is up $1.19 to $81.87/bbl.
> Natural gas is down -24.7c to $6.688/MMBtu.

AEGIS NOTES
CRUDE OIL

Oil extends gains amid easing demand concerns
> WTI rose by $1.18 to trade above $76/Bbl this morning
> Both OPEC+ and the IEA released their monthly reports, with OPEC+ maintaining its forecasts for the rise of demand in 2022–23 and the IEA slightly increasing its forecasts
> Crude prices rose following lower-than-expected CPI data yesterday, indicating that US inflation is slowing
> The market awaits today's US Fed monetary policy decision, with a 50-basis point rate hike widely expected
> The 0.622 MMBbl/d Keystone pipeline remains shut, but TC Energy is aiming for a segment to restart partially today and a full restart on Dec 20

IEA expects oil prices to increase in 2023 as Russian exports decline (BBG)
> In its December monthly report, IEA raised its 2022 global demand forecast by 0.14 MMBbl/d to +2.3 MMBbl/d, noting robust Gasoil use in key consumer nations in 4Q22
> The group also slightly increased its forecast for demand growth in 2023 by 0.1 MMBbl/d to +1.7 MMBbl/d as a result of a recovery in Chinese demand and strong growth in India
> "While lower oil prices come as a welcome relief to consumers faced by surging inflation, the full impact of embargoes on Russian crude and product supplies remains to be seen," said IEA
> The organization sees Russian production to decline by 1.4 MMBbl/d next year
REMINDER: IEA has a long history of underestimating demand. At this point, their demand forecasts for 2023 and 2024 are just Wild Ass Guesses ("WAGs"). The key to oil demand is population growth. As long as the world's population is increasing (currently estimated to be ~185,000 per day), demand for oil-based products goes up.

In its December monthly report, OPEC+ maintained its 2022 forecast for the growth of global demand at +2.5 MMBbl/d (BBG)
> The group revised its 1Q23 demand forecast by 0.4 MMBbl/d but kept its 2023 global demand growth forecast at +2.2 MMBbl/d
> The bloc listed Geopolitical tensions, the global economy, and China's COVID-19 crisis as areas of uncertainty

NATURAL GAS

Natural gas prices are lower by 4% to $6.69 in the prompt month < Wild swings in the front month contract are common as the expiration date approaches because paper traders must close their positions.
The Summer ’23 strip is down 12c to $5.29, and the Winter ‘23/’24 strip is down 8c to $5.68

Regulators issue list of requirements for Freeport LNG restart (Reuters)
> FERC has requested that Freeport provide them with additional information or documents for 64 items
> The information FERC requested pertains to safety, training, and emergency procedures in response to a report on the root cause of the fire that shut down the facility in June
> The gas export facility will be unable to resume operations until FERC receives and reviews the information they have requested
> Freeport continues to guide towards a gradual late-December restart before ramping up to its full capacity of 2.1 Bcf/d by March

Winter storm continues to track across the US (BBG)
> A large weather system that brought freezing conditions and power outages to the west coast is moving east and threatening to bring blizzard conditions to several states
> According to a senior forecaster at the US Weather Prediction Center, “An arctic airmass is going to be sliding east of the northern Rockies spreading across a good portion of the central and eastern US late this weekend”
> Temperatures are expected to fall more than 15 °F below normal across the Great Plains and Midwest regions, while flooding and tornadoes could impact the Gulf Coast

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $1.89 on the day, to settle at $77.28
> Prompt-Month Henry Hub (Jan 23) was down $-0.505 on the day, to settle at $6.430 < Dip might be in anticipation of the bearish storage report for the week ending Dec 9th.

Trading Economics"

Oil
WTI crude futures steadied near $77 per barrel on Thursday after rallying nearly 9% in the past three sessions, as investors took stock of conflicting market factors.
> The International Energy Agency said that oil prices could rally next year as China recovers from the Covid-induced demand downturn and as the latest Western sanctions squeeze Russian supply.
> Meanwhile, OPEC and Goldman Sachs warned that global energy demand could weaken next year, with the former reducing estimates for the amount of crude that it will need to pump in the coming months due to macroeconomic headwinds.
> Elsewhere, the US Federal Reserve slowed the pace of its historic tightening campaign, raising interest rates by a more moderate half percentage point this week, but signaled that the fed funds rate could peak higher than anticipated next year.
> Official data also showed that US crude inventories rose more than 10 million barrels last week, the largest build since March 2021.

Natural Gas
US natural gas futures traded around $7/MMBtu in early trading, moving away from five-month lows of $5.5/MMBtu hit on December 6th, amid forecasts for much colder weather and higher heating demand than previously expected. Frigid temperatures and heavy precipitation on the West Coast have fueled natural gas demand at a time when storage inventories are below average.
> Meanwhile, the Freeport LNG export plant in Texas, forced to go offline in June following a fire, expects to begin bringing operations back online by year's end, in another delay due to pending regulatory approval.
> Still, prices remain subdued for this time of the year, as milder weather in most of October and November delayed the winter heating season while record production levels added to the bearish sentiment.
> EIA reported that US production of dry natural gas, used primarily in homes and businesses for heating, cooking, and electricity, is set to break an annual record of 98.0 Bcf/d in 2022.