Energy Prospectus

Opening Prices:
> WTI is down $2.15 to $73.96/bbl, and Brent is down $2.12 to $79.09/bbl.
> Natural gas is down -69.9c to $6.271/MMBtu.

AEGIS Notes
Oil

Oil set to post the biggest weekly gain since early October
> Prompt month (Jan '23) WTI is set to post a nearly $5/Bbl weekly gain
> WTI extends losses and is down by $2.15 this morning to trade below $75/Bbl [color=#0000yesterday's IMO this is a FEAR based reaction to yesterdays overall market selloff.[/color]
> Limited disruption to Russian supply and hawkish tone from the Fed headed into 2023 continue to weigh on crude prices
> In addition to the rate increase by the Fed on Wednesday, the Bank of England and European Central Bank also increased rates yesterday
> However, China's swift reversal of its Covid-zero policy has given rise to optimism for the long-term demand, although the near-term forecast is uncertain due to surging virus cases
> TC Energy is awaiting regulatory approval from PHMSA for a full restart of the 622,000 Bbl/d Keystone oil pipeline

Early signs indicate that Russia's Asian oil flows show signs of weakening (BBG)
> The loadings on the ESPO pipeline, which transports oil from east Siberia to the Pacific, have decreased by half since the cap was implemented
> However, the Urals grade oil supplied from western Russia is still freely flowing to Asian clients as it is well below the $60/Bbl level
> Oil tanker companies may be avoiding sending ships to the port of Kozmino (an oil terminal in Eastern Russia that sends cargoes to Asia-Pacific markets) as the price of the key ESPO grade is about $10/Bbl above the G-7 price cap. However, people who trade ESPO said it is still too early to determine whether the decline in flows is structural, as tanker tracking may not be too accurate

Keep in mind that U.S. oil production is "seasonal" and normally declines during December to March.

Natural Gas

Natural gas prices are down by nearly 8% to $6.27 < Back to $6.53 at the time of this post.
> The Summer ’23 strip is lower by 16c to $5.15, and the Winter ‘23/’24 strip is down 11c to $5.58
> Weather forecasts shifted warmer, with the Lower 48 forecast gaining 9 °F, mostly in the 6-10 day period

Gulf Run pipeline approved by regulators (Reuters) < Good news for Comstock Resources (CRK)
> Energy Transfer received approval from federal regulators on Thursday to begin operations on the Gulf Run Pipeline
> The pipeline has a capacity of 1.65 Bcf/d and will transport gas from the other Energy Transfer pipelines in the Haynesville region to the Gulf Coast
> Gulf Run will partially serve the planned Golden Pass LNG export facility, with Golden Pass having signed a 20-year supply agreement for 1.1 Bcf/d
> Aegis notes that there will be an increasing need for pipelines from Northern Louisiana to the Gulf Coast as more LNG projects are developed over the next several years

ICE could relocate gas trading hub if price cap is implemented (Reuters)
> The Intercontinental Exchange has warned that if the EU places a price cap on gas at the Dutch TTF trading hub, they may relocate the hub outside the EU
> The company said that “It is the responsibility of ICE as the market operator to consider all options if this mechanism is agreed, up to and including whether an effective market in the Netherlands is still viable”
> ICE warned last week that a price cap might actually increase prices in the region if liquidity providers are prompted to buy back short positions and stop selling TTF futures

The most recent international natural gas prices I have are
> $42.20/MMBtu at Dutch TTF
> $33.44/MMBtu at Japan/Korea Marker (JKM)
Demand for US LNG export will remain HIGH as long as Russian gas to Europe is curtailed. A cold winter could send TTF over $100.

Trading Economics

Oil
WTI crude futures fell almost 3% to around $74 per barrel on Friday morning, extending losses for a second consecutive session as concerns about recession-driven demand downturn, particularly among advanced economies, took the driver's seat.
> Global industrial activity remains weak, especially in the US and Europe, with tightening financial conditions denting economic activity while posing a significant risk to the demand outlook.
> Still, the US benchmark rallied roughly 4% this week amid optimism about a recovery in Chinese fuel consumption and tight global supplies.
> The IEA offered a somewhat bullish outlook for markets next year, citing the reopening of the Chinese economy as a critical driver for growth and demand.
> On the supply side, OPEC+ decided to stick to their existing policy of reducing oil output by 2 million barrels a day from November through 2023. < Actual OPEC production was below the new quotas in November. I believe that outside of Saudi Arabia & UAE, the other cartel countries have less than zero excess production capacity.
> The shutdown of the Keystone pipeline added to the highly uncertain supply outlook. < It should be back online in a few days.

Natural Gas
US natural gas futures dropped 6% to around $6.5/MMBtu on Friday morning, moving away from a two-week peak of roughly $7/MMBtu hit in the previous session, as forecasts for milder weather and lower heating demand in late December rattled investors.
> Still, the commodity remains on track for a weekly gain, up more than 5%, amid signs of robust foreign demand and a drop in domestic output.
> Recent data showed that natural gas flowing towards US LNG terminals rose to 13 bcf per day on Thursday, the most since June, pointing to firm international demand.
> Supporting prices further was a decline in production as extreme cold from North Dakota to Texas caused oil and gas wells to freeze. < This is key "detail" that is often overlooked by most investors. If temperatures drop below freezing for an extended period in Appalachia (Ohio, Pennsylvania, West Virginia), Marcellus & Utica shale gas production will decline.
> 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.

Closing Prices:
> Prompt-Month WTI (Jan 23) was down $-1.82 on the day, to settle at $74.29
> Prompt-Month Henry Hub (Jan 23) was down $-0.370 on the day, to settle at $6.600

Oil finishes lower, but posts a $3.27/Bbl weekly gain | Gas posts a 35.5c weekly gain