Energy Prospectus

Opening Prices:
> WTI is up $0.99 to $75.28/bbl, and Brent is up $1.12 to $80.16/bbl.
> Natural gas is down -43.7c to $6.163/MMBtu.

AEGIS Notes
Oil

Oil trades higher as the market weighs China’s demand outlook
> WTI gained nearly $1 this morning to trade above $75/Bbl
> China pledged to boost consumption and support small businesses as Beijing adjusts its focus to boosting growth (BBG)
> China's President Xi Jinping said that expanding and restoring consumption should "take precedence" at a conference to establish the economic policy priorities for 2023
> However, China confirmed two COVID-19-related deaths today for the first time since December 3 as the nation gradually relaxes COVID-zero policies
> China's swift reversal of its Covid-zero policy has given rise to optimism for the long-term oil demand, although the near-term forecast is uncertain due to surging virus cases

The Biden administration announced plans to purchase 3 MMBbl of oil to refill the SPR on Friday (BBG, WSJ)
> The Energy Department solicited bids on Friday for purchases of crude for delivery in February
> The DOE said, “this repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96/Bbl average price it was sold for, as well as to strengthen energy security” in a note on Friday
> According to a senior administration official, the US will buy additional oil to refill the SPR in the future depending on crude prices
> Additionally, the DOE is planning a crude oil exchange of 1.8 MMBbl to address the potential supply disruptions brought on by the Keystone pipeline shutdown

Natural Gas

Natural gas prices are down 7.3% to $6.12 in the prompt month
> The Summer ’23 strip is lower by 18c to $5.05, and the Winter ‘23/’24 strip is down 13c to $5.53
> Lower 48 forecasts shifted warmer by 6.4 °F over the next two weeks, while the Northeast regions forecast warmed by a total of 25.5 °F over the same period

Cold weather to spread across the US this week (BBG)
> A winter storm will impact the Midwest, Northeast, and Southern regions of the country this week, with record cold forecast for Texas
> Freezing conditions will remain in much of the country throughout the weekend before warming slightly next week
> The freezing temperatures are expected to drive up natural gas demand for heating and could strain electrical grids

Global LNG supply may rise less than 4% in 2023 (Reuters)
> It is expected that while demand for LNG will remain high, supply will only grow by a small amount
> Spot market cargoes have been limited and in high demand throughout 2022, despite global LNG prices hitting their highest annual average ever
> US LNG export capacity will not increase by a substantial amount until late 2024 and 2025
> On Friday the Asian price (JKM) for delivered LNG was $33.44. The price in Europe (TTF) was $42.20.

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $0.90 on the day, to settle at $75.19
> Prompt-Month Henry Hub (Jan 23) was down $-0.749 on the day, to settle at $5.851 < My take on why ngas prices were down today: The "Paper Traders" must close their long positions in the JAN23 NYMEX contract because they can't take physical delivery of the gas. The weather forecast is extremely bullish for natural gas demand. We are going to see very large draws from storage for the weeks ending December 23rd and December 30th. My guess is now that the combined draws will be over 400 Bcf.

If ngas storage is below 3,000 Bcf on December 31st, just a normal winter in Q1 2023 should push storage down to 1,000 Bcf at the end of March, over 600 Bcf below the 5-year average. That should make HH gas average over $6.00 thru 2023.

There are going to be lot of well "freeze offs" in the next few days.

Received today from a partnership I am invested in Texas/Oklahoma.

"Partners, we are still waiting on our load to be picked up, which will probably be by wed or at least after the freeze. We are trying to get full for the second load but we will have to shut in the wells wed until at least sat due to freezing temperatures. This is due to fresh water that produces with our oil and we have tried in the past to run it at these temps but it seems to cause more damage then revenue. The weather by beg of the week should suffice us turning back on production."
Cheers