Energy Prospectus

Opening Prices:
> WTI is up $0.58 to $80.14/bbl, and Brent is up $0.70 to $84.62/bbl.
> Natural gas is up 13.8c to $5.217/MMBtu.

AEGIS Notes
Oil

Oil extends gains to hit a three-week high
> Feb ’23 WTI gained nearly 50c this morning to trade above $80/Bbl < Up $1.01 to $80.57 at the time of this post.

China announced a further loosening of its Covid-zero policy yesterday (Reuters)
> The reduced measures include inbound travelers no longer having to undergo mandatory quarantine and will take effect beginning January 8
> China is seeing a surge in Covid cases after abandoning its Covid-zero policy that was in place for more than two years
> AEGIS notes that despite the surge in new cases and disruption to supply chains, oil demand could see a significant increase in the world’s largest oil importer after the initial Covid waves

More than 1.8 MMBbl/d of the Texas Gulf Coast's refining capacity was shut down due to the freezing temperatures (BBG)
> The two biggest refineries, Marathon Galveston Bay (0.593 MMBbl/d) and Motiva Port Arthur (0.626 MMBbl/d), both stopped producing gasoline and diesel
> Although the disruptions are not expected to last, they might have caused gasoline futures to surge to their highest level in more than three weeks

Natural Gas

Natural gas prices are trading slightly higher as the U.S. approaches the end of its cold spell; Freezing temperatures bring soaring demand and lower production due to freeze offs
> Winter storm Elliot caused power outages for over 1.5 MM homes on Friday and also affected operations at Sempra’s Cameron LNG facility, with gas flowing to the facility falling by 1.2 Bcf/d to 1.0 Bcf/d before climbing back to 2.3 Bcf/d this morning

Weather forecasts show milder temperatures ahead, with the U.S. consistently staying above the 10-year average temperature for this time of year. The milder temperatures are partly responsible for the selloff in price last week
> The 1-15 day weather forecast deteriorated shows heating degree days fell by 12% over the long weekend, from 366 pop-weighted heating degree days on Friday to 325 heating degree days this morning
> Lower-48 dry gas production has fallen by 12 Bcf/d since the freeze rocked the U.S., causing a surge in Canadian imports of 6 Bcf/d to offset the losses
You should all watch Joe Bastardi's Saturday Summary here: https://www.weatherbell.com/premium/ < My take is that milder weather in first half of January will be offset by the impact of well freeze offs.

Freeport LNG restart slips to mid-January as the company responds to questions from regulators (NGI)
> The company adjusted its restart timeline as it responds to a list of additional questions from regulators
> Freeport LNG representatives have said that the repair work is “substantially complete” but estimates final approval could take longer than expected
> The current restart target date is for the second half of January

Trading Economic:

WTI crude futures rose above $80 per barrel in holiday-thinned trade on Tuesday, as China reversed Covid restrictions further while winter storms across the US disrupted oil flows. China announced on Monday that it will end quarantine requirements for inbound travelers starting on Jan. 8, lifting the demand outlook in the world’s top crude importer. On the supply side, more than a third of Texas Gulf refining capacity was shut over the past few days due to winter storms, as reported by Bloomberg. The prospect of a production cut by Russia also supported oil prices, as the country may reduce output by 5% to 7% in early 2023 in response to price caps imposed by Western nations, the RIA news agency reported citing Deputy Prime Minister Alexander Novak. Meanwhile, investors remain cautious about growing risks of a global recession next year, as major central banks are set to tighten policy further.

US natural gas futures rose to $5.2/MMBtu on Tuesday morning, rebounding from a 9-month low of $4.8 hit before the Christmas break, due to lower production and supply constraints after wells and pipes froze due to extreme cold. Output fell to as low as 84.2 bcf on Dec 24th and was still around 10% below normal levels on Monday. Meanwhile, temperatures in Midland are seen rising while the Northeast is expected to continue to see below-freezing conditions. Natural gas prices in the US have been subdued amid forecasts for warmer weather and as investors continue to monitor the situation at the Freeport LNG plant. Also, the latest EIA report showed a smaller-than-expected storage draw as milder weather kept heating demand low and lots of wind power reduced the number of gas generators needed to produce electricity. < The storage draws for the two weeks ending Dec 23 and Dec 30 will exceed the 5-year average. Heavy snow and continued sub-freezing temperatures will continue to hamper natural gas production this week, especially in Appalachia.

OilPrice.com

- Daily natural gas output in the United States has been trending around 90 billion cubic feet this week, some 10% below normal as the extreme cold swept across two-thirds of the country.

- The impact of the freeze was felt most markedly in North Dakota where 300-350,000 b/d of Bakken production remains idled, approximately a third of pre-storm readings.

- Day-ahead prices in Western Texas natural gas prices jumped to $9/mmBtu before the weekend, although with the south expected to warm up significantly on Tuesday spot prices are almost certain to decline from here onwards.

- The pain is still felt in New England where the cold will be slower to subside, day-ahead prices at the Algonquin pricing hub are still above $20/mmBtu, after trading late last week at the level of Asian LNG. < Anyone living in New England should be pissed by the insane political opposition to pipelines that can bring much cheaper Appalachian gas to the region.

We will import from Russia, no worries

Hard to get pissed at the people you vote for over and over again ad nauseum.

Closing Prices:
> Prompt-Month WTI (Feb 23) was down $-0.03 on the day, to settle at $79.53
> Prompt-Month Henry Hub (Jan 23) was up $0.203 on the day, to settle at $5.282

Very thin trading volume on the days between Christmas and New Years.