Energy Prospectus

Opening Prices:
> WTI is up $0.15 to $81.77/bbl, and Brent is up $0.07 to $88.26/bbl.
> Natural gas is up 2.9c to $3.476/MMBtu.

AEGIS Notes
Oil

Oil was little changed after fluctuating between gains and losses on Monday
> Mar ’23 WTI gains 15c this morning to trade above $81/Bbl
> Expectations of recovery in Chinese demand and an uptick in mobility continue to support crude prices
> EU’s sanctions on Russian fuel products are set to take effect on Feb 5
> Seaborne Russian crude exports for the week ending January 20 were 2.98 MMBbl/d, broadly consistent with levels recorded for most of the second half of 2022 despite declines at some pacific ports

Meanwhile, the US dollar hovered close to a seven-month low, supporting crude prices
A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods

OPEC+ will review output levels on February 1 after cutting production late last year (BBG)
> Delegates from OPEC+ said they expect a ministerial advisory group to recommend maintaining current levels despite a tighter outlook as global demand keeps recovering
> The delegates said that they would not adjust existing levels until they get clarity about how Chinese demand is recovering and how sanctions are affecting the Russian supply
MY TAKE: Without Russian supply growth, there is very little spare capacity that OPEC+ cartel members can bring to the market even if they wanted to. Each month they struggle to produce up to the existing quotas.

The US will push China to cease importing Iranian oil (BBG)
> The US said it would put further pressure on China to stop purchasing Iranian oil as the White House works to impose sanctions intended to curb Iran’s nuclear activities
> “China is the main destination of illicit exports by Iran,” and talks to dissuade Beijing from such purchases will be “intensified,” said Robert Malley, the Biden administration’s special envoy for Iran. < Why would China have any fear of Team Biden?

Natural Gas

Natural gas prices are down slightly in the prompt month after climbing 9% yesterday
> Weather forecasts are mixed again today, with the Lower 48 forecast cooling slightly
> The Northeast regions forecast warmed by 15 °F cumulatively over the next two weeks, while the Midwest cooled by 30 °F over the same period
> Temperatures in the Permian Basin are expected to fall below freezing Monday, which could curtail some production in the region

Freeport LNG says it has completed repairs (Reuters)
> In a filing yesterday, Freeport LNG said that they have completed repairs and are requesting approval from FERC to restart some operations
> The filing states that Freeport is seeking approval “to commence cooldown of its Loop 1 transfer piping and reinstate the facility's boil-off gas management compressors and associated piping”
> The process is expected to take about 11 days, although subsequent approvals will be necessary to bring the facility fully online

EU could increase gas imports from Africa, Eni CEO says (Reuters)
> Italy could significantly increase the amount of gas imported from Algeria if it builds out additional infrastructure
> Italy is also working on expanding the Trans Adriatic pipeline, which brings gas from Azerbaijan through the Balkans and into Italy
> If the EU can increase pipeline imports of gas from north Africa or other sources, it would reduce the amount of LNG cargo that would be needed
MY TAKE: This will have little if any impact on U.S. natural gas demand or the price. Most recent natural gas prices are $22.95 in Asia and $19.24 in Europe. I believe that by 2027 (when U.S. LNG export capacity goes over 22 Bcf per day) the price of U.S. natural gas will move toward 1/6th the price of oil. We lack the pipeline infrastructure to increase U.S. natural gas production to keep up with rising demand.

"Frosty" early February pattern sparks natural gas futures rally. NGI.

Natural gas futures rallied sharply in early trading Monday as weather models over the weekend advertised a significantly colder Lower 48 temperature outlook heading into early February. The February Nymex contract was up 35.5 cents to $3.529/MMBtu at around 8:40 a.m. ET. March was up 12.0 cents to $3.156. Weather data over the weekend showed milder trends for later this week but trended “sharply colder” for the period starting Sunday and continuing through Feb. 5, according to NatGasWeather. “A frosty system will sweep across the Midwest Friday to Saturday. It’s this Midwest system that opens the door for a series of frigid shots over Canada to advance aggressively into the northern and central U.S. Jan. 29-Feb. 5,” bringing low temperatures ranging from the 20s down into the negatives, NatGasWeather said. The outlook for this period “is now easily frosty enough to be considered bullish,” but “it would be more impressive if the South and Southeast were colder instead of remaining relatively comfortable,” the firm added.

Market response to the notably colder forecast reflects “increasing freeze-off risks” given the frigid conditions expected to impact production areas in the Bakken Shale, the Rockies and parts of the Midcontinent, according to EBW Analytics Group analyst Eli Rubin.

“It is possible that early-February freeze-off risks, potential short covering and market memory of last year’s $1.988 spike into February expiration could support a modest near-term price recovery,” Rubin said.

Read full article: https://www.naturalgasintel.com/frosty- ... res-rally/

Closing Prices:
> Prompt-Month WTI (Mar 23) was down $-1.49 on the day, to settle at $80.13
> Prompt-Month Henry Hub (Feb 23) was down $-0.189 on the day, to settle at $3.258