Energy Prospectus

Opening Prices:
> WTI is down $0.98 to $74.44/bbl, and Brent is down $1.02 to $78.85/bbl.
> Natural gas is down -0.6c to $2.533/MMBtu.

AEGIS Notes
Oil

Oil trades lower as Libya’s production resumes and weak China data
August ’23 WTI lost 98c this morning to trade around $74.44/Bbl
China's Q2 GDP rose by just 0.8% from Q1 due to weakening domestic and international demand, increasing pressure for more stimulus (Reuters)
Although year-on-year GDP grew 6.3% in Q2, it fell below the expected 7.3%, underscoring recovery and unemployment challenges < The U.S. would love to have half the GDP growth that China enjoys.

Libyan oilfields' output resumption over the weekend also weighed on prices
However, Nigeria’s Forcados terminal (0.23 MMBbl/d) remains halted since July 12
Additionally, the U.S. dollar continues to trade at its lowest since April 2022, making dollar-denominated commodities cheaper for holders of other currencies

Libya’s oil fields resume operations as protests end (BBG)
As protests end, Libya's Sharara and El Feel oil fields started gradually resuming their 0.33 MMBbl/d capacity, alleviating market supply worries
However, recurring disruptions highlight the instability and risks to Libya's oil production

Saudi oil exports and production plunge in May (JODI)
Saudi Arabia's crude oil exports dropped by 0.39 MMBbl/d to 6.93 MMBbl/d in May
Concurrently, Saudi production fell by 0.5 MMBbl/d to 9.6 MMBbl/d in May, aligning with its OPEC+ pledge, according to IEF
Furthermore, an extended cut of 1 MMBbl/d is pledged for July and August

China’s crude output reaches its highest since 2015 (BBG)
Amid a drive for energy security, China's crude oil output in H1 2023 rose to 4.25 MMBbl/d, its highest since 2015
Meanwhile, China's apparent oil demand in June reached 14.87 MMBbl/d, a 14% year-over-year increase, while refining rates rose to 14.89 MMBbl/d, up 1.6% from May

Natural Gas

Natural gas prices are lower, around $2.53, extending losses from last week
Weather forecasts were mostly unchanged over the weekend, although the Midwest region’s forecast cooled by 8.6 °F over the two-week period
LNG feedgas levels recovered slightly to 12.8-Bcf/d but are still down about 2-Bcf/d from record levels seen in April

Mountain Valley Pipeline asks Supreme Court to vacate stay order (Reuters)
On Friday, developers of the Mountain Valley Pipeline sent a request to the US Supreme Court requesting that they vacate the stay order issued by the US Fourth Circuit Court of Appeals
FERC gave MVP permission to resume construction in June following the inclusion of the pipeline in the debt ceiling bill
The Fourth Circuit Court has scheduled oral arguments on the case for July 27 after developers said that the order must be reversed by July 26 for construction to finish in 2023

Kinder Morgan plans new pipelines from the Eagle Ford to the Gulf Coast (S&P)
Together with Howard Energy, Kinder Morgan is looking to expand its pipeline infrastructure in the Gulf Coast area to meet demand growth
The expansions are designed to bring 2-Bcf/d to the Gulf Coast through a 67-mile pipeline starting at the Kinder Morgan Texas Pipeline compressor station near Freer, Texas, and extending to the Tejas pipeline system near Sinton, Texas
Howard Energy is constructing a 62-mile pipeline from their existing midstream facilities in Webb County, Texas, and extending to Kinder Morgans Freer, Texas compressor station < This is good news for SilverBow Resources (SBOW) which has a promising gas field in Webb County.
Both Pipelines are expected to finish construction in the fourth quarter of 2023

From Bloomberg:
"Russia aims to reduce its third-quarter crude export plans by 2.1 million tons in total, which corresponds to the nation’s pledge to cut overseas supplies by 500,000 barrels a day in the month of August, the Energy Ministry said.
Moscow will curtail exports both from its key western ports — Novorossiysk in the Black Sea and Primorsk and Ust-Luga in the Baltic — as well as pipeline flows, the ministry said in a statement on Monday, without giving further details."

MY TAKE is that if these Russian export cuts are confirmed, it will help push Brent over $90/bbl early in Q4 and over $100/bbl by year end. Lack of actual Russian export cuts has been one of the things keeping a lid on oil prices.

For those of you that went through Marshall Atkins' slide presentation (slides 57 & 58), you know that Raymond James is only assuming a small decline in Russian oil exports in 2H 2023 and 2024. A decline of 500,000 bpd would push Marshall's supply deficit to demand forecast over 3.0 million bpd. If global petroleum inventories decline by 100 million barrels in Q4 it should draw lots of attention and move oil over $100/barrel.

Per Raymond James:
Global petroleum inventories increased by 1.3 million bpd in Q1 2023, then declined by ~1.2 million bpd in Q2. RJ's forecast is that global inventories will decline by 2.6 million bpd in Q3 and 2.9 million bpd in Q4. This compares to Rystad Energy's forecast of average declines of 2.4 million bpd from June through December 2023. Raymond James is forecasting that global petroleum inventories will be ~750 million barrels below normal by the end of the year and OECD petroleum inventories will fall to 25 Days of Consumption. < OECD inventories have NEVER BEEN THAT LOW.

Closing Prices:
> Prompt-Month WTI (Aug 23) was down $-1.27 on the day, to settle at $74.15
> Prompt-Month Henry Hub (Aug 23) was down $-0.027 on the day, to settle at $2.512