Energy Prospectus

Opening Prices:
> WTI is up $0.78 to $77.85/bbl, and Brent is up $0.73 to $81.80/bbl.
> Natural gas is up 2.9c to $2.742/MMBtu.

AEGIS Notes with my comments in italics

Oil

Oil trades at a three-month high as concerns about a tight market offset economic worries
September ’23 WTI gains 79c this morning to trade around $77.86/Bbl
Equities steadied while the dollar continued to strengthen relative to its recent lows

Saudi Arabia and Russia’s production cuts started taking effect, driving expectations that the market is set to move into deficit in 2H 2023 < The global oil market has been in a supply deficit for over a month.

Fed’s aggressive monetary policy continues to weigh on the demand outlook as the market expects another 25 interest-rate hikes this week

Additionally, China's state planner announced measures on Monday to boost private investment in some infrastructure sectors and vowed stronger financial support for private projects

OPEC+'s supply cuts are sufficient to balance the market, says UAE (Bloomberg)
> OPEC+'s production cuts are adequate to maintain balance in the market, according to UAE’s Energy Minister
“We are doing this on behalf or for the benefit of all producers around the world and for balancing the supply and demand for oil consumers as well,” said Minister Suhail Al Mazrouei < IMO OPEC is cutting supply so they can demand much higher oil prices when the paper traders finally figure out how tight the oil market really is. OECD petroleum inventories are dropping fast and will soon be under 25 Days of Consumption and heading toward 22 Days of Consumption within five months.
> Russian oil exports fell for a second straight week, hitting a six-month low, with a further 0.5 MMBbl/d cut planned in August < Falling Russian oil exports was the final piece of the puzzle needed to push WTI over $80/bbl.
> Saudi Arabia's oil exports dropped by 0.39 MMBbl/d to 6.93 MMBbl/d in May, with a further 1 MMBbl/d output cut announced for July and August < Falling imports of oil from Saudi Arabia will not impact U.S. oil inventories until late August. That's what I believe will push WTI over $90/bbl by early in Q4.

Natural Gas

Natural gas prices are mostly unchanged, around $2.72, after rallying 17.4c last week
> The Winter ‘23/’24 strip is trading at $3.53, and the Summer ’24 strip is at $3.28
> Lower 48 weather forecasts indicate temperatures will be well above the 10-year average this week and remain elevated throughout the next two weeks

LNG feedgas levels recovered over the weekend, currently at 13 Bcf/d

Kinder Morgan seeking approval to begin construction on Evangeline Pass Expansion (S&P)
> Kinder Morgan’s Southern Natural Gas has requested authorization from federal regulators to begin construction on its section of the Evangeline Pass Expansion, which will supply Venture Global’s Plaquemines LNG terminal
> The expansion will add about 1.1 Bcf/d of capacity in Louisiana and Mississippi
> The company is looking to begin construction by September 11, 2023

Natural gas rig count falls again (Reuters)
> According to the Baker Hughes rig count, the number of gas-directed drilling rigs fell by two from 133 to 131
> The number of gas rigs has fallen steadily over 2023 after peaking at 166 in September 2022

I want to clarify why I lowered the natural gas price in my models for 2024:

Demand for U.S. natural gas is definitely higher than five years ago, so comparisons to the 5-year average storage level is somewhat misleading. However, I am concerned that the storage level being so much higher than last year will cause the NYMEX strip prices for DEC23 through MAR24 to pull back toward $3.00. Remember that the front of the curve is focused on near-term supply/demand and at the beginning of the 2023/2024 winter storage will be totally full.

I was using $3.50 for 2024 in my models, and I have lowered it to $3.25.

Storage looks like it will go over 4 TCF by November 15.
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The long-term outlook for all of our gassers (AR, CRK, EQT and RRC) is still bullish. I just think that for NOW the best move is to have more exposure to oil prices.

- WTI is trending up 1.0% this morning in thin early trading at $77.62 and Brent is up 1.1%
this morning as well.
- CNBC is reporting that U.S. Energy Secretary Jennifer Granholm reiterated calls for additional
oil supplies. She was quoted as saying, “there’s no doubt that there is a volatile environment,
and there’s plenty of indebtedness. There is a lot of emotion in these markets and so we have
deep concern about trajectories of where things are headed. We want to see more supply as
it gets dangerous when the prices are so high. I think the prudent course is to ensure that
transportation is affordable for people, and that of course means making sure that supply is
stable. We want prices to come down. The President is really focused on the impacts on real
people who need to get to work and cannot afford that premium.” < In other words, Jennifer is clueless
- Bloomberg is reporting that the cuts in oil output by OPEC+ coalition to rein in supplies are
adequate for balancing the market, according to the United Arab Emirates’ energy minister.
Leo Mariani, CFA, Managing Director at Roth MKM

Closing Prices:
> Prompt-Month WTI (Sep 23) was up $1.67 on the day, to settle at $78.74
> Prompt-Month Henry Hub (Aug 23) was down $-0.028 on the day, to settle at $2.685