Energy Prospectus

Opening Prices:
> WTI is up $0.33 to $81.88/bbl, and Brent is up $0.37 to $85.51/bbl.
> Natural gas is down -2.3c to $2.542/MMBtu.

AEGIS Notes
Oil

Oil heads for a sixth straight weekly gain following Saudi and Russia’s extended cuts
September ’23 WTI gained 34c this morning to trade around $81.89/Bbl

Saudi Arabia has extended its voluntary production cut of 1 MMBbl/d through September, with the possibility of a further extension or even deeper cuts. Russia also extended its export curbs through September, though it tapered the curbs from 0.5 MMBbl/d in August to 0.3 MMBbl/d

Additionally, EIA data showed a record 17 MMBbl draw in crude inventories last week, providing further evidence of a tightening market
A drone attack on Russia's Novorossiysk base, managing 2% of world oil, briefly disrupted ship movements before normal operations resumed

U.S. Shale producers lift forecasts following productivity surge (Bloomberg)
Pioneer, Occidental Petroleum, and Diamondback Energy revised output forecasts due to improved well performance
Chevron aims for a 10% rise in Permian output, targeting 1 MMBbl/d soon, with Oxy boosting its yearly estimate by 1.3% after an 11% production increase in its Delaware Permian wells
Despite a 15% decrease in oil drilling rigs, shale production surged due to increased efficiency
According to John Lindsay, CEO of Helmerich & Payne, this rig decline is more related to budget constraints and production discipline, signaling an industry shift. Producers also note reduced costs for oilfield equipment and foresee lower fracking expenses
Keep in mind that the Permian Basin is the only major shale basin that still has growth potential. Bakken, Eagle Ford and DJ Basin are on decline.

China's oil demand growth set to slow down in Q4, says CNPC (Bloomberg)
China's oil demand growth is projected to decrease to 0.94 MMBbl/d year on year in Q4, down from 1.24 MMBbl/d in Q3, as reported by China National Petroleum Corp
In 2023, China will account for 40% of the global rise in oil demand, nearly 0.8 MMBbl/d, according to Wang Lining, the head of CNPC's oil market research
Wang also noted that a stimulus signaled by China boosted oil prices in late July and expects the oil market to tighten in H2, leading to a reduction in inventories

Natural Gas

Natural gas prices heading for a second consecutive weekly loss
LNG feedgas levels remain depressed relative to the highs seen this spring, currently around 12.5 Bcf/d
Gas production is lower today by about 1.2 Bcf/d, according to early pipeline nominations, with most of the drop due to maintenance in the Northeast

Energy Transfer seeking new export permit after DOE denial (S&P)
The Department of Energy denied an export permit for Energy Transfer’s Lake Charles LNG export project, which ET warned could lead to the “demise” of the project
The company has not said what their expected timeframe is for their new permit, although the company stated that they are optimistic and are still on a path to secure a final investment decision by the end of 2023
The facility is planned to have a capacity of 2.4 Bcf/d and will be built at the site of the mothballed Trunkline LNG import facility in Lake Charles, Louisiana

Chesapeake Energy to slow drilling this year (S&P)
The gas producer maintained their 2023 production guidance of 3.45 Bcf/d but dropped two rigs, one from the Haynesville and one from the Marcellus region
Chesapeake said one of their goals is to have 15-20% of their production sold into the LNG market

Bloomberg:
Oil headed for a sixth straight weekly gain,
the longest streak in more than a year, after OPEC+ heavyweights
Saudi Arabia and Russia extended supply curbs into next month
and US stockpiles sank by a record.

West Texas Intermediate traded around $82 a barrel, taking
gains over the six-week span to about 18%. Saudi Arabia said
Thursday it would extend its unilateral 1 million barrel a day
oil output cut into September, and that the move could be
prolonged further or even deepened. Russia will extend cuts to
its exports into next month, although it tapered the size of the
reduction.

The conflict in Ukraine was also in focus after the Caspian
Pipeline Consortium said that Russian authorities temporarily
closed Novorossiysk port for marine traffic after a drone
attack. Oil loadings on moored tankers continued, and the port
has since reopened, it said.

Futures in New York have now risen in the year to date,
amid the rally driven by the leaders of the Organization of
Petroleum Exporting Countries and its allies. An OPEC+ committee
meeting Friday affirmed the group’s quota policy and made no
recommendations for changes to production cuts members are
implementing.

“The Saudis are making clear that they are willing to do
more if conditions warrant it,” said Giovanni Staunovo, a
commodity analyst at UBS AG. “The other part is Russia,” he
said, adding that there was some expectation in the market the
country might not extend its voluntary export cuts. Traders will
watch whether those reductions continue to draw crude out of
storage, a process that’s so far been uneven, he said. < My take is that Russia's production is on decline. They have been draining above ground storage to keep exports high since Putin needs cash to fund his war in Ukraine. Russia will need to retain more oil as winter approaches since they burn a lot of oil for space heating.

US data this week showed the largest-ever drawdown of crude
inventories as holdings plunged by more than 17 million barrels,
providing further evidence of a tightening market.

Goldman Sachs Group Inc. estimated this week that global
oil consumption swelled to a record in July, outpacing supplies
and putting the market in a deficit. ANZ Group Holdings Ltd.,
meanwhile, said supply cuts were tightening the market and Brent
could rally to $100 a barrel by year-end. < My forecast is that we see WTI move to $85 by the end of August and $90 by end of September. Q4 oil prices will depend on China's demand and if they drain their SPR to keep a lid on oil prices. No matter what happens, demand for oil-based products exceeds supply and the price risk is to the upside. Fear of recession has faded, just like all fears do. Commodity price movements based on FEAR seldom hold for long. That is true for moves up or down.

Closing Prices:
> Prompt-Month WTI (Sep 23) was up $1.27 on the day, to settle at $82.82
> Prompt-Month Henry Hub (Sep 23) was up $0.012 on the day, to settle at $2.577