Energy Prospectus

Opening Prices:
> WTI is down $0.02 to $85.53/bbl, and Brent is down $0.03 to $88.52/bbl. < WTI spiked to $87.25 when this was posted, thanks to a short covering rally caused by Saudi Arabia's announcement to extend their production cuts through December.
> Natural gas is down -17.1c to $2.594/MMBtu. (As of 08:01 AM CDT)

AEGIS Notes
Oil

Brent touched $90.32/Bbl, and WTI hit $87.30/Bbl this morning as OPEC+ members surprised the market
Saudi Arabia sent prices soaring Tuesday morning as the Kingdom extended its unilateral oil production cut
The Saudis announced they would extend 1 MMBbl/d cuts through December
Previously, the Saudis had only announced unilateral cuts through September
The Saudis’ move exceeded market expectations (Bloomberg)

Russia said it would also extend additional voluntary reduction in oil supplies through December
Russia has been cutting by an additional 300 MBbl/d, on top of what was already promised with the greater OPEC+ group

Natural Gas

Natural gas prices fall 6% to $2.59 as weather forecasts shift significantly cooler < Despite the heat in Texas and Louisiana all summer, 75% of the U.S. actually had a cooler than normal summer.

The Winter ‘23/’24 strip is down 3c to $3.41, and the Summer ’24 strip is lower by 2c to $ 3.20

Lower 48 forecasts shifted cooler by 20.7 °F cumulatively over the two-week period
The Midwest forecast was the most changed, cooling by 31 °F in the 1-5 day period and 28.1 °F in the 6-10 day period

Gas demand is expected to fall to 65.7 Bcf/d from 72.8 Bcf/d over the next two weeks as temperatures begin to moderate heading out of summer

Cheniere’s Sabine Pass expansion to start as early as 2028 (BBG)
Cheniere’s CEO said that exports from the Sabine Pass expansion could begin as soon as 2028 if all necessary permits are obtained
The project will expand capacity by 2.67 Bcf/d, bringing the Sabine Pass’s total capacity to 7.4 Bcf/d
So far, the company has signed contracts for 0.67 Bcf/d of exports from the expansion
Cheniere said they may do additional expansions at Sabine Pass or Corpus Christi if there is demand for it
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MY TAKE: Keep your portfolio heavily weighted to oil. The U.S. will begin the 2023/2024 winter with over 400 Bcf more gas in storage than we had at the beginning of the last winter. NYMEX strip prices for DEC23 to MAR24 are $3.31 to $3.69, but I think they will not hold at those prices unless we have a very cold start to the winter.

Note from Truist Financial:
" - Energy: Cautious Near-term, Thoughts from the Road
- We have spent the better part of the past month on the road
meeting numerous energy focused long-only’s and hedge funds
who have experienced strong stock returns the past several
weeks (QTD - Truist Securities E&P coverage average +18%,
WTI +22%, S&P 500 +1%, NASDAQ +2%). Many investors we
have spoken to are starting to become slightly cautious near-
term given the energy sector’s recent outperformance versus
the broader indices as oil closed at a 14-month high Friday and
continued economic pressures that could cause incremental
inflation the remainder of the year." - Neal Dingmann

Notes from Oilprice.com

Saudi Arabia Extends Productions Cut. Publishing its press release in unison with Russia’s export cut pledge, Saudi Arabia decided to extend its voluntary production cut of 1 million b/d for three months until December 2023, with any prospective supply changes to be reviewed on a monthly basis.

- Russia extended its voluntary decision to curb crude exports by 300,000 b/d until December 2023, acting in concert with Saudi Arabia, with the alleged aim of maintaining stability and balance in the oil markets.

- In the meantime, Russian seaborne crude and product exports fell to their lowest since September 2022 as strong domestic demand in the summer kept volumes available for external markets capped.

- Delivering on their promise to cut exports by 500,000 b/d in July-August, Russian flows to India decreased by 30% to 1.5 million b/d, just as Urals has been trading above the oil price cap threshold of $60 per barrel since early July.

- Lower Russian crude exports will ease the task of the country’s exporters as they are set to rely more on their shadow fleet, the utilization of which rose to 40-45% of all oil exports in July-August, avoiding G7 shipping and insurance.

Low Diesel Inventories Stoke Shortage Fears. Low US distillate inventories could make heating oil prices be susceptible to sudden shocks this winter as stocks of diesel and heating oil remain 15% below five-year average rates, at 118 million barrels or 31 days of supply.