Energy Prospectus

Opening Prices: Holding steady while traders wait on EIA weekly storage reports.
> WTI is down $0.30 to $87.24/bbl, and Brent is down $0.24 to $90.36/bbl.
> Natural gas is up 0.2c to $2.512/MMBtu.

AEGIS Notes
Oil

Oil’s rally takes a pause amid market headwinds despite tightening supplies
October ’23 WTI lost 35c this morning to trade around $87.19/Bbl
Crude faces pressure after a nine-day rally; equities trade lower while the dollar’s on track for an eighth straight weekly gain

Goldman Sachs outlined a bullish scenario where extended OPEC+ cuts could drive oil prices to $107/Bbl barrel by December 2024
However, the bank emphasizes it is not their base case, given past responses to the 2022 energy crisis, U.S. shale activity, and the political implications of U.S. gasoline prices

Mixed data from China showed crude imports surged by 30.9%, while overall exports and imports declined by 8.8% and 7.3% Y-o-Y

Saudi Arabia raises crude prices in a tightening market (Bloomberg)
Saudi Arabia raised its Arab Light crude price to Asia by 10c, marking $3.60/Bbl in October, its peak since December
Aramco also increased prices to the US by 20c but reduced prices for Northwest Europe and the Mediterranean by 10c
Sour crude prices surged post-Saudi cuts since July, prompting Europe to look for alternatives

China’s oil imports surge as the nation snaps up cheap Iranian barrels (Bloomberg, Kpler)
China's crude oil imports in August surged by 21% from July, reaching 12.5 MMBbl/d, nearing a record from June 2020
The rise in imports is attributed to attractive pricing from Iran and Chinese refiners' restocking activities
Oil products exports from China also saw an 11% increase to 5.89 million tons in August, marking the highest since February

Biden admin moves to block drilling on millions of wild Alaskan acres (CNN)
Biden administration cancels seven oil and gas leases in the Alaska Arctic National Wildlife Refuge, reversing Trump-era decisions
The Interior Department is also proposing federal protections for 13 million acres in the NPR-A, explicitly banning new oil and gas leasing on 10.6 million of those acres
The 2017 GOP tax bill allowed drilling in a portion of the wildlife refuge, but no development occurred; major oil companies like Chevron canceled their leases after they were suspended in 2021
However, the 2017 tax law requires ANWR leasing, compelling the Biden administration to conduct a new lease sale by 2024, likely with stricter environmental provisions

Natural Gas

Natural gas prices are trading lower, near the low end of the past two months range
Weather forecasts shifted cooler again today, with the Lower 48 two-week forecast indicating a significant reduction in average temperatures over the forecast period
Gas exports to Mexico continue to be elevated, with pipeline nominations today showing 7 Bcf/d being exported

ERCOT declares Level 2 emergency for the first time this summer (Reuters)
The Texas power grid operator declared an emergency alert on Wednesday evening, as available reserves fell to less than 1.75 GW
ERCOT brought all available generation online and used demand responses to avoid power outages
Real-time ERCOT power prices traded limit up at $5,000/Mwh

Venture Global anticipates Gator Express pipeline to be ready in September 2023
According to a recent FERC filing, the Gator Express pipeline, which will provide gas to the planned Plaquemines LNG facility, will be ready to flow gas this month
The pipeline will be constructed in two phases, with each phase having a capacity of 1.97 Bcf/d
The pipeline will receive gas from the Tennessee Gas Pipeline and TETCO in southeast Louisiana

Notes below are from RothMKM

- WTI is trending down 0.6% this morning in thin early trading at $87.06 and Brent is down
0.5% this morning as well.
- Reuters is reporting that Chinese crude oil imports for August rose 21% vs. July levels to
12.43 MMBopd (up 31% y/y), according to data from the General Administration of Customs.
The daily rate is the third-highest ever, according to Reuters calculations.
- Bloomberg New Energy Finance is reporting that road traffic in Asia ex-China fell 7% week
over week in the week ended September 5, while traffic in China rose 5% over this same time
frame. European road traffic rose 24% week over week in the week ended September 5, and
North American road traffic fell 9% during the same week.


Exploration & Production
Saudi/Russia Extend Cuts Until YE23; Fall/Winter Gas Spreads Defy Gravity
Both Saudi Arabia and Russia gave the oil market an upside surprise earlier this week when
both countries announced that the collective 1.3 MMBopd in additional production/export cuts
that were previously announced for September would be extended through YE23. This three-
month extension was ahead of market expectations which were generally that extra cuts would
be evaluated on a month-to-month basis. As a result, Brent oil touched $90 per Bbl on Tuesday
for the first time since mid-November 2022. These latest OPEC+ actions further solidify in our
mind that OPEC+ is targeting Brent oil prices of $90 or higher and that the group will do what
is necessary to achieve that level and to maintain it. We expect oil prices to be well-supported
into refinery maintenance season in September and October, and we wouldn't be surprised if
prices move higher into YE23.

The pricing structure of the natural gas futures market continues
to baffle us as the more than $1 per mmbtu contango between current spot prices and prices
this winter feels very aggressive to us. We think the right price is likely somewhere in the
middle and that prices are more likely than not to disappoint vs. the ~$3.50 per mmbtu 2024
NYMEX futures curve absent a cold winter. We think investors should be taking profits in gassy
E&P's heading into this winter given the potential downside weather risk and high valuations
for these stocks.
Leo Mariani, CFA, Managing Director

Closing Prices:
> Prompt-Month WTI (Oct 23) was down $-0.67 on the day, to settle at $86.87
> Prompt-Month Henry Hub (Oct 23) was up $0.069 on the day, to settle at $2.579

Just remember that WTI and Brent futures contracts are the most heavily traded commodity futures in the world, more that all of the metals put together. Lots of Day Traders set the oil price.
Also, remember that the NYMEX strip is not a forecast; out months are just the price you can lock in today.
30X more "paper oil" is traded than physical oil that gets delivered.

Note from RBC Capital says China's oil demand much higher than others are saying

"Chinese oil data is stronger than macro headlines would suggest. And physical tightness
could be turbocharged if imports ramp further in the coming months. To de-risk outcome
distribution, we divide components of crude imports into a three-part framework. Spoiler
alert: We anticipate strong imports to continue with a focus on rebuilding product stocks."

>NYMEX strip is not a forecast; but its the best thing we got.

Real people are putting real money down based on those numbers. If its too low, users should be buying.If its too high, producers should be selling