Energy Prospectus

Opening Prices:
> WTI is down $0.26 to $87.25/bbl, and Brent is down $0.03 to $90.62/bbl.
> Natural gas is down -2.0c to $2.585/MMBtu.

Oil edges lower despite tight supply concerns
October ’23 loses 26c this morning to trade around $87.25/Bbl < WTI bounced back to over $87.50 soon after the markets opened. I expect it to stay range bound until the IEA's monthly "Oil Market Report" comes out in a few days. IMO if the IEA report agrees with the RBC Capital report that global oil is significantly under-supplied and likely to remain under-supplied through year-end, Brent will drift up to $100/bbl with weekly declines in above ground inventories.

Saudi Arabia and Russia announced last week an extension of their voluntary supply cuts, totaling 1.3 MMBbl/d, through the end of the year
Oil benchmarks soared to ten-month highs following the announcement, with WTI and Brent reaching highs of $88.08/Bbl and $91.15/Bbl, respectively
Last week's supply cuts took precedence over uncertain China demand recovery data

The dollar’s eight-week rally halted as China and Japan verbally intervened, leading the Bloomberg Dollar Index to drop 0.6% despite recent positive US economic data
Furthermore, Russia's oil refineries reduced operations for seasonal maintenance, lowering processing capacity by 0.032 MMBbl/d M-o-M to 5.52 MMBbl/d

China supertanker flow lowest since February (Bloomberg)
China's incoming supertanker numbers (both VLCCs and ULCCs) plunge to a six-month low, with only 99 vessels expected in the next 90 days
U.S. sees an uptick in supertanker traffic, with 41 ships heading its way, an increase of two from last week- the highest since July 21
VLCCs can hold around 2 MMBbl, while ULCCs have a larger capacity at about 3 MMBbl

Eastern Libya ports halted following a hurricane (Bloomberg)
Major oil ports in eastern Libya, including Es Sider and Ras Lanuf, halted operations due to recent hurricane-induced flooding
Although no significant damage was reported, reopening is expected to be in two days but will depend on evolving weather conditions
Since August 2022, Libya's oil production rebounded to 1.2 MMBbl/d, attracting global oil companies and setting plans for a 2024 tender to target 2-3 MMBbl/d by 2026

Natural Gas

Natural gas prices are slightly lower this morning
The Winter ‘23/’24 strip is trading at $3.41, and the Summer ’24 strip is at $3.20

Weather forecasts for the South Central region have shifted warmer but have been slightly offset by cooler shifts in the Northeast region’s forecast
Gas demand is expected to fall steadily over the next few weeks, from 74 Bcf/d last week to 64.7 Bcf/d by the end of September

Freeport LNG gas flows fall sharply (Reuters)
Feedgas levels have fallen from 1.64 Bcf/d on Friday to 0.69 Bcf/d on Saturday, and 0.58 Bcf/d today
Gulf South Pipeline, which supplies Freeport, issued a statement saying that it anticipates confirmation reductions due to "Customer’s failure to take confirmed quantities"
Supply has been pushed back onto NGPL and Gulf South
Consultancy firm Energy Aspects said that the magnitude of the drop indicates at least two trains are currently offline < This might have something to do with Hurricane Lee keeping LNG tanker out of the Gulf of Mexico.

Closing Prices:
> Prompt-Month WTI (Oct 23) was down $-0.22 on the day, to settle at $87.29
> Prompt-Month Henry Hub (Oct 23) was up $0.003 on the day, to settle at $2.608

Note from Keith Kohl, Founder of "The Energy Investor" newsletter.

The New World Oil Order: "The recent decision by Russia and Saudi Arabia to extend voluntary production cuts of roughly 1.3 million barrels per day couldn’t have come at a worse time. Some people have even called it a victory lap for the two countries, especially considering that the United States is unable to ramp up production to offset the cuts. What this means is that the precarious imbalance between global supply and demand from crude will widen as we head into the final quarter of 2023.
Already, we’ve seen Brent crude prices rise above $90 per barrel and WTI grade crude find support above $87 per barrel. However, the bitter truth behind these cuts — and our inability to offset them with new supply — is the sobering fact that the U.S. has officially lost its place as a global swing producer."