Oil & Gas Prices - Sept 16

[dan_s]

Opening Prices:
> WTI is up $0.35 to $89.19/bbl, and Brent is up $0.36 to $92.42/bbl.
> Natural gas is down -0.4c to $2.739/MMBtu.

AEGIS Notes
Oil

Oil extends rally to highest since November as IEA warns of potential surge in volatility
October ’23 WTI gains 35c this morning to trade around $89.19/Bbl

OPEC, in its September monthly report, forecasted an over 3 MMBbl/d supply deficit for 4Q23, potentially the largest in over a decade, as Saudi and Russia extended production cuts

Yesterday, both oil benchmarks finished at their highest since November 2022, WTI at $88.94 and Brent at $92.06

U.S. inflation accelerated in August, with annual CPI up 3.7% versus 3.2% in July and core inflation at 4.3% versus 4.7% in July
However, Fed officials are expected to hold rates steady while debating if another rate hike in November or December will be necessary to maintain recent progress in slowing inflation
The dollar traded higher, and equity futures were lower after the August CPI release

IEA warns OPEC+ production cuts to send oil price volatility soaring (Bloomberg)
Supply cuts by Saudi Arabia and Russia will cause a “significant supply shortfall”, warned the IEA, threatening renewed price volatility
“Already in August, we saw global oil inventories falling by a massive 75 MMBbl, according to preliminary data,” said Toril Bosoni, head of IEA’s oil division
In its September monthly report, IEA estimated 2023 demand growth stable at +2.2 MMBbl/d, reaching 101.8 MMBbl/d, with China, jet fuel, and petrochemicals as the main drivers

The bloc noted that China, despite wrestling with multiple economic crises, will account for 75% of the growth in 2023
Demand growth forecast for 2024 fell slightly to +0.99 MMBbl/d, affected by slow GDP growth and a decline in transport fuel use
Non-OPEC production forecast for 2024 is up by 0.1 MMbl/d to 68.8 MMBbl/d, OPEC production forecast is down to 28.4 MMBbl/d from 29 MMBbl/d; non-OPEC+ to drive 2024 supply growth increase to +1.7 MMBbl/d

Natural Gas

Natural gas prices are mostly unchanged following yesterday’s 14c rally
The EIA released their Short-Term Energy Outlook yesterday, raising their forecast for gas consumption from 34.8 to 35.3 Bcf/d in 2023 and 33.5 to 33.9 Bcf/d in 2024 < Lower consumption forecast for 2024 makes no sense unless you think we are going to have another very mild winter.

Yesterday afternoon, NGPL announced they are significantly reducing capacity between Texas and Louisiana from October 12 to December 9
The reduction could potentially impact flows to the Sabine Pass LNG plant

Freeport LNG flows remain lower (Reuters)
Feedgas flows to the Freeport LNG export plant have been well below capacity for five days now, with pipeline nominations indicating the facility is taking 0.37 Bcf/d as of this morning
LNG consultancy Energy Aspects said, "Sustained depressed flows suggest an ongoing outage at the facility, although the exact operational nature of the disruption remains unknown,"
While Freeport has declined to comment on the outage, sources familiar with the plant's operations said that Trains 1 and 3 have been affected

Coal power plant retirements to slow in 2024 (BBG)
Coal plants will continue to be retired next year but at a slower pace than in 2023
11.9 GW of capacity was or will be retired in 2023, following 13.1 GW in 2022, while the first ten months of 2024 will only see 3.6 GW retired
The lost capacity will be replaced with 27.3 GW of renewable installation in 2024,

[dan_s]

Closing Prices:
> Prompt-Month WTI (Oct 23) was down $-0.32 on the day, to settle at $88.52
> Prompt-Month Henry Hub (Oct 23) was down $-0.063 on the day, to settle at $2.680

My prediction ("Wild Ass Guess") is that WTI oil closes over $90.00 and HH ngas closes over $2.75 at the end of September, which are the prices that I am using in all of my forecast models for Q4.
> The global oil market is tight and will get MUCH TIGHTER in Q4. I give it more than a 50% chance that we see WTI over $100 by Thanksgiving.
> The U.S. natural gas market is working back to a balance, but we will start the winter mid-November with over 350 Bcf more gas in storage than we had a year ago. It will take a colder than normal December to keep natural gas over $3.00 in Q1 2024. 2H 2024 should see a much tighter U.S. natural gas market and HH ngas price should move over $4.00 by this time next year.