Energy Prospectus

Opening Prices:
> WTI is up $1.11 to $91.88/bbl, and Brent is up $0.87 to $94.80/bbl.
> Natural gas is down -0.3c to $2.641/MMBtu.

AEGIS Notes
Oil

Oil rally continues as the market expects a significant supply deficit in the fourth quarter
October ’23 WTI gained $1.11 this morning to trade around $91.88/Bbl

Last week, WTI hit a YTD high of $91.2/bbl and Brent at $94.6/bbl following OPEC+ and IEA's deficit forecasts of 3.3 MMBbl/d and 1.2 MMBbl/d for Q4 2023, respectively < In mid-June Marshall Atkins, Head of Energy Investment Banking at Raymond James told us that RJ's research projected oil supply deficits of 2.6 million bpd in Q3 and 2.9 million bpd in Q4. If accurate, the draws from petroleum inventories will be over 500 million barrels over the last six months on 2023. Draws of that size will push OECD Petroleum Inventories down to 22 Days of Consumption, a level NEVER seen before.

Chinese demand expectations as August data surpassed expectations with improved credit growth, industrial production, and retail sales. The CPI also moved out of deflation
Despite positive August data, concerns persist in the property market with declining housing construction and dropping home prices

Equities and the U.S. dollar traded slightly lower this morning ahead of Wednesday's FOMC meeting
This morning, equity futures and the dollar are flat ahead of the FOMC meeting this Wednesday

Responding to market tightness, Chinese refiners set new record in August oil processing (Bloomberg)
Chinese refiners achieved a record fuel production throughput of 15.3 MMBbl/d in August
Following the government's latest fuel export quotas, diesel exports surged to 0.303 MMBbl/d in August, marking the highest since March, and jet fuel exports to the highest since December
Meanwhile, gasoline exports climbed 13% from July, reaching 0.37 MMbbl/d in August
FGE consultants forecast Diesel exports to further rise by 0.080 MMBbl/d MoM to 0.240 MMBbl/d in September.
Chinese exports will rise by a further 0.025 MMBbl/d in October and by 0.070 MMBbl/d in November

Natural Gas

Natural gas prices are mostly unchanged from Friday despite cooler weather forecasts
The lower 48 two-week weather forecast has cooled by 5.9 °F, with most of the change coming from the Northeast and Midwest
Gas demand is expected to decline steadily over the next few weeks as the shoulder season gets underway

Venture Global says court battles will not affect LNG timeline (Reuters)
Venture Global has been involved in a series of court battles over the company's failure to supply contracted cargoes
The company claims that its Calcasieu Pass facility has not yet started commercial operations due to equipment malfunctions despite the facility having shipped over 200 cargoes since 2022
Venture Global CEO Michael Sabel said that the ongoing court cases should not impact the company's timeline for new LNG export plants and expansions

Freeport LNG resumes loadings (Reuters)
Following an unexplained drop in feedgas levels leading to the cancelation of several cargoes, the facility has resumed loadings
Rapidian Energy said that the outage may have been due to pressure on the Texas power grid, which has been constrained by peak demand; however, Freeport has declined to comment on the cause

LNG exports from the U.S. need to stay near 13 Bcf per day through Q1 2024 to rebalance the U.S. natural gas market and push HH ngas prices over $3.00. With two more large LNG export facilities coming online in 2H 2024, there is a good chance that we see HH ngas prices move over $4.00 a year from now. My 2024 forecast models are based on HH ngas averaging $3.25/MMBtu for the year.

Closing Prices:
> Prompt-Month WTI (Oct 23) was up $0.71 on the day, to settle at $91.48
> Prompt-Month Henry Hub (Oct 23) was up $0.084 on the day, to settle at $2.728

Trading Economics:
"WTI crude futures rose above $91 per barrel on Monday, hovering at the highest levels in over ten months amid expectations of a widening market deficit in the fourth quarter due to extended supply cuts by Saudi Arabia and Russia, as well as hopes of a demand recovery in China. OPEC, the US Energy Information Administration and the International Energy Agency all predicted larger market deficits in the next quarter as major producers kept global supplies tight, with global oil demand growth also expected to rise in the same period. Fresh stimulus measures from Beijing and increased output from Chinese refiners driven by strong export margins also supported the demand outlook in the world’s top crude importer. Meanwhile, investors remain cautious ahead of the US Federal Reserve’s policy decision this week, where it is expected to hold interest rates steady but is likely to stay hawkish."

"US natural gas futures traded above $2.65/MMBtu, after a 1.5% increase in the previous week. Preliminary data showed that gas production in September has decreased to 102.2 billion cubic feet per day (bcfd), hitting a three-month low last Friday. Meteorologists forecast the weather will remain relatively normal until around September 23, but from September 24 to 30, it is expected to become warmer than usual. Cooler seasonal weather has led to reduced air-conditioning usage and a drop in short-term gas consumption. Consequently, gas demand for the upcoming week is expected to decline. In contrast, gas flows to US LNG export facilities have been on the rise, with LNG feedgas hitting a near two-week high on Friday, driven by increased flows to the Freeport plant. Meanwhile, the Cove Point LNG export plant in Maryland is scheduled for planned maintenance from September 21 to 29."