Energy Prospectus

We have an EPG webinar this morning starting at 11AM CT

Opening Prices:
> WTI is up $0.03 to $88.85/bbl, and Brent is down $0.23 to $90.48/bbl.
> Natural gas is up 5.3c to $2.893/MMBtu.

The Flash Crash is over and OPEC is going to have some words of wisdom tomorrow morning.

AEGIS Notes
Oil

Oil prices hold steady as the dollar rises to an 11-month high
November ’23 WTI gained 3c this morning to trade around $88.85/Bbl < Up $0.23 to $89.05 at the time of this post.

The US dollar surged to the highest since November ’22 amid higher US treasury yields and weakness in other currencies
A strong dollar makes dollar-denominated commodities expensive for holders of other currencies < MY TAKE: Rising dollar is the ONLY JUSTIFICATION for yesterday's dip in the oil price + $92 is still a strong technical resistance level.

OPEC+ convenes tomorrow, and minimal policy changes are expected after the UAE Energy Minister Mazrouei affirmed the group's current production cut strategy as "the right policy"

The EIA reported that US petroleum exports hit a record ~6 MMBbl/d in 1H23, marking a 2% increase from 1H22
In 1H23, the rise in petroleum product exports was driven by propane and other HGLs (Hydrocarbon Gas Liquids), while exports of major fuels like gasoline, distillate, and jet fuel declined compared to 1H22

Additionally, the market awaits the ADP and JOLTs report, which is indicative of the US labor market's health, to be released today

US fall refinery maintenance season shapes up to heaviest since pre-COVID (Bloomberg)
Refining capacity is set to decrease by about 2.5 MMBbl/d for maintenance from September to December, marking an 11% increase from last year
The 3-2-1 futures crack spread fell from its YTD $43/Bbl high in August to $23/Bbl. While diesel margins have held strong, gasoline margins are seeing a post-summer decline
Estimated offline processing capacity for September was 0.53 MMBbl/d and is projected to be 1.48 MMBbl/d in October, and 0.45 MMBbl/d in November, with no planned outages in December, according to Energy Aspects
However, these figures only account for scheduled maintenance; real numbers may rise due to unforeseen shutdowns or additional work

Natural Gas

Natural gas prices are trading higher after falling 9c yesterday
The Winter ‘23/’24 strip is up 5c to $3.28, and the Summer ’24 strip is higher by 3c to $3.19

TotalEnergies says LNG prices to soften towards the end of the decade (Reuters)
LNG supply is expected to increase by more than 20% by 2030, as new projects from the US and Qatar enter service
The CEO of TotalEnergies said, "It is better for everyone to have more supply in the market to stabilize the price than having a tense market like today. Probably by the end of the decade, we will see a softening of (LNG) prices,"

ERCOT is seeking additional power capacity ahead of winter (Reuters)
ERCOT began seeking bids from power producers on Monday to increase its operating reserves by 3,000 MW to prevent unexpected shortfalls in generation
The request seeks capacity from dispatchable generation and demand response for the period of December 2023 through February 2024, citing significant peak load growth since last winter
ERCOT said that offers from mothballed or decommissioned units could a 10% “incentive factor that reflects the revenues the unit owner determines would be necessary to bring the unit back online”

Trading Economics

WTI crude futures steadied around $89 per barrel on Tuesday, after falling more than 6% in the previous three sessions due to a strong dollar and surging Treasury yields. The dollar scaled fresh ten-month highs against a basket of peers and the 10-year US yield rallied to its highest levels since 2007 as strong US economic data bolstered the view that the Federal Reserve will keep interest rates higher for longer. Analysts also noted that a key oil pipeline between Iraq and Turkey looked ready for operations this week which could result in additional oil flows and ease global supply tightness. Meanwhile, markets look ahead to an OPEC+ meeting this week, where it is expected to maintain previously announced output cuts.

US natural gas futures traded around $2.9/MMBtu due to strong demand and slightly reduced production. Gas production in September was 102.0 billion cubic feet per day, down from August's record high of 102.3 bcfd. Also, warmer-than-normal weather forecasts until October 6 are supporting gas demand despite the shoulder period with typically lower power demand. Furthermore, gas flows to US LNG export facilities have been rising and pipeline exports to Mexico reached 7.2 bcfd in September. However, feedgas remained steady at around 12.1 bcfd for a second consecutive day, following a 4-week low of 11.5 bcfd due to maintenance at facilities like Cove Point and production reductions at other plants. Meanwhile, the EIA reported a slightly larger-than-expected weekly increase in gas inventory, with US utilities adding 90 bcf during the week ending September 22, exceeding market expectations of 88 bcf.
MY TAKE: If the NOV23 HH ngas contract can stay around $2.90 through October, the DEC23 contract, which will become the front month near the end of this month, should hold over $3.00. This morning it is trading at $3.29

Note from Raymond James this morning.

When OPEC’s JMMC meets this Wednesday, we do not anticipate any major
shift in production policy despite a price increase of nearly 9% since the August
monitoring meeting. A lot of the heavy lifting for setting the 2024 production
levels was done at the June meeting, and any tweaking that is deemed necessary
will likely take place at the November full ministerial gathering. What is in play
every month is Saudi Arabia’s unilateral 1 mb/d supply adjustment. Last month,
the Kingdom announced that the cut would extend through year-end with the
important caveat that the decision would be reviewed monthly and could be
altered in either direction.

Closing Prices:
> Prompt-Month WTI (Nov 23) was up $0.41 on the day, to settle at $89.23
> Prompt-Month Henry Hub (Nov 23) was up $0.109 on the day, to settle at $2.949

Sure would be nice to see HH ngas move over $3.00.

OPEC meeting news in the morning should firm up oil price.