Energy Prospectus

Opening Prices:
> WTI is up $0.11 to $82.42/bbl, and Brent is up $0.23 to $84.30/bbl.
> Natural gas is up 4.7c to $3.213/MMBtu. < Today, I will be posting how much natural gas and NGL production that each of the Sweet 16 companies has. It will be posted under the Sweet 16 tab. Exxon's takeover of PXD will draw a lot of attention to the Sweet 16 today.

AEGIS Notes
Oil

Oil heads for its largest weekly loss in six months as macro-economic concerns counter tight supply

Brent crude and WTI fell by nearly $11.33/Bbl and $8.50/Bbl this week, exacerbated by a potentially overstated EIA report on weak U.S. gasoline demand
The decline also coincides with the recent bond market selloff, leading to a stronger U.S. dollar and concerns about a slowing economy

In September, nonfarm payrolls increased by 336,000, surpassing the expected 170,000 gain, while the unemployment rate stayed at 3.8% despite forecasts of a drop to 3.7%
Strong job growth and stable unemployment rates often signal higher oil prices due to increased demand in a healthy economy
However, Central bank measures to counteract inflation could weigh on this outlook
MY TAKE: A Major Recession is highly unlikely in a country that has near full employment. It would take a MAJOR GLOBAL RECESSION to lower demand for oil-based products.

Keystone oil pipeline that carries oil from Alberta to U.S. Midwest and onward to the U.S. Gulf Coast is running at 0.5 MMBbl/d, close to its 0.6 MMBbl/d capacity (Woodmac)

Russia lifts ban on most diesel exports with new terms (Bloomberg)
Russia resumes seaborne diesel exports weeks after an export ban due to a domestic fuel price surge that disrupted global markets; shipments now require delivery to ports via pipeline
The export ban that started on Sept 21 led to a spike in European prices, and the new regulations will release about 90% of the pre-ban volumes, roughly 0.63 MMBbl/d, says Viktor Katona of Kpler
The new terms stipulate producers must still retain 50% of their diesel production domestically
Additionally, exporters that ship domestically bought diesel will incur a $500/ton export duty, while the government fully subsidizes refiners to offset price differences between local and international markets

Natural Gas

The November natural gas contract is at the highest level since August and up 40c in October alone
Gas demand is expected to slowly increase over the next two weeks, from 69.7 Bcf/d to 71.5 Bcf/d. as temperatures decline across the Lower 48

LNG feedgas nominations are close to a multi-month high of 13.3 Bcf/d, as Sabine pass lifts its intake by 340 MMcf/d

Tellurian seeking additional time for Driftwood LNG (Reuters)
Tellurian is asking FERC for an additional 36 months to build its planned Driftwood LNG export facility in Louisiana
If the extension is granted, it would push the expected in-service date to 2029, from 2026
Construction at the facility has been ongoing despite difficulties with financing and finding customers

Natural Gas Supply Association says high storage will pressure gas prices (Reuters)
The NGSA said that while gas demand may grow this winter relative to last year, high inventory levels, strong production, and a slower economy could weigh on gas prices
In their 2023-2024 Winter Outlook, they project gas inventories to start the withdrawal season at 3.7 Tcf, 200 Bcf higher than last year < This is well within the 5-year range for U.S. natural gas storage. We don't have a "glut" of natural gas in the U.S. If LNG exports remain near capacity all winter, the draws from storage should be larger than a year ago.
The association also noted continued growth in gas-fired power generation, with an additional 10 GW of coal retirements this year

Closing Prices:
> Prompt-Month WTI (Nov 23) was up $0.48 on the day, to settle at $82.79 < Support level at $82 held.
> Prompt-Month Henry Hub (Nov 23) was up $0.172 on the day, to settle at $3.338 < Cold wave in Eastern U.S. generates some space heating demand.

Trading Economics:
WTI crude futures fell as much as 2% before settling around a five-week low of $84 a barrel on Thursday, and extending a 5.6% slump the day before, as concerns about lower demand offset tight supplies. The prospect of prolonged high-interest rates has been weighing on the oil market this week. Yesterday, EIA data showed that gasoline stocks in the US rose the most since the first week of 2022, and the four-week average for gasoline demand reached its lowest point for this time of the year since 1998. On the supply side, OPEC+ made no changes to the group's oil output policy, following Saudi Arabia and Russia's decision to extend voluntary supply cuts until the end of the year. On Thursday, the Russian government stated that there was no set deadline for lifting the fuel export ban introduced in September, and these restrictions would remain in place as long as necessary.

US natural gas futures rose toward $3.3/MMBtu, closing in on their highest level since January driven by reduced domestic gas production and increased exports. October's gas output declined to 102.1 bcfd from 102.9 bcfd in September and a record 103.1 bcfd in August. Additionally, natural gas exports to Mexico are rising, with expectations of further growth when New Fortress Energy's plant starts exporting liquefied natural gas (LNG). The total volume of natural gas supplied to the seven major US LNG export plants edged up to 12.8 bcfd in October, but it still falls short of the record levels of 14 bcfd observed in April. Cove Point, which halted operations around September 20, is expected to resume production within the next week or so. Elsewhere, workers at US energy firm Chevron's two LNG export plants in Western Australia voted to restart strikes. For the week, US natural gas prices are up more than 12%, following a 1.7% gain in the previous period.