Energy Prospectus

Our next Houston Luncheon will be on November 8 that is being hosted by BayTex Energy (BTE). Our speaker will be the Company's CEO.

Opening Prices:
> WTI is up $0.93 to $84.14/bbl, and Brent is up $1.00 to $88.93/bbl.
> Natural gas is up 12.0c to $3.334/MMBtu.

AEGIS Notes
Oil

Oil is trading higher around $84.75 but is set to finish the week with a loss of $3.20

Oil is reversing some of yesterday's losses following reports of US strikes on Iranian-linked facilities in Syria and continued action by the Israeli military in Gaza
Iran’s foreign minister warned that a broader regional conflict would not leave the US unaffected

US GDP numbers yesterday showed the economy grew at 4.9% annualized, higher than the estimate of 4.7% < The highly promoted recession continues to be pushed back.

Chevron sees oil production from Venezuela up 15% by the end of the year (BBG)
Chevron’s CFO said that their Venezuela production will rise to about 150 MBbl/d by the end of 2023 < A tiny impact on the global oil supply deficit.
The US recently eased sanctions on the country, permitting more crude sales and enabling more production
Chevron said that their work in Venezuela “is primarily repairs to wells and facilities” and that they “don’t have a long-term license, and we would not make significant investments with a short-term license in addition to other geopolitical uncertainties that exist”

Senator Manchin pushes for offshore oil auction following court ruling (BBG) < Manchin is one of the few Democrats that actually works for the people who elected them.
The Department of the Interior planned to hold the last offshore auction until 2025 last month, but six million acres were trimmed from the auction over concerns for the endangered Rice whale, which lives in the Gulf of Mexico
Senator Joe Manchin said, “Shrinking or further delaying lease sale 261 threatens both our energy security and climate goals and could make us more dependent on dirty foreign oil and gas”
The Fifth Circuit Court will hear oral arguments on the issue on November 13.

Natural Gas < Today is the last day of trading for the NOV23 HH gas NYMEX contract. DEC23 (trading at $2.53 this morning) will become the "Front Month" NYMEX futures contract tomorrow.

The November gas contract continued its rally on Friday ahead of today’s expiry
Nov gas rose 8.5c to $3.31/MMBtu Friday morning, following a 21c rally on Thursday

Cooler shifts in the weather have been the main driver of the recent surge in prices
Weather models are showing the coldest start to November in four years (CWG) < Old Man Winter does not believe in Global Warming.
In the past 24 hours, the American operational model showed a +28 increase in US gas-weighted HDD, and the European gained 12.4 HDDs
A gain of 28 HDDs is about 36 Bcf
Keep in mind that the last two cold starts to winter, 2018 and 2019, had December flip to warmer than 30-year normal

Yesterday, the EIA reported an injection into underground storage of 74 Bcf for the week ended October 20
Total working gas is now 313 Bcf higher than last year during the same week and 183 Bcf higher than the five-year average (3.517 Tcf)
Thursday’s gas print caught the market a little by surprise, as most were expecting a beefier injection
Gas prices rallied and stayed elevated following the AM data release

If the shooting war between Iran and the U.S. escalates to the point that Team Biden is forced to enforce sanctions against Iran's oil exports, WTI will move over $100/bbl quickly. Obviously, Team Biden does not want to do this because higher fuel prices, lead to higher inflation and hurt all Democrats up for re-election.
---------------------------
Two U.S. fighter jets struck weapons and ammunition facilities in Syria on Friday in retaliation for attacks on U.S. forces by Iranian-backed militia as concerns grew the Israel-Hamas conflict might spread in the Middle East.

President Joe Biden ordered strikes on the two facilities used by Iran's Revolutionary Guard Corps and militia groups that it backs, the Pentagon said, warning the U.S. will take additional measures if attacks by Iran's proxies continue.

U.S. and coalition troops have been attacked at least 19 times in Iraq and in Syria by Iran-backed forces in the past week. Hamas, Islamic Jihad and Lebanon's Hezbollah are all backed by Tehran.

Iranian Foreign Minister Hossein Amirabdollahian said at the United Nations on Thursday that if Israel's offensive against Hamas did not stop, the United States will "not be spared from this fire."

The U.S. air strikes took place at roughly 4:30 a.m. Friday (0130 GMT) near Abu Kamal, a Syrian town on the border with Iraq, and were carried out by two F-16 fighter jets using precision munitions, a U.S. defense official said.

"These precision self-defense strikes are a response to a series of ongoing and mostly unsuccessful attacks against U.S. personnel in Iraq and Syria by Iranian-backed militia groups that began on Oct. 17," Defense Secretary Lloyd Austin said in a statement.

"These Iranian-backed attacks against U.S. forces are unacceptable and must stop," Austin said.

"Iran wants to hide its hand and deny its role in these attacks against our forces. We will not let them. If attacks by Iran's proxies against U.S. forces continue, we will not hesitate to take further necessary measures to protect our people."

Biden has sent a rare message to Iranian Supreme Leader Ayatollah Ali Khamenei warning Tehran against targeting U.S. personnel in the Middle East, the White House said earlier on Thursday.

"What we want is for Iran to take very specific actions, to direct its militias and proxies to stand down," a senior U.S. defense official said. The United States did not coordinate the air strikes with Israel, the official added.

The United States has sent warships and fighter aircraft to the region over the last three weeks. On Thursday the Pentagon said about 900 more U.S. troops have arrived in the Middle East or are heading there to bolster air defenses for U.S. personnel.

Israel said on Friday military raids into Gaza were preparing "the next stage of the operation," amid fears that a ground invasion of the Palestinian enclave could spark a wider Middle East conflict.

Israel has bombarded the densely populated Gaza Strip following the Oct. 7 Hamas attack on Israeli communities. Israel says Hamas killed some 1,400 people including children, and took more than 200 hostages, some of them infants and older adults.

The Hamas-controlled Gaza health ministry said on Thursday that 7,028 Palestinians had been killed in the retaliatory air strikes, including 2,913 children.

Reuters could not independently verify the tolls.

A missile launched as part of fighting between Hamas and Israel struck an Egyptian resort town about 220 km (135 miles) from the Gaza Strip early on Friday, Egypt's Al Qahera News reported, citing sources.

The missile hit a medical facility in Taba, injuring at least six people, Al Qahera reported. A witness in Taba confirmed hearing an explosion and seeing smoke rising, but Reuters was not immediately able to identify the blast's source.

Israel Hits Hamas Commanders

Israel said Friday that its fighter jets had struck three senior Hamas operatives who played significant roles in the Oct. 7 attack on Israel. They were commanders in the Daraj Tuffah Battalion, part of the Gaza City Brigade, Israel said.

There was no official announcement by Hamas.

Palestinian militants clashed with Israeli troops in at least two areas of the Gaza Strip on Friday, Hamas-affiliated media reported.

Reuters was unable to immediately confirm the reports.

As the plight of Palestinian civilians grows more desperate, the issue of whether to have humanitarian pauses or ceasefire agreements in the Hamas-run coastal enclave will come before the 193-member U.N. General Assembly on Friday in a draft resolution submitted by Arab states calling for a ceasefire.

Unlike in the Security Council where resolutions on Gaza aid failed this week, no country holds a veto in the General Assembly. Resolutions are non-binding, but carry political weight.

More than 613,000 people were estimated to have been made homeless by the Israeli bombardment of Gaza and were being sheltered by the United Nations agency for Palestinian refugees, UNRWA.

Poll: Israeli Support for Ground Invasion Dips

Almost half of Israelis want to hold off on any invasion of Gaza, according to a poll published Friday.

Asked if the military should immediately escalate to a large-scale ground offensive, 29% of Israelis agreed while 49% said "it would be better to wait" and 22% were undecided, the poll published in the Maariv newspaper said.

The daily said the results contrasted with its Oct. 19 poll that found 65% support for a major ground offensive.

Maariv said "it is almost certain that the developments on the matter of the hostages, which is now topping the agenda, have had a great impact on this shift (in opinion)."

Hamas freed four hostages over the last week amid efforts by regional mediator countries to arrange a larger-scale release. Hamas says around 50 hostages have been killed in Israeli strikes on Gaza.

Trading Economics:
Oil
"WTI crude futures rose above $84.5 per barrel on Friday but were still set to lose about 4% this week amid easing concerns of a wider conflict in the Middle East and signs of weakening demand in the US. Analysts pointed to ongoing diplomatic efforts to delay an expected ground invasion of Gaza by Israeli forces. Meanwhile, EIA data showed that product supplied for both motor gasoline and distillate fuels significantly fell last week, while refinery crude runs and utilization rates also dropped. The report also showed that US crude inventories rose by 1.371 million barrels last week, exceeding forecasts for a 0.239 million barrel increase. Moreover, stronger-than-expected US economic data suggested the Fed will stay on its path of higher-for-longer interest rates, weighing on the demand outlook."

Natural Gas (DEC23)
"US natural gas futures moved toward the $3.6/MMBtu mark, approaching levels last seen in January amid forecasts of higher demand and lower inventories. Temperatures in the Pacific Northwest of the United States fell below average for several days highlighting the seasonal volatility. At the same time, new data from the EIA showed that US utilities added 74 billion cubic feet of gas into storage on the week until October 20th, above the five-year average, but missing market expectations of an 80 billion cubic feet build. Previously, meteorologists noted that weather in the lower 48 US states is likely to be significantly colder than expected from the end of October to the start of November, increasing demand for gas-intensive heating. Capping the rebound, however, data from the LSEG showed that average US production averaged 103.9 billion cubic feet so far in October, on track to surpass the record high of 103.1 billion cubic feet from July."

This is what will drive oil prices in the near term. AEGIS: "Oil climbs $2.33/Bbl as Israel expands ground operations in Gaza."
U.S. airstrikes against Iran back bases in Syria also raising geopolitical risk premium for oil.

Closing Prices:
> Prompt-Month WTI (Dec 23) was up $2.33 on the day, to settle at $85.54
> Prompt-Month Henry Hub (Nov 23) was down $-0.050 on the day, to settle at $3.164 < The DEC23 NYMEX contract will be the quoted price on Monday. It closed today at $3.44.