Energy Prospectus

Opening Prices:
> WTI is down $0.88 to $76.95/bbl, and Brent is down $0.88 to $81.44/bbl.
> Natural gas is down -0.6c to $2.876/MMBtu.

AEGIS Notes
Oil

Oil is trading lower, around $77.45, after posting a $1.71 rally yesterday
The Cal ’24 strip is trading at $76.16, and the Cal ’25 strip is at $72.07

Iran sees higher oil production in 2024-2025 (BBG)
The country’s oil minister said that Iran’s production will rise to 3.6 MMBbl/d by March 2024 and 4 MMBbl/d by 2025
Current production levels in Iran are around 3.4 MMBbl/d
Due to US sanctions, the vast majority of Iranian exports have been shipped to China

RBC sees the possibility of deeper OPEC cuts (BBG)
The bank said recently that they see some scope for a deeper supply reduction by OPEC in order to preserve a floor for oil prices
According to the bank’s note, if the cartel seeks deeper cuts, Saudi Arabia may push individual producers to reduce output so that the member countries share the burden
RBC also sees continued risk from the Israel-Hamas conflict despite the erosion of the risk premium in recent weeks

Russian seaborne crude exports fall to a three-month low (BBG)
2.7 MMBbl/d of Russian oil was exported last week, the lowest level since August and following a surge in exports in October
Almost all Russian exports have been delivered to China or India this year
Russian refinery throughput has jumped recently as the country’s refineries return from seasonal maintenance

Natural Gas

Natural gas trades lower amid persistently high production levels

The Winter ‘23/’24 strip is up 0.7c to $2.950, and the Summer ’24 strip is down by 0.2c to $2.998
The weather model shows a cooling trend east of the Rockies and slight warming in the West for the Lower 48, moderating the forecast into early December, especially in the 8-15 day period

Meanwhile, production remains at or near an all-time high of above 105 Bcf/d
Furthermore, Gulf Coast Express in the Permian is expected to return to full capacity today, with increased interstate deliveries indicating a ramp-up (Criterion)

FERC approves TC Energy's Virginia Reliability Project (TC Energy)
TC Energy has received approval to resume service for parts of its Columbia Gas Transmission Pipeline and is seeking approval for the remaining segments
In July, CGT was ordered by PHMSA to reduce pressure in parts of its Virginia pipeline following an incident
The CGT Pipeline, spanning 5,375 km, connects to major pipelines in the U.S. Gulf Coast and additional Midwestern lines
The Virginia Reliability Project involves replacing around 48 miles of old 12-inch diameter pipeline with a new 24-inch diameter pipeline, with construction expected to start in the 2Q2024 and completion targeted for Nov. 1, 2025

Tennessee Gas Pipeline completes East 300 upgrade, bringing 115 MMcf/d capacity online (S&P)
Tennessee Gas Pipeline's East 300 upgrade, with a full capacity of 115 MMcf/d, is now fully operational, providing a supply boost to the Northeast this winter
Project shipper Con Edison said, “As of Nov. 16, a combination of lower peak demand forecast and increased supply resulting from the Tennessee East 300 Project coming online resolves the Westchester supply-demand gap”
Northeast gas prices, typically lower than Henry Hub in summer due to Appalachian supply, can spike in winter due to limited pipeline capacity and increased demand from cold weather

This is why I moved to Houston in 1994
Energy: The pillar of economic growth and productivity
BY DR. DEAN FOREMAN, CHIEF ECONOMIST, TXOGA NOVEMBER 20, 2023 8:00 AM

Energy, particularly oil and natural gas, is pivotal to economic growth.

The EIA forecasts global oil demand to reach record highs in 2023 and 2024, challenging the fears of a potential recession. A thriving O&G sector indicates a robust economy, which is evident in the data.

Recent data gives us reasons for economic optimism. We have witnessed strong energy demand, record U.S. O&G exports, sturdy domestic production and fluctuating inventories. Specifically, U.S. crude oil stocks in August fell to the lowest level since 1985. In terms of the global oil market, U.S. inventory data is the most timely and transparent in the world. The drop in U.S. crude oil inventories shows there is a historically low cushion against potential market disruptions, which raises concerns over the extended supply cuts by OPEC+. By contrast, U.S. natural gas storage levels are close to five-year highs, reflecting strong productivity.

Read more: https://www.bicmagazine.com/industry/refining-petrochem/energy-pillar-economic-growth-productivity/

Closing Prices:
> Prompt-Month WTI (Jan 24) was down $-0.06 on the day, to settle at $77.77 < Note that JAN24 is now the "Front Month". Also, Brent is still ~$5 higher than WTI, which is a much larger spread than usual. That gap should be under $3. Demand for heating oil is ramping up now and a lot of transportation fuels will be burned up this week.
> Prompt-Month Henry Hub (Dec 23) was down $-0.036 on the day, to settle at $2.846