Energy Prospectus

Notes below are from the EIA's June STEO report

> U.S. crude oil production. U.S. crude oil production grows in our forecast by 2% from 2023 to an
annual average of 13.2 million barrels per day (b/d) in 2024 and by another 4% in 2025 to 13.7
million b/d. Increasing production is led by the Permian region, which is the source of almost 50% of
domestic crude oil production, followed by the Eagle Ford region and the Federal Gulf of Mexico.

> OPEC+ crude oil production. In our May outlook, we had assumed OPEC+ would begin to relax some
voluntary production cuts beginning in the third quarter of 2024 (3Q24). In line with the group’s
recent announcement, we now expect OPEC+ will begin relaxing voluntary cuts in 4Q24. As a result,
we expect that the extension of voluntary OPEC+ production cuts will cause global oil inventories to
continue falling through 1Q25. Although we expect crude oil prices to rise from early June levels,
lower-than-expected Brent prices in May mean our forecast for 2024 is $84/b, 4% lower than our
May forecast.

> Global oil inventories fell by an estimated 300,000 barrels per day (b/d) in the first half of 2024
(1H24), and we expect they will decrease by an average of 600,000 b/d from 3Q24 through 1Q25.
Following the start of the phaseout of voluntary OPEC+ supply cuts in 4Q24 and supported by the
ongoing supply growth from countries outside of OPEC+, we expect growth in global oil supply will
outweigh growth in global oil demand growth, returning the market to moderate inventory builds for
most of 2025. We forecast that global oil inventories will begin increasing at an average of 400,000
b/d in 2Q25 and will increase by 600,000 b/d in the second half of 2025.

> As a result, we expect oil prices (Brent) will increase to an average of $87/b in 4Q24 and $88/b in 1Q25. As
global oil inventories rise during most of 2025, we forecast the Brent crude oil price will gradually fall to
an average of $83/b by 4Q25.

What happens is President Trump enforces the sanctions against Iran in 2025?

My 2024 forecast models are now based on WTI averaging $78 in Q2, $80 in Q3, $82.50 in Q4 < Q3 and Q4 may need to trade places. In 2023, WTI prices peaked in Q3, averaging $82.32/bbl

My 2025 forecast models are now based on WTI averaging $80/bbl for the year.

EIA's outlook for natural gas prices:

> Natural gas production. We expect U.S. marketed natural gas production to fall by 1% in 2024
because of low natural gas prices. Marketed natural gas production in the Haynesville region in our
forecast falls by 9% this year and production in the Appalachia region falls by 4%. The forecast
declines are partly offset by growth of 4% in the Permian region, largely because most of the natural
gas produced in the Permian is associated with oil production.

> We forecast U.S. marketed natural gas production will increase by 2% next year, with growth in
all three of these regions, as natural gas prices rise in our forecast.

> Natural gas prices. We expect that a drop in U.S. natural gas production in 2024 will continue to put
upward pressure on the Henry Hub natural gas spot price. We expect that the Henry Hub spot price
will average $2.50 per million British thermal units (MMBtu) this year, 13% higher than we expected
last month, with prices rising from $2.12/MMBtu in May to $3.30/MMBtu in December 2024

> EIA's natural gas price forecast for 2025 is $3.20, which seems too low to me. They don't seem to factor in
enough demand growth for LNG exports.

Note from HFI Research this afternoon:

Oil Price: "We think judging by the magnitude of the move in flat prices coupled with the move we are seeing in timespreads, most of the short covering is done. In order for oil prices to rally further going forward, oil market fundamentals need to take the lead. The fundamentals are improving.

EIA forecast is that global oil demand will exceed supply through Q1 2025, so we should see more bullish weekly storage reports. Just keep an eye on the Gulf of Mexico because tropical storms can have a significant impact on tanker loadings and unloadings.