Energy Prospectus

Comments below in " " are from Roth Capital's weekly E&P Update:

"Due to the recent pullback in WTI crude oil spot prices and the continuing overhang of crude oil and petroleum product inventory levels, we are pulling back our 4Q 2016 estimate from $55/bbl to $50/bbl. Similarly, for the full year 2017 we are revising our previous $65/bbl to $55/bbl."

In all of my forecast models, that are used to value our model portfolio companies, I am now using the following oil prices (WTI):
Q3 2016 = $45
Q4 2016 = $55
2017 = $60
In each forecast model I adjust the oil, gas and NGL prices for regional differences and the impact of hedges.
For natural gas, I am assuming Henry Hub prices of:
Q3 2016 = $2.50
Q4 2016 = $3.00
2017 = $3.25

"One of the major lessons we have learned from covering the sector, in our opinion, is that oil market sentiment is fleeting and fragile and the herd mentality is on occasion extreme. While we are pulling back our WTI crude oil projected prices, we continue to be positive on the long term, upward direction for crude oil prices. While the outage of oil sands production from the Canadian wildfires is returning to the market, in our view, we see continued outages in places such as Nigeria and Venezuela getting worse in the short and intermediate term."

"Contributing to increased negative sentiment were recent headlines on Saudi Arabia’s increased oil production to record highs. But we point out the Saudi officials included clear comments indicating that the increase was for domestic summer demand. The U.S. is not the only county suffering from a warmer than normal summer season."

According to media reports on Monday, Russia is opening up to an agreement with other major oil producers to freeze output in an effort to stabilize the market.

Alexander Novak, Russia's energy minister, said his country is consulting with Saudi Arabia and other producers to jointly cap production "if necessary," Arabic newspaper Asharq al-Awsat reported.

"We are cooperating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability," Novak said.

Investing.com -- U.S. crude futures soared to fresh 3-week highs after Russia energy minister Alexander Novak hinted that his nation could be open to holding discussions with major producers from the Middle East in the coming weeks, as OPEC considers whether it will be prudent to freeze output in an effort to stabilize persistently low oil prices.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $44.38 and $45.77 a barrel before closing at $45.72, up 1.23 or 2.76% on the session. The front month contract for U.S. crude closed higher for the fourth straight session and the fifth time in the last seven trading days. With the sharp gains, WTI crude eclipsed $45 a barrel for the first time since July 20. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $46.84 and $48.39 a barrel, before settling at $48.33, up 1.36 or 2.90% on the day. Brent futures cleared $48 for the first time since July 15.

Both the U.S. and international benchmarks of crude are coming off their strongest week since the spring, soaring approximately 5% last week.

Crude futures extended last week's rally on Monday after reports surfaced that Russia could consider meeting with top producers from OPEC in a potential attempt to coordinate joint oil market stabilization. The comments come days after Saudi energy minister Khalid al-Falih sparked a rally last week by suggesting that OPEC producers could meet on the sidelines of next month's International Energy Forum (IEF) in Algeria, their first informal meeting since the 14-member cartel left its production ceiling unchanged at a closely-watched meeting in June. Weeks earlier, a coordinated production freeze between Saudi Arabia, Russia and two other major producers collapsed after the Saudi kingdom insisted that main rival Iran take part in any agreement that required the participants to cap output at levels from early-2016.

"With regard to the cooperation with Saudi Arabia, the dialogue between our two countries is developing in a tangible way, whether in the framework of a multi-party structure or on a bilateral level," Novak told Saudi state-owned newspaper Asharq al-Awsat. "We are cooperating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organization, and are determined to continue dialogue to achieve market stability."

Saudi Arabia, the world's top oil exporter, could be willing to freeze output at its current levels given that the kingdom pumped 10.67 million barrels per day of oil last month, its highest amount on record. Iran, which boosted production to 3.65 million bpd in July, has plans to increase output over the next five years until it reaches a target of 4.6 million bpd, according to comments made by energy minister Bijan Zanganeh before the Islamic Consultative Assembly, also known as the Iranian Parliament. The comments were reported by Iran's FARS News Agency.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell by more than 0.15% to an intraday low of 95.43. Since hitting a four-month high at 97.62 in late-July, the Dollar has retreated by approximately 2%.

Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.

Data from market intelligence firm Genscape estimating a draw of more than 350,000 barrels at the Cushing, Oklahoma delivery point for U.S. crude futures last week added to the bullish sentiment, said traders who saw the data.