AEGIS Hedging : January 17, 2024

Oil is trading lower by more than $1.50, extending losses from yesterday
- As much as 650 MBbl/d of production in the Bakken was shut down yesterday due to freezing temperatures
- The EIA said in their January Drilling Productivity Report that they expect US crude production to rise 2 MBbl/d between January and February, driven by increases in the Permian
OPEC sees strong oil demand in 2025 (BBG)
- OPEC forecasts global oil demand to increase strongly next year, exceeding growth in supply, according to OPEC’s 2025 assessment
- Global oil demand is expected to rise by 1.8 MMBbl/d, driven by Chinese growth and a recovering economy
- The group forecasts non-OPEC supply to increase by 1.3 MMBbl/d in 2025, resulting in oil markets remaining in a deficit
- However, the International Energy Agency expects oil demand to fall sharply and ultimately peak this decade, which OPEC has disagreed with
Mercuria says further OPEC cuts may be needed (Reuters)
- On Wednesday, the CEO of commodity trader Mercuria said that OPEC may need to reduce production further to keep the market balanced
- He added, “U.S. oil production growth was underestimated over the past year. But it will probably slow down because of huge industry consolidation and cost reduction,”

Natural gas prices see further decline with the forecast of warmer temperatures next week
- February ’24 Henry Hub is down 13c this morning to trade around $2.77/MMBtu
- The Winter ‘23/’24 strip is down 2.5c to $2.604, and the Summer ’24 strip is down 0.5c to $2.663
- The weather model indicates warmer temperatures across all Lower 48 regions, particularly in the Midwest and Rockies, reducing the impact of a potential cool pattern in the 11-15 day period
- Lower 48 gas production hit a winter-storm low at 89.9 Bcf/d yesterday, then recovered this morning to 92.47 Bcf/d, with a notable +2.7 Bcf/d rebound in the South Central, while the Rockies and Northeast continued at near-low levels (Criterion)
Record US natural gas exports to Mexico seen in 2024 (NGI)
- Mexico's demand for natural gas, mainly driven by its power sector, rose by nearly 440 MMcf/d to 4.6 Bcf/d in 2023, with U.S. pipeline gas imports growing 8% to around 6.2 Bcf/d, according to Woodmac
- Additionally, the U.S. is seeing record natural gas production levels, offering Mexico affordable prices, contrasting with Mexico's declining production due to mature field challenges
- The shift to nearshoring, moving manufacturing to North America from regions like India and China, could be increasing Mexico's dependence on U.S. natural gas for energy-intensive industries

January 17, 2024