Wrap – Week Ended 9/3/21

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Mixed bag of a week in the markets and energy.

• Oil edged up:
  • After OPEC+ opted to, as most expected, stay the course on the 0.4 mm bopd monthly de-curtailment. In our view this sends a signal that OPEC doesn't see as dire a 2022 Covid impact as some (IEA) do, and we note they actually boosted their 2022 demand forecast, or they are being overly cute and threading the needle for now to get a little more volume back on line, keeping members in line, before taking another pause if needed later this year.
  • The weekly out of EIA was another "positive side of neutral" report.
    • Next week's numbers will be a mess due to Ida.
    • We note offshore production continues to be sharply impacted longer than usual and has actually bobbed lower again instead of the usual linear recovery we normally see from inspection and re-staffing efforts. Some items will take longer this time to recovery given Ida's path and strength.
  • We also note that CFTC net long to short continues edge off recent highs. Under 6x is considered safer territory. Over 6x is more volatile territory and we note the moves have become more muted as the speculative length came out of the metric a few weeks back (5.5x now).
• Natural gas built upon the recent rally.
  • Smaller than expected storage build.
  • About 2.0 Bcfgpd offline due to Ida.
  • Less of an impact from Ida on demand in the form of still strong CDD readings.
  • We see the move as overdone.
  • However the move on the 2022 strip (now a whopping $3.88 vs a Street that is still below $3.25) is welcome and we expect early October to bring substantial upward revisions to EBITDA, FCF, and price targets for the gassy players. Note the gassy players are for the most part a lot less hedged for 2022 than they were for 2021 and less than in recent years at this point in the calendar as well.
  • The 2023 strip is warming.
  • Bank line redeterminations are of no concern this fall.
  • We note the non commercial net long position bounced off the 2021 low's with this week's report. Speculators however remain very short at 0.7x (long to short).
  • See our Gassy Macro Slide Show update in last Thursday's post (slide decks for production, imports, supply, demand, and the storage balance). 
  • We added to our gassy wedge again in late August. Yippee.

Holdings Watch:

• The trading blotter is updated. 
• The positions page is updated.  We hold 23 equity positions in the ZLT Portfolio at this time.
• We added to two infrastructure plays (doubling one of them) and one solar play last week
• The ZLT was up 3.6% last week building on the prior week's 14% gain.

Questions under The Wrap will be addressed in the Subscriber Mailbag in the Tuesday post.

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Have an awesome long weekend,

Z