Wrap – Week Ended 01/14/22



Market Comment Watch: Second solid week for the ZLT to start the new year with oil and natural gas centric upstream positions and oil service contributing to strong portfolio performance while our smaller renewables wedges in EV-tied, solar-tied, and wind names acted like less of a sea anchor this week.

  • Our 3 oil centric E&P positions are up a weighted average 19% YTD vs XOP up 16% (individual names are up from 16 to 29% in the two week period),
  • While our 4 gassy holdings are up a weighted average 12% vs XNG up 9% (range of 6 to 22%),
  • and our 4 oil service names are up a whopping weighted average 41% (range of up 26% to 69% YTD 2022) vs a roaring OIH up 23%,
  • Tech names and anything renewables have had a tough start to the year with TAN and FAN (both unowned ETF's) down 8% and 4% respectively.
  • The broad markets as reflected by the DJIA and SPX are off to a slightly negative start on Fed/inflation concerns.

Free Stuff Last Week: None but will have some this week.

Holdings Watch:

Notable Numbers from the Wrap Table Below Watch:

  1. Oil:
    1. "Negative side of neutral" as weeklies from EIA goes, with refiner throughput easing and major product builds reported. A lot of inventory moves this time of year are EIA accounting and don't reflect slack demand.  The refiner throughput dip was a little unwelcome/early.  We anticipate a short and shallow maintenance turn that may be a little historically early in the calendar for the spring turn followed by a move to pandemic period crude demand highs.
    2. The presidential plan to cut prices has run in to a snag as predicted for moves based upon SPR releases with the intention of cutting prices. Oil and gasoline prices are well off the November lows now with wholesale gasoline up some 50 cents from the November trough.
    3. CFTC non commercial (speculator) net longs crept back over the 6.0x mark. We see 6.0x as the dividing line between OK and something to watch out for. Above 6.0x long to short can result in oversized moves to the downside for oil on little meaningful news.
  2. Natural Gas:
    1. Bigger than expected storage withdrawal.  Expect a 200+ Bcf pull this coming Thursday. Storage is fine but not $5 fine.
    2. Prices moving on colder weather in the U.S. and high demand from Europe and Asia. Note the big moves in prompt but also in the Calendar 22 strip here (up 10% on the week).
    3. And also on a bit of geopolitical fear for once (usually this is oil's domain) with the idea that Russia may actually pull the trigger on Ukraine. This would mean LNG cargoes would increasingly be re-routed to Europe raising global prices.
    4. We note that for the first time in recent months the CFTC speculative net short position meaningful contracted.
    5. Previously we said we would add to gassy names on dips in natural gas prices as pullbacks make the group more buyable vs chasing unsustainably high natural gas prices. We did. And we have no change to that plan at this time. We continue to model at $3.50 for 2022 and increments above and below that level and are pleased to see the Street easing back on their price expectations for 2022 which helps to make consensus estimates more of a base case and less of stretch/hopes and dreams case.
  3. Activity - Frac spread and rig counts bounced in the second week of the new year. We anticipate more modest growth on a YoY basis for both this year and most names adopt maintenance or maintenance plus type 2022 budgets. We anticipate modest growth for both Lower oil and natural gas production in 2022. We anticipate the rapid decline in DUC depletion of 2020 and 2021 will abate in 2022.
  4. We'll see the first of those 2022 budget/program announcements in early February. Subscribers see our 4Q21 Energy Earnings Calendar along with the 3Q21 summary for a majority of the calls we were on last quarter in the link at left.

Questions and comments under The Wrap will be addressed in the Tuesday post (markets are closed Monday for MLK).

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Have a great rest of the long weekend,


2 Responses to “Wrap – Week Ended 01/14/22”

  1. 1
    zman Says:

    Weather Watch:

    Last week: Gas-weighted Heating Degree Days (HDDs) came in at 209 vs 226 normal and 225 in the prior week.

    This week’s forecast: This week, CPC predicts HDDs will rise to 219 vs 225 normal.

  2. 2
    Anonymous Says:

    P&F weekly Rel. strength buy signals from Dorsey Wright in energy this week: PBF, NEX, HAL, RPT, BPMP, SU.
    RS sells: GTLS, PLUG, some retailers

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