Wrap – Week Ended 02/25/22



Ukraine Crisis Relief Fund

Volatile week in more ways than one. The ZLT was up a bit over 3%.  Oil and natural gas names performed fairly well on the week. Somewhat surprisingly renewables returned to following a long forgotten path of rising on oil price spikes with both solar and wind segments catching a strong bid as WTI briefly eclipsed $100 for the first time since 2014.

4Q21 earning season continues to slog along (we're through just over 40 calls out of > 65 we will be on this quarter) and has been largely as expected (some pricing dips to expectations in the gassy space, maybe a little more per unit LOE than we expected exiting the year but nothing significant). Notable quotes this week came from frac and sand producers:

  1. NEX ~ Rough Quotes:  "most people don't know it but frac spreads will govern U.S. volume growth". By their count the U.S. has about 250 active spreads working (there are different ways to count them relative to @primaryvision based frac spread number noted below) and sees only about 15 spreads that could return from cold stack, including ones that are Tier II diesel and/or would be very costly to reactivate and staff up.
  2. SLCA (unowned) ~ "we're sold out for frac sand".  We own a different name in this segment. See the blotter.

Free Stuff This Week:

Holdings Watch:

  • We sold SLB in the preceding week, up 36%, as a profit protection trade (SLB has some Russia exposure).
  • We continued to add to one small cap Sand name before during and after Upstream and Sand peer player comments this week,
  • We added to one of our Core Oily Upstream names as it weakened and provided additional thoughts on potential reasons for the weakness with that trade (see blotter)
  • The Trading Blotter is updated.

Numbers of note from The Wrap table below:

  1. Oil:
    1. Oil spiked on the invasion of Ukraine by Russia. Prices hit a high of $100.54 before settling up less than 2% on the week at $91.59 (April), fading hard as it became apparent that most sanctions who not impact Russian oil or gas exports.  We do not reluctance on the part of tankers and some buyers to take Russian cargoes.
      1. We do note that Brent and the OPEC basket fared considerably better on the week, sending the premium to WTI to levels not seen in years (> $6) which should: 
        1. help boost U.S. crude exports.
        2. help boost U.S. gasoline prices as they pair with Brent more than WTI. 
    2. The weekly EIA oil inventory report was modest side of negative for headline numbers but better for internals. Few cared this week.
    3. Oil directed rigs hit another pandemic (post pandemic?) high.
    4. The Generic 3-2-1 crack continues to skyrocket, advancing over $28.  We continue to expect a "short and shallow" maintenance turn and super elevated margins only increase the likelihood of this outcome. Also, distillate stocks are very understored.
    5. Active frac spreads rose to a new pandemic period high of 290, up 7 from last week and up 107% from year ago levels.
      1. The ratio of oil
    6. Not in table below:
      1. Some tanker and tanker insurance rose.
      2. Some commodity credit rates.
      3. Air traffic is eclipsing 2019, 2020, 2021 levels.
  2. Natural Gas
    1. The natural gas weekly storage report was in line with reduced expectations.
      1. Storage is only 282 Bcf above the mid point of our so-far-this-season-unchanged EOS range of 1.4 to 1.6 Tcf and we expect storage to ultimately land near the lower half of that range.
      2. This coming week's report should be larger and confidence in our math from last Friday (calling for a lower pull from storage just above -100 Bcf) is low given obviously better weather for the full week than what was in our partial week numbers.
    2. The Nymex non-commercial net short position continues to slowly erode but remains very net short.
    3. Gas directed rigs also hit another new high.  This is largely private player action.
    4. More large cap gas names reaffirmed they will not grow but will be in maintenance mode, harvesting cash flow, in 2022.

Questions and comments under The Wrap will be addressed in the Subscriber Mailbag section of the Monday post. 

Questions about the site may be directed to zman@zmansenergybrain.com

Have a peaceful weekend, 



4 Responses to “Wrap – Week Ended 02/25/22”

  1. 1
    zman Says:


    WH says energy sanctions on the table.

  2. 2
    Anonymous Says:

    Thanks for publishing the charity address….

  3. 3
    Zorgnak Says:

    MGY Setup for breakout with a move above 21.67

  4. 4
    zman Says:

    re 2 – you bet. Lot of suffering about.

    re 3 – thanks.

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