07
May
Wrap – Week Ended 5/6/22
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Volatile week, as expected. Broad markets eased. Energy was largely up and the ZLT ended the week up 3%. The OPEC+ meeting was 13 minutes long and bore no surprises. The EIA weekly was positive side of neutral and benign. Powell was the careful version of Powell. Energy earnings were largely better than expected, and we're through 57 of 67 calls we care about this season.
Free Stuff Last Week:
- None, however EE should get positive coverage next week in the LNG regas space and we wrote them up pre IPO here so it might be worth a look.
- Next week look for a piece on coming IPO ProFrac (PFHC).
Holdings Watch:
- We added to one completion company multiple times last week in the wake of much better than expected earnings.
- We sold our position in PUMP, up 22%, in a previously telegraphed move to reposition in the space.
- We added to our short term sand name trade.
- We added to one gassy name during the week.
- The blotter is updated.
Comments From The Wrap Table Below
- Oil
- Prices rallied on the EU Russian oil ban proposal.
- The OPEC+ meeting was a non event.
- The NOPEC bill is bad idea unless you want much higher prices.
- Crack spreads remain extremely elevated (> $50 on the basic 3-2-1).
- Distillate stocks are getting more mainstream energy media notice for being exceptionally understored.
- The gasoline to distillate skew is not above normal. At this balance distillates are going to have a tough time recovering over summer.
- Implied gasoline demand remains under-whelming
- Exports, crude and products remain strong and set to move higher.
- SPR releases are about to accelerate .... likely sending US crude exports to new all time high levels ...
- ... and the "net imports" graph back to new envelope lows.
- Sidebar protip - don't use the SPR in an attempt to manipulate gasoline prices. Oil is not gasoline.
- Sidebar protip 2- don't pre announce a plan to refill the SPR if you have engaged in an attempt to manipulate prices.
- Sidebar protip - don't use the SPR in an attempt to manipulate gasoline prices. Oil is not gasoline.
- We continue to see a lack of real push to import oil to the U.S. relative to announced OPEC+ quota increases. Not surprising but notable.
- Active frac spreads are rising after the usual spring lull. Very tight market. Net pricing is on the move for Tier II and Tier IV DGB and commentary revolves around upgrades but holding faster on adding HHP.
- Natural Gas
- Pricing is nutty high. We see as overdone and in need of a pullback.
- Equity names have been expected to be and have turned out to be better to buy on pullbacks.
- Not in the table but production growth remains elusive YTD in 2022.
- Storage remains in sharp deficit territory.
- Look for a similarly sized build in the coming we vs last week's modestly larger than expected build.
- Expect no record injections this year
- Z4 has a peak expectation range of 3.2 to 3.65 Tcf for 2022 - a fairly wide range for us but given pricing is well above our average expected price for the year we still see the potential for greater than currently market expected switching.
- Sidebar: 3 gassy upstream conference calls last week noted the exceptional resilience of power burn year to date despite the higher prices (noting boosted coal prices and ongoing coal fired closures).
- Street consensus for 2022 and 2023 natural gas are rising more swiftly now. They often overshoot.
- LNG exports are commonly > 12 Bcfgpd now trend over 13 and headed to 14 before year end.
- Mexico exports remain at a plateau.
- Not in the table below but all large cap gassy players who were in maintenance move before their 1Q22 reports are in maintenance mode after their 1Q22 reports.
Questions under The Wrap will be addressed in the Monday post.
Questions about the site may directed to zman@zmansenergybrain.com
Have a good weekend,
Z
The calendar is updated:
https://zmansenergybrain.com/subscriber-data/calendar/
May 7th, 2022 at 5:57 pmZ, do you have a preference between EE and NFE?
May 8th, 2022 at 11:32 amGeneral Market.
May 8th, 2022 at 10:09 pmS&P Falling into the volume gap. 3900 in play.
https://ibb.co/m4ztdvm