17
Jul
Wrap – Week Ended 07/15/22
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Sloppy week last with with oil off ~ 7% and the ZLT down 4.7% helped to a below XOP type performance (down 2.2%) due to much weaker Oil Service (down 8.1%) and our small renewables segments (TAN and FAN benchmarks) were down sharply on an end of week bit of news. Even the gassy names ebbed despite a sharp rebound in the natural gas strip. We see the dips in upstream and oil service as an opportunity and are adding weight there.
Earnings season kicks off this coming week with HAL (unowned):
- Look for "maintenance" to be the upstream theme of the quarter (again).
- Look for some modest capital budget increases without incremental production improvement.
- Look for oil service to highlight frac capacity tightness (less of an issue on the rig side).
- The latest calendar can be viewed here
Free Stuff Last Week: None
Holdings Watch:
- We added to one oily upstream names, one EV name, sold one frac name and added to another.
- The Blotter is updated.
Questions and comments under The Wrap will be addressed in the Monday post.
Questions about the site can be addressed to zman@zmansenergybrain.com or zmanalpha@gmail.com
Notes on the Wrap Table:
- Oil
- Crack spreads remain aloft as diesel rose on the weak while oil and gasoline fell.
- Distillates remain quite understored. We added 5 year averages to the Wrap for oil, gasoline, and distillates.
- Active frac spreads were 289 four weeks ago, 1 fleet below the 290 high for 2022. They backed to 285 for the last two weeks, normal around the July 4th holiday but then fell to 279 with this report. That's an odd number and we'd expect a rebound very near term.
- Data from the OPEC Monthly are not in the table below but of note:
- The July monthly includes the inaugural forecast for 2023.
- Oil Demand:
- 2021A: 96.92 mm bopd, up 5.9 mm bopd on post initial Covid rebound
- 2022E: 100.29 mm bppd, up 3.37 mm bopd (initial forecast was 99.86)
- 2023E: 102.99 mm bopd, up 2.7 mm bopd.
- Non OPEC Supply:
- 2021A: 63.59 mm bopd, up 0.6 mm bopd
- 2022E: 65.73 mm bopd, up 2.1 mm bopd (initial was 65.85 mm bopd)
- 2023E: 67.44 mm bopd, up 1.7 mm bopd
- Call on OPEC:
- 2021A: 28.0 mm bopd, up 5.1 mm bopd on return of demand from Covid
- 2022E: 29.2 mm bopd, up 1.2 mm bopd (initial forecast a year ago was 28.7)
- 2023E: 30.1 mm bopd, up 0.9 mm bopd
- June OPEC Production (secondary sources): 28.72 mm bopd
- Oil Demand:
- We expect OPEC+ to pause quota increases on August 3rd.
- The July monthly includes the inaugural forecast for 2023.
- Natural Gas
- The storage build last week was in line.
- We expect a modestly smaller build this week.
- We've seen no evidence of material gas to coal switch and given the rise of coal prices this is makes sense.
- We expect much smaller builds in the next several reports setting up the potential for a summer draw or two.
- Storage continues to trade toward our EOS range.
- Rig counts appear to be flattening out as expected for 2H but it's early in the half.
- We very much expect the coming round of 2Q22 conference calls to stress maintenance/discipline/free cash flow/debt reduction/return of capital. Please see our Gassy Players update in Friday's post for FCF and dividend yield comps.
- Natural gas speculators remain very short. Fuel for the rally in the fall in our view as Freeport re-opens and as European prices move higher.
Have a good weekend,
Z
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https://www.offshorewind.biz/2022/07/15/acp-ceo-new-vessel-crewing-rule-in-us-gut-punch-to-offshore-wind-projects/
This should get stripped out in the senate version.
July 17th, 2022 at 8:38 amCrude Oil opening down tonight after last weeks bounce. Trading between two previous acceptance levels 92/102..Noisy low volume zone. Demand volume still weak in multiple time frames. Daily
https://ibb.co/wQW3Xjf
Nat Gas Looks to open within it’s value range on Monday. Demand volume supportive of testing higher.
July 17th, 2022 at 7:25 pmhttps://ibb.co/Fsh4Mdj
XOP 117 is defined resistance. Demand volume continues to show signs of trying to improve with a double test and rejection of 110 as too low.. A lot of supply to work through.. Watch 120 to see how it’s doing with that.
Daily
https://ibb.co/NsrtxZ3
65 Minute
https://ibb.co/Y0MHZxQ
General Market…
July 17th, 2022 at 7:50 pmStill stuck in a wide and highly congested range (3640-4010) with 3900 as the major acceptance level.
Daily
https://ibb.co/Y0MHZxQ