Wrap – Week Ended 03/31/23

.

.

The ZLT ended up 9.5% on the week last week with all portfolio segments bouncing from recent post quarterly report news deserts that allowed for pressure from bank and broad market related weakness.

A few comments on The Wrap:

1. Oil
   • Nice rebound week that appears to have begun with a Kurdish flow stoppage (likely resolved this weekend) and gained momentum in the wake of a much better looking set of weekly figures from EIA.
   • The big 3 (oil with SPR + gasoline+ distillates) showed a rare for 2023 drop and we note we are out of maintenance season now so bigger product draws may fade but "unadjusted" crude stocks should slip seasonally from here.
   • 
   • While throughput helped the chart above to fall we also note net imports remain bottom of range or below range YTD ...
   • 
   • ... and U.S. oil production growth remains tepid with volumes up just 0.5 mm bopd over the last 15 months and still markedly below the pre pandemic peak.  Yes, the Permian is reported at new highs commonly but the Permian is not the whole US picture.
   • 
   • The non commercial shorts had recently built their biggest position in years.  Last week saw this begin to reverse (see CFTC highlight below the table) as they ran for cover.
   • Refiner margins held up nicely (still upper to mid $30's on the basic 3-2-1 crack) as crude outperformed into quarter end.
   • Active frac spreads moved back up to 295, just short of last year's peak.  This is needed to maintain, not really grow production. Capacity remains tight, demand remains high (though there is some shifting from gassy to oily basins) and we see the March drop in pressure pumpers as very much overdone to the down side.
   • 
2. Natural Gas
   • We got what was probably the last of the meaningful withdrawals of the season last week, a bit below consensus and a bit above our weekly estimate.
   • We think we're essentially at trough now and our peak remains essentially unchanged near 3.8 Tcf.
   • 
   • Look for our natural gas macro slide show early next week.  
   • Note the big short cover in the CFTC section of The Wrap table below.
   • Freeport LNG hit max capacity this week (2.1 Bcfgpd).
   • While Lower 48 natural production continues to hover near record high levels it has held at plateau levels since November (spikes up and down from there since). Few are trying to grow this year. Many are in maintenance or maintenance minus mode.
   • Supply however, which is Production + Net imports, is trending lower. Look for higher LNG exports, flattish Mexico exports and flat to lower Canadian imports for 2Q and especially 3Q as YoY comps.
   • As such, natural gas remains in our view overdone to the down side.

Holdings Watch: 

• Pretty quiet week after a couple of weeks of opportunistic adds to the portfolio. We did add early in the week to the ACDC position.
• The trading blotter is updated here. 
• The Positions page will be updated before the weekend is done.

Questions and comments under The Wrap will be addressed either this weekend or in the Monday Subscriber Mailbag section.

Questions about the site can be sent to zman@zmansenergybrain.com

Our home town was hit hard yesterday by a round of storms but the Z4 HQ is safe and we feel blessed to have been unscathed. Thanks for the well wishes. The Salvation Army is taking donations to help their relief effort here.

Have a good weekend,

Z

.