Oil & Gas Prices - Aug 11

[dan_s]

Opening Prices:
> WTI is up $1.38 to $93.31/bbl, and Brent is up $1.40 to $98.80/bbl.
> Natural gas is up 25.0c to $8.452/MMBtu.

AEGIS Notes
Oil

The IEA increased its forecasts for global crude demand growth in 2022 by 380 MBbl/d to 2.1 MMBbl/d from 1.7 MMBbl/d in its August monthly report
> "Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries," said the agency
> Global oil demand is now anticipated to reach 99.7 MMBbl/d in 2022 from 99.2 MMBbl/d earlier this year
> In addition, the group projects an increase in global stockpiles of 900 MBbl/d through year's end, citing numerous emergency SPR releases along with more resilient Russian crude production < Keep in mind that commercial oil inventories are going up at the expense of draining SPR's. IMO that is not an "increase" in stockpiles.
> An EU import embargo will cause Russia's oil production to decline by about 20% by the beginning of 2023 < This is going to hurt Europeans much more than it hurts Putin.
> The agency added that if Russia reduces its refining output, gradual monthly declines will begin as early as this month and accelerate when the embargo takes effect < Firewood sales are soaring in the EU!
> Although output has recently experienced a robust rebound, it anticipates that close to 2 MMBbl/d will be shut in by the beginning of 2023

OPEC cut its forecast for oil demand growth in 2022, citing expectations for a resurgence of COVID-19 restrictions and continued geopolitical concerns
> The bloc cut its estimate of 2022 demand growth to 3.1 MMBbl/d from a previous forecast of 3.4 MMBbl/d
They left the forecast for world oil demand growth in 2023 unchanged at 2.7 MMBbl/d, with total oil demand averaging 102.7 MMBbl/d

U.S. average retail gasoline prices fell below $4/Gal to the lowest level since early March, according to data from AAA (BBG)
> Prices continued to decline, dropping to $3.99/Gal, according to data released on Thursday
> Meanwhile, nationwide gasoline demand has been falling, and oil prices have fallen by nearly $10/bbl since June

Natural Gas

The EIA releases its weekly natural gas storage report today
> The median estimate is for an injection of 40 Bcf, while the survey ranges from 30-44 Bcf
> The prior week saw an injection of 41 Bcf which brought the total storage to 2,457 Bcf
> Total working gas in storage is currently 337 Bcf below the five-year average but within the five-year historical range

Freeport LNG retracts force majeure, widening losses for gas buyers (Reuters)
> Top U.S. gas exporter, Freeport LNG, has retracted the force majeure it initially declared after an explosion in June, a development that could cost its buyers billions of dollars in losses
> The force majeure would have allowed Freeport’s LNG buyers to exit their agreements to deliver gas to end users. Instead, they are facing a collective loss of up to $8 billion as they source alternative supplies at elevated spot market prices
> Without the force majeure, the company needs to pay compensation to its gas buyers, and the buyers still need to supply end users.
> The outage leaves a hole of about 80 cargoes based on an October restart date

[dan_s]

Trading Economics:

WTI crude futures surged by 3% to above $94.5 per barrel on Thursday, extending a 1.6% gain in the previous session after the IEA raised its oil demand estimate for 2022. The Paris-based agency said higher natural gas and electricity prices will lead to more gas-to-oil switching and forecasted a near 20% drop in Russia’s oil output by the start of next year when the EU ban takes effect. In contrast, OPEC lowered its global oil demand forecast for 2022 to 3.1 million bpd compared to 3.36 million bpd. On Wednesday, EIA data showed that US crude stockpiles expanded by 5.5 million barrels last week, much higher than the 73,000-barrel increase expected by analysts. On top of that, US gasoline demand remained 6% down over the past four weeks compared to last year. Meanwhile, flows on the Russia-to-Europe Druzhba pipeline resumed earlier this week, easing some supply concerns.

US natural gas futures soared 7% to a 2-week high of $8.8/MMBtu, moving closer to a 14-year peak of $9.75/MMBtu hit on July 26th as demand forecasts for the next two weeks were revised upwards and daily output has been falling to near 1-month low. Preliminary data showed daily output was on track to fall by 2.7 bcfd to 95.6 bcfd on Thursday, from a record of 98.3 bcfd on Monday. Additionally, Refinitiv projected average US gas demand, including exports, would fall less than previously expected to 97.7 bcfd next week from 101.9 bcfd this week. Meanwhile, gas flowing to US LNG export plants held at 10.9 bcfd so far in August, the same as July and below a monthly record of 12.9 bcfd in March. The latest EIA data showed utilities added 44 billion cubic feet of gas to storage during the week ended August 5th, above expectations for a 39 bcf build. Still, stockpiles rose to 2.501 trillion cubic feet, remaining 11.9% below the 5-year average of 2.839 tcf for this time of the year.

[Fraser921]

IEA are they the dummies from Paris?

[dan_s]

Yes and they have a long history of under-estimating global oil demand.

[dan_s]

Closing Prices:

> Prompt-Month WTI (Sep 22) was up $2.41 on the day, to settle at $94.34
> Prompt-Month Henry Hub (Sep 22) was up $0.672 on the day, to settle at $8.874

MY TAKE: WTI is heading back over $100/bbl because the FEAR of a recession is much worse than the reality. Even a recession is not going to have a big impact on oil demand. Trying to figure out the day-to-day moves in HH ngas prices is impossible. Today's reported storage build was at the high end of estimates. After Labor Day the Wall Street Gang will begin to focus on how much ngas we will need for the coming winter. That is when the real Bidding War for physical supply begins.