Oil & Gas Prices - Sept 6

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - Sept 6

Post by dan_s »

Opening Prices:
> WTI is up $1.01 to $87.88/bbl, and Brent is up $1.11 to $94.13/bbl.
> Natural gas is down -39.7c to $8.389/MMBtu.

AEGIS Notes
Oil


Oil rose slightly on Tuesday morning after a two-day rally following OPEC+'s monthly meeting
> Concerns returned about weaker demand as China's strict covid lockdowns persist amid weaker business activity and apparent oil consumption sinking 9.7% in July to a two-year low

OPEC+, which consists of OPEC and its allies, agreed to lower its daily production target for October by 100 MBbl/d (BBG)
> The decision on Monday exactly reverses the September hike < Basically just a rounding error.
> The cartel also said that it would be willing to call another ministerial meeting whenever there were new market developments
> Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, said in an interview after the meeting that "The simple tweak shows that we will be attentive, preemptive, and pro-active in terms of supporting the stability and the efficient functioning of the market to the benefit of market participants and the industry"

Covid lockdowns have been reinstated in several areas of China per the nation's strict zero Covid policy (Reuters)
> China closed down parts of Guiyang, the capital of the Guizhou province, following a spike in Covid cases
> The city of 6.1 million people was placed under lockdown after 132 new cases were discovered there as China continues to enforce its strict zero Covid policy
> Meanwhile, Chengdu, the southwestern Chinese industrial city, prolonged the lockdown of its 21 million residents through Wednesday
> The southern technology hub of Shenzhen also went into lockdown over the weekend
> China recorded 1,499 new cases across the country on Monday, with the majority of cases occurring in the region of Tibet < Considering China's HUGE population, the number of cases seems extremely low to me. Plus, do lockdowns really work? Is this just the Chinese government's way of using FEAR to control the population?

Natural Gas

Prompt month natural gas prices are down 5% this morning
> Weather forecasts for the next two weeks have moved lower, with temperatures now expected to be closer to the 10-year normal
> With the seasonal decline in temperatures starting, gas demand is expected to fall below 65 Bcf/d over the next two weeks < Note that this does not include exports of close to 20 Bcf/day/
> Production set a new high over the weekend, coming close to 99 Bcf/d

Gas flows to Europe halted again over pipeline issues
> Gazprom has blamed the latest stoppage on an engine oil leak at the Portovaya compressor station
> The company said that the Nordstream 1 pipeline will not resume operations until Siemens Energy can repair faulty equipment
> Siemens said it has not been commissioned by Gazprom to repair the equipment, and that such issues do not normally constitute halting pipeline flows < In other words, this is Putin's response to the silly oil price caps.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Sept 6

Post by dan_s »

LOL: "Reuters is reporting that U.S. President Joe Biden is committed to taking all steps
necessary to shore up energy supplies and lower prices, according to the White House
on Monday after OPEC and its allies led by Russia agreed to a small oil production cut."

Does Old Joe have some drilling rigs?
Dan Steffens
Energy Prospectus Group
Cliff_N
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Re: Oil & Gas Prices - Sept 6

Post by Cliff_N »

The lockdowns in China are especially misguided considering the variant of Covid is far more infectious and far less lethal than the original. This is exactly what is needed for herd immunity. Since May 20th the USA is averaging 100K cases per day in a population that is much smaller than China. Something else has to be driving this insane policy.
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Sept 6

Post by dan_s »

Rising U.S. dollar is primarily responsible for at least $10/bbl drop in the oil price. Actually, closer to $15/bbl.

Read this:

"Putin Has Pushed Europe Into An Inflationary Depression And Currency Collapse"
BY TYLER DURDEN
TUESDAY, SEP 06, 2022 - 08:27 AM
By Michael Every of Rabobank

"Truss-itory" Inflation and Soviet Planning
With US markets closed yesterday for Labor Day all the action was in Europe – and given that Nord Stream 1 had been shuttered and the European Commission had floated war economy style regulations, and Russia then made clear that unless sanctions on it are dropped, no gas will *ever* flow through Nord Stream 1 again, it was no wonder Eurostoxx were down and EUR dipped below 0.99 for the first time in 20 years, as the Dollar wrecking ball momentum continued. (Forcing China to slash banks’ FX reserve requirement ratios from 8% to 6%, which won’t do anything to stop the ongoing slide in CNY for long, sitting at 6.9340 at time of writing this morning in Asia.)

Benchmark Dutch TTF gas was up hugely at first before closing ‘only’ 17% higher on open recognition that while much bad news is now priced in, Europe is really in the economic war I have been warning of.

As pointed out on Twitter, Russia’s move is so blatant there is no way Europe can fudge an agreement with it the way some might have over ‘technical issues’ with the pipeline. (As was Russian President Putin also approving a new foreign policy doctrine backing a “Russian world” covering all Russian speakers, including some in the EU, while building up relations with all the countries the USSR was friendly with to boot.) This is a gun to the EU’s head. So was OPEC+ agreeing on a token 100,000 barrel a day cut to production. So was Iran saying no to the nuclear deal unless the IAEA backs off from investigating the serious breaches of the last nuclear deal it didn’t stick to.

Assuming Europe cannot retreat, that means a severe recession with very high inflation, and if anything were to happen to gas flows via Ukraine, which could easily occur, Europe would need to make swinging cuts to demand in order to avoid unplanned ‘gas outs’. German Economy Minister Habeck just said: “Expect the worst.” As mentioned yesterday, existential choices now need to be made, because there may not be enough energy to go round. The choices are obviously unappetising.

First, Germany is to delay mothballing some nuclear reactors – so common sense at gunpoint.

Yet Europe and the UK will not ration energy by price because it means the staggering bills already being seen, and then stagflation, incession, or ‘inpression’ (an inflationary depression). They will instead subsidize businesses and households even if that means wholesale energy prices march even higher. Germany’s latest EUR65bn energy bailout will do just that; so will Sweden’s and the Netherlands’ measures, and France’s and Spain’s: and Brussels is talking about an EU-wide energy price cap. Only part of these subsidies will flow from windfall taxes (which also remove the industry capital needed to invest in new energy supply). New UK PM Truss, just selected with an underwhelming 57% mandate of a tiny Tory electorate, has also floated Covid-furlough sized spending to cap business and household energy bills; and huge tax cuts; and a 2.5% trend GDP growth rate target. Good luck with the latter.

Borrowing or printing money to pay for imported energy (in dollars), while running rising twin deficits is a great way to destroy one’s currency – which means ‘Truss-itory’ inflation, not transitory. So, we must then ration by diktat: but how?

By sector: households or industry? Households freeze and vote. But industry employs households – or doesn’t. (As California tells its drivers who bought EVs to go green that they can’t now charge them because of grid power shortages.)

By industrial energy intensity and shut the ‘sinners’ down? But that ignores the value-chain impact on GDP and employment (i.e., no x, then no y, and if no y, so no z, etc.)

By industry in terms of external realpolitik, i.e., the sectors that produce defence-related goods come first?

By industry in terms of internal realpolitik? i.e., the sectors that employ the most people come first?

By industry for equity? i.,e., all sectors take the same cuts so there can be no favouritism, even if this is totally inefficient?

These are the kind of questions Soviet planned economies asked daily – and got wrong because they had no pricing mechanisms, interest rates, fully-fungible money, external trade, or business/consumer feedback mechanisms like the media or elections. And they all wanted to arm themselves to the teeth for the struggle against US imperialism of course.

This is not a joke.. This is not a blast from the past. This is not an abstract exercise. This is a thought process undoubtedly already underway at the highest levels of some governments, or which I hope to goodness already is. As I have alluded to before, I also hope someone from the army engineers is nearby to help steer the discussion away from the silliness of traditional economics and GDP by demand and towards a national security focused GDP by supply.

Indeed, we also need to invest in the supply side, not just cut it back. Without that, we remain trapped in this purgatory. Will the private sector do it? If they could, they would have, but they didn’t. Now they have windfall taxes too. That is why the European Commission is getting ready to tell them to do so. Presumably with state capital and printed money. Or the state can just do it directly.

But what to invest in? One has to use the same thought process as for rationing, but in reverse. Do we want output for households or industry? Both need energy now. Do we plan energy from ‘sinful’ or ‘sin free’ sources? (As California tells its drivers who bought EVs to go green that they can’t now charge them because of grid power shortages.) But do we look at the crossovers? (i.e., you need sulphuric acid to extract ‘green’ metals like lithium; and you need fossil fuels to produce sulphuric acid; and you need fossil fuels to produce many renewables to some degree…. but the army engineering corps know all this.) Do we look at the downstream value-chain impact on GDP and employment? Do we look at the goods needed for external realpolitik? Do we look at lobbyists and internal realpolitik? Do we just aim for equity?

The Soviet planners had to juggle such output decisions daily – and usually got them wrong because they had no pricing mechanisms, interest rates, fully-fungible money, external trade, or business/consumer feedback mechanisms like the media or elections. And they all wanted to arm themselves to the teeth for the struggle against US imperialism of course.

If you have enjoyed a nice market career forecasting GDP by demand and making macro forecasts within traditional parameters on the back of it, I’m happy for you: what are you planning to do now that skillset becomes that of a Soviet apparatchik after 1991? Get with the plan, and get with the planning – and with the US imperialism!

Yes, we all know how badly governments plan. To which I say: have you met the private sector? And what do we do when the things we need most don’t make money, or won’t do so for decades? Yes, I know that doesn’t stop Silicon Valley – but they have the promise of being monopolists one day, or just selling out early to a greater fool or an existing monopolist.

The central bank all of this is in focus for today, or rather is all a big blur for, is the RBA. The market expectation is that they will hike another 50bps again to take their overnight cash rate to 2.35%; and they still have another three meetings this year. Just weeks ago, the Reserve Bank was trying to peddle the view that the rates peak would be around 3%. The market rightly now sees 4% is far more sensible. Painful as that will be, Australia (where I was just called a “provocateur”, which is a badge I will wear with pride!) is still vastly better off than the UK or Europe. They have summer coming up when we have winter, for one. And they have stuff, even if they also have no planning.
-------------------------------
MY TAKE AND ADVICE TO EUROPE.
> Immediately stop wasting money and energy on wind and solar project. You need every molecule of fossil fuels to harvest & process food and to heat homes this winter.
> Tell Ukraine that the military support from the EU and US is over, so make a deal with Russia.
> Drop all sanctions against Russia and promise never to allow Ukraine into NATO or watch your economy and citizens die.
> GET REAL about energy policy. Realize that Climate Change is a lie; we aren't all going to die within ten years from a half of a degree increase in the Earth's temperature. BTW the Pacific Ocean is actually cooling (called "La Nina") and only God can control the weather.
> Get off the BS War on Fossil Fuels. Oil, gas and coal are why we have enjoyed a high standard of living for a hundred years.
> China and India will NEVER support the Paris Climate Accord, so rip it up.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2955
Joined: Mon Mar 22, 2021 11:48 am

Re: Oil & Gas Prices - Sept 6

Post by Fraser921 »

I never thought I would see the green new deal implode as fast as it did.

Some still don't get it. Let's call them deniers
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Sept 6

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Oct 22) was up $0.01 on the day, to settle at $86.88.
> Prompt-Month Henry Hub (Oct 22) was down $-0.641 on the day, to settle at $8.145.
Dan Steffens
Energy Prospectus Group
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