Oil & Gas Prices - Sept 7

[dan_s]

Opening Prices:
> WTI is down $0.70 to $86.18/bbl, and Brent is down $0.81 to $92.02/bbl.
> Natural gas is down -8.7c to $8.058/MMBtu.

AEGIS Notes:
Oil

Oil prices extended losses this morning, with the prompt contract falling below $85/bbl for the first time since January
> Prices were impacted by China's renewed Covid lockdowns, persistent worries over an economic slowdown, and a stronger dollar
> The USD Index (DXY – a proxy for USD strength against a basket of other int’l currencies) is up by over 30 pips over the last two days, printing around 1.0% higher at 110.70. The DXY index is now trading near its highest level since 2002
> The Cal '22, '23, and '24 WTI swap prices are currently trading $1.39, $1.18, and $0.98 lower near $84.64, $79.53, and $72.89

Russian President Vladimir Putin threatened to stop energy supplies if price caps were imposed on Russia's oil and gas exports (Reuters)
> Today, Putin addressed an economic forum in Vladivostok and said that Russia would cancel its supply contracts if a price cap is imposed
> He added, "We will not supply gas, oil, coal, heating oil - we will not supply anything"
> Europe usually imports about 40% of its gas and 30% of its oil from Russia
> The comments came after the G-7 nations agreed to impose a cap on Russian oil Exports last week to restrict Russia's revenues
MY TAKE: The Elites running Europe need to realize they have lost the "Sanctions War". They need to "Get Real, Real Quick" or energy poverty will spread across the EU like a tidal wave.

China's crude oil imports rose to a three-month high in August, With a significant month-to-month increase (BBG)
> The nation imported 9.54 MMBbl/d of crude in August, 8% more than in July, according to data from the General Administration of Customs
> Analysts partly attributed the rise in August inflows to refiners refilling inventories after the summer and in preparation for the winter
> However, domestic demand in the upcoming months is still uncertain because Covid lockdown measures are threatening China's oil demand
MY TAKE: There is a global shortage of space heating fuels. It will draw a lot more attention in a few weeks.

Natural Gas

Prompt month natural gas prices are down another 1.5% today after yesterday’s 8% decline
> Summer’23 tenors are down 4%
> Weather forecasts have warmed slightly, indicating temperatures a few degrees above the 10-year normal
> Production is down 2 Bcf/d to 97 Bcf/d after coming off new yearly highs

EPA denies Cheniere’s request to be exempted from the new pollution rule (Reuters)
> The EPA said on Tuesday it has denied a request from leading LNG exporter Cheniere Energy to exempt turbines at its two Gulf Coast terminals from a hazardous pollution rule
> Around 250 U.S. gas turbines are subject to the new rule, according to an EPA list, with a quarter of them belonging to Cheniere
> The rejection raises questions about whether Cheniere will have to reduce LNG exports
> Cheniere said the decision may result in “unwarranted expenditures” but added that coming into compliance will not affect the company’s ability to supply LNG to customers

MY TAKE: As I pointed out in last Saturday's podcast, we are in the "Shoulder Season" for ngas. This means that storage builds will be larger for a few weeks. There is no shortage of ngas or propane in the U.S. today. However, the U.S. ngas market is still going to be extremely tight this coming winter. Keep in mind that a year ago, HH ngas was under $5.00.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Oct 22) was down $-4.94 on the day, to settle at $81.94
> Prompt-Month Henry Hub (Oct 22) was down $-0.303 on the day, to settle at $7.842

MY TAKE:
> The spike in the U.S. Dollar Index is the primary fundamental reason for the oil prices to pullback. Just keep in mind that the U.S. dollar is up just because the Euro has tanked. This trend could reverse.
Read: https://www.marketwatch.com/story/will- ... quote_news
> After that it is just a lot of noise:
>> FEAR of a recession's impact on oil demand (Yes, Europe is going off a cliff but so are oil-based refined product inventories)
>> China's seemingly endless Covid lockdowns (Why do their citizens put up with this nonsense???)
>> Iran Nuke Deal Outcome (my bet is the standoff goes on and on, as the Supreme Leader is just play Team Biden)
>> What's up with the OPEC+ production cut? (IMO this is a bullish sign. Saudi Arabia wants higher oil price and they control the cartel.)
>> What is Putin going to do next? (He's not pulling out of Ukraine and sooner or later EU will figure out the "Sanctions War" is going to kill a lot more European citizens than Russia will. Why are the idiots in Europe not talking to Putin about a settlement? Just give him the eastern half of the country or watch the entire EU economy go down the tubes.)

Natural gas prices pulled back because we are in "Shoulder Season". Demand goes down and injections to storage go up.

The Global Energy Crisis has not been resolved.

[Orindakid]

Hi Folks,
I really don't agree that the West should give in to Putin's aggression. He is a bad, bad Murdering Bastard (check out the Oligarch deaths in the last 6 months) and the more he gets, the more he wants. If we need to, we need to fight this war right now where it is. This is not the time to "give" him something to appease him..... What will the Chinese do if we the West give in.
It may be time for all of us to suffer for the long term good of the world. Xi and Putin have no love for us (the West) and the sooner we disentangle from them the better for the world. I was astounded about the quantity of trains running into Europe via the Chinese Belt and Road initiative.... Thousands and thousands per year.
I worked overseas in the oil business for over 30 years all over the Middle East, Far East, Africa and Europe, I don't think the world has ever been a more dangerous place than it is today.
Time to take Putin to task, in his backyard, not ours.
Cheers.

[Fraser921]

That's what make this a difficult issue. There are no easy answers.

History tells us, we have to stand up to bullies.

I believe Putin took one look at Biden and he decided the "time was right"