Oil & Gas Prices - June 22

[dan_s]

Opening Prices:
> WTI is down $7.85 to $102.80/bbl, and Brent is down $6.40 to $108.25/bbl.
> Natural gas is down -17.7c to $6.631/MMBtu.

AEGIS Notes
Oil

U.S. President Joe Biden to ask Congress to enact a three-month gasoline tax suspension
> Biden will ask that both the 18c/gal federal tax on gasoline and the 24c/gal tax on diesel be suspended < Will this tiny dip make Biden's approval rating go up? Increasing the national debt and draining the SPR at the same time only sounds like a good idea in "Woke America". Wouldn't backing off his "War on Fossil Fuels" make more sense? How about approving the Keystone XL Pipeline and opening federal lands for oil exploration?
> The move comes after the national average gasoline price hit a record this month above $5/gal, despite the historic release from U.S. reserves earlier this year

OPEC+ is weighing when to make its final output announcement (BBG)
> The cartel has brought back its official production quotas to 42.5 MMBbl/d in modest, pre-planned monthly increases, with the last two hikes scheduled for July and August
> In reality, the output is nearly 1 MMBbl/d below their quota because of the inability of several nations including Nigeria and Libya to boost output in recent months < Key words are "In reality".
> The cartel is set to meet on June 30 to rubber-stamp the final monthly hike that, on paper, would boost August production back to pre-Covid levels < So, "in reality" OPEC+ is tapped out of spare capacity. The geopolitical risk to the world's oil supply goes higher and higher.

Natural Gas

Yesterday, natural gas futures in the U.S. rallied sharply in after-hours trading but retreated lower to start this morning's trading session
> The strip prices are also trading much lower, with much of the selling pressure focused on the first two seasons. Summer '22 and Winter' 22/’23 are trading near $6.626, and $6.621
> Beyond those tenors, strip prices have been more insulated from the negative price action that has taken place. The Summer ’23, Winter ‘23/’24, and Summer ’24 prices are trading near $4.844, $5.271, and $4.485
> June weather has been nearly perfect, in terms of gas demand, with the cooling-degree day total, a proxy for gas demand, finishing at the highest in at least the last twenty years. July weather forecasts look bullish, but we don’t pay much credence beyond the two-week forecast
> International gas prices have been soaring, too. The prompt-month JKM and TTF prices are up by 63% and 55% at $37.325 and $38.963, respectively
> There have been a few drivers behind the international buying pressure, but the two largest factors behind the rally appear to be the Freeport LNG facility outage and the reduction in flows to Europe through their legacy Nord Stream 1 pipeline

Cheniere goes ahead with Corpus Christi Stage 3 LNG export plant
> The stage 3 expansion project was the second to reach a final inventment decision (FID) this year as demand for the super-chilled fuel surges as countries try and phase out the world’s second-largest gas-producing country
> Venture Global LNG also reached an FID to build its Plaquemine LNG export plant in Louisiana
> Both facilities were already under construction by the time the companies had reached an FID
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MY TAKE: The short-term outlook for U.S. gas prices has dimmed just a bit because of the Freeport LNG export facility outage, but it will eventually come back online. We are still going to begin the winter with a significant storage deficit to the 5-year average. Looking beyond Q3, I see Europe in "panic mode" with significant shortages of home heating fuels, Freeport will begin to come back online and the international buyers in a Bidding War for LNG shipments. Keep in mind that a recession will not have much impact on natural gas demand.

[dan_s]

Trading Economics:
"WTI crude futures fell more than 7% toward $102 per barrel on Wednesday, hitting their lowest levels in a month, amid mounting concerns that rising US interest rates aimed at curbing soaring inflation would cause a recession and slowdown in oil demand. US President Joe Biden is also expected to call for a gasoline tax holiday and is set to meet with seven large oil companies this week amid a campaign to drive down fuel prices. Still, prices are set to remain elevated as supply remains tight. The war in Ukraine led to an embargo on Russian oil from several countries and the OPEC is unable to pump more crude due to underinvestment. Adding to woes, Exxon Mobil and Vitol warned that demand is still on the road to recovery to pre-pandemic levels. Also, analysts argued that Fed-induced slowdowns are a short-term solution to surging prices, but will not solve the problem of supply tightness."

Key phrase: "Will not solve the problem of supply tightness".

[dan_s]

Closing Prices:
> Prompt-Month WTI (Aug 22) was down $-4.46 on the day, to settle at $106.19 < Each day that WTI closes over $105 in June means that our upstream companies should report Q2 results better than my forecasts.
> Prompt-Month Henry Hub (Jul 22) was up $0.050 on the day, to settle at $6.858 < I think HOT weather in the Southeast will increase demand for power generation that will offset some of the impact of the Freeport LNG export facility shutdown.