Oil & Gas Prices - Aug 8

[dan_s]

Opening Prices:
> WTI is down $0.96 to $88.05/bbl, and Brent is down $0.84 to $94.08/bbl. < Up 0.27 to $89.28 at the time of this post (9:20 am CT)
> Natural Gas is down -41.2c to 7.652/MMBtu. < Down 0.44 to $7.63 at the time of this post.

AEGIS Notes
Oil

Oil has a choppy start to the week as the market continues to weigh the potential hit to demand from an economic slowdown
> WTI is at $88.05/Bbl, down 96c, as concerns about a recession hitting oil demand weighed on prices
> Both WTI and Brent recouped some losses on Friday after jobs growth in the U.S., the world's top oil consumer, unexpectedly accelerated in July

China's oil imports in July showed some tentative signs of a demand recovery after a steep decline earlier this year owing to strong Covid-19 restrictions
> July's crude imports increased by 1% from June's four-year low to 8.8 MMBbl/d, although they were still 9.5% lower year-over-year, according to customs data
> The increase in inflows in July was likely contributed by independent refineries increasing their crude imports by 25.4% to 3.16 MMBbl/d in July from 2.52 MMBbl/d in June

Goldman Sachs maintains its Brent outlook for 2023 at $125/Bbl while lowering its 3Q22 and 4Q22 forecasts to $110/Bbl and $125/Bbl, respectively, down from $140/Bbl and $130/bbl (Bloomberg)
> "We believe that the case for higher oil prices remains strong, even assuming all these negative shocks play out, with the market remaining in a larger deficit than we expected in recent months," said GS analysts in an Aug. 7 note to clients
> The price of Brent dropped by about 9% last week, while WTI dropped by nearly 10%. Futures are currently at their lowest in six months
MY TAKE: The FEAR of a recession will probably prove to less than the reality, especially when it comes to transportation fuel demand. After the draws from the SPR stop and we get past the mid-term elections oil price should go up. Space heating fuels (oil, propane and natural gas) are all too low for this time of year.

Natural Gas

Asian spot prices jump on Russian supply concerns, Pelosi's Taiwan visit (Reuters)
> Asian spot LNG prices continued their rise towards record levels this week on an expected pick-up in demand from China as it eases COVID rules and ongoing concerns over curtailed Russian supply to Europe
> The average LNG price for September delivery into north-east Asia was estimated at $45/mmBtu, up $2.5, or 5.9%, from the previous week. That is close to record levels slightly over $48/mmBtu hit in December 2021
> LNG cargo prices into North Asia are trading above European prices at the moment, due to a rebound in demand in the world’s largest importing region

NOAA still expects an above-normal Atlantic hurricane season (NOAA)
> NOAA forecasters have slightly decreased the likelihood of an above-normal Atlantic hurricane season to 60% (lowered from the outlook issued in May, which predicted a 65% chance)
> NOAA’s update to the 2022 outlook — which covers the entire six-month hurricane season that ends on Nov. 30 — calls for 14-20 named storms (winds of 39 mph or greater), of which 6-10 could become hurricanes (winds of 74 mph or greater). Of those, 3-5 could become major hurricanes
> AEGIS notes that most LNG export facilities are along the gulf coast and an active hurricane season could put a significant amount of U.S. gas demand at risk if a storm was to impact the area

Watch the Saturday Summary at https://www.weatherbell.com/premium/ to get an update on why tropical storm activity is likely to pick up in a few weeks. Joe Bastardi expects two hurricanes to impact the U.S. late in August.

[Fraser921]

crude up 1.40 at 12:25
NG down .31 c to 7.75 at 12:25 off it's lows on the day 7.57

[Cliff_N]

The crude oil markets and gasoline took big hits last week on the survey/estimate from EIA. It would seem that if "demand destruction" was happening, it would be evidenced at the consumer level. Some evidence from https://finance.yahoo.com/news/dodgy-de ... 00526.html: "We are supposed to believe that in July, in the middle of driving season we are only using 8.6 million barrels per day. That would be down half a million barrels a day from May of this year; that would be below the Covid low of 2020,” Sandler noted. “So we ask all the refiners, we ask all the retailers, we ask everybody that reported earnings this season. Every single one of them tells you that their sales are not down materially from even pre-covid days. Some report record high sales,” he added.

Piper Sandler’s allegations are buttressed by U.S. refining giant Valero. Asked about falling gasoline demand at the company’s earnings call last week, CEO Gary Simmons had this to say:

"I can tell you, through our wholesale channel there is really no indication of any demand destruction... In June, we actually set sales records. We read a lot about demand destruction and mobility data showing in that range of 3% to 5% demand destruction. Again, we're not seeing it in our system."

Dan how much confidence do you have in the weekly EIA reports? Have you noticed any changes since their "server problems?" Is the head of this agency a "political appointee," or someone with knowledge? Thanks! Cliff

[dan_s]

The EIA's weekly petroleum and natural gas reports are just estimates and sometimes "Wild Ass Guesses". Months later we get actual data that is often much different. The Department of Energy has a HUGE budget and it is full of employees with little or no industry experience. However, their reports do have a big impact on the energy paper traders.

Here is an example:
> EIA's weekly petroleum reports for May said that U.S. crude oil production averaged ~11,900,000 bpd (a 300,000 bpd increase from March).
> Their recent 941 report (our first look at actual production) shows that in May, U.S. crude oil production was only 11,595,000 bpd.
> More important is the fact that U.S. production actually DECLINED from March (11,701,000 bpd) to April (11,652,000 bpd) and again in May.
> Now do you think that Biden's people want the EIA to report that U.S. oil production is on decline?

It is hard to tell how "political" they are, but most people in Washington lean heavily to the Left. More so at the IEA based in France, agency employees know they must believe in the Climate Change Agenda to keep their jobs. I am sure this has an impact on their reports.

Crude oil prices and to a lesser extent oil-based refined product prices are determined by the global market fundamentals. This world is "Short Oil" and there is no Quick Fix. With OPEC+ now out of spare capacity, news like this will have a more significant impact on oil prices:
Fire at Cuba oil facility spreads as 3rd tank ignites
By ANDREA RODRÍGUEZ, Associated Press - 3h ago
HAVANA (AP) — A deadly fire that began at a large oil storage facility in western Cuba spread Monday after flames enveloped a third tank that firefighters had tried to cool as they struggle to fight the massive blaze.
Read more: https://www.msn.com/en-us/news/world/fi ... 58f5312dbc

[Fraser921]

Cuba is screwed big time the whole country has no electricity due to this explosion and they have no money to replace the oil that is burning off

How come they didn't install windmills?

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 22) was up $1.75 on the day, to settle at $90.76
> Prompt-Month Henry Hub (Sep 22) was down $-0.475 on the day, to settle at $7.589

Someone at EIA should be fired if it is proven that they intentionally understated gasoline demand last week. But we all know that will never happen because the Feds never fire screw-ups.