Oil & Gas Prices - July 21

[dan_s]

Opening Prices:
> WTI is up $1.15 to $76.80/bbl, and Brent is up $1.18 to $80.82/bbl.
> Natural gas is down -1.5c to $2.742/MMBtu.

AEGIS Notes
Oil

Oil heads for a fourth consecutive weekly gain as global markets tighten
September ’23 WTI gains $1.15 this morning to trade around $76.80/Bbl
Equities trade lower while the dollar continues to strengthen relative to its recent lows

Russian crude oil exports have fallen for the second week, hitting a six-month low in the four weeks to July 16
Additionally, the nation plans a 0.5 MMBbl/d cut in oil exports in August
If Russian oil exports keep falling, WTI will be over $90/bbl withing three months

Saudi Arabia's crude exports dropped below 7 MMBbl/d in May
Saudi's shipments may further decrease due to a 1 MMBbl/d production cut in July and August

U.S. crude inventories dropped by 0.71 MMBbl last week, buoyed by a surge in exports and increased refinery utilization

Sluggish growth in China and economic concerns have contributed to keeping oil prices range-bound in 2023
However, China introduced stimulus measures to support purchases of cars and electronics on Friday

Ship-to-ship transfers of Russian Urals crude drop sharply (Bloomberg)
Ship-to-ship transfers of Russia’s flagship Urals crude fell to just one in July from 14 in June
Regulatory scrutiny, cheaper freight, and the seasonal absence of ice-strengthened ships near Russia's western ports are likely contributing to the decline
In May, the EU banned ships involved in illegal transfers from its ports. However, not all transfers, including of Russian oil, breach EU sanctions unless the cargo exceeds $60/Bbl, a threshold Urals oil has recently passed

Biden administration proposes to raise the cost of drilling on federal lands (Bloomberg)
Biden's administration on Thursday proposed a rule that would raise the royalties on federal land oil and gas extraction to boost taxpayer returns
These new charges from the Interior Department involve an increase in royalty rates, bid requirements, and measures to protect wildlife and cultural sites
Under the 2022 IRA, the Interior Department has raised royalty rates for public land drilling from 12.5% to 16.67% and the minimum bid at drilling lease auctions from $2 to $10 per acre, changing rates set since 1920
These costs will be passed on to consumers in the form of higher prices for transportation fuels.

Natural Gas

Natural gas prices are trading lower today but heading for the first weekly gain in two weeks
Weather forecasts shifted cooler, with the Northeast region’s forecast falling by 9.5 °F and the Southeast region’s by 10.6 °F

Storms knocked out power for about 250k customers overnight in several states in the Eastern half of the US

East Tennessee Natural Gas looking to build a new pipeline (S&P)
The company is requesting authorization to construct a 122-mile pipeline that would supply gas to a retiring coal power plant planned to be converted to natural gas
The conversion is part of a plan by the Tennessee Valley Authority to replace coal power plants and build up to 10.9 GW of gas-fired generation
East Tennessee has requested approval from FERC no later than November 2024 to bring the pipeline into service by 2026

IEA cuts European gas demand forecast (S&P)
The International Energy Agency has reduced its forecast for gas consumption in Europe, now expecting demand to fall 7% in 2023 from their previous forecast of a 5% decline
Most of the fall in demand is expected to come from the power sector, as renewable power displaces gas and electricity consumption falls relative to last year
In the first half of 2023, LNG imports accounted for about 40% of Europe's gas consumption

[dan_s]

WTI Is Up 1.4% To $76.66 On More Signs That Physical Markets Are Tightening
- WTI is trending up 1.4% this morning in thin early trading at $76.66 and Brent is up 1.2%
this morning as well.
- Reuters is reporting that Asian refiners have booked near-record volumes of U.S. crude to
be shipped in August, replacing Middle Eastern oil, as competitive prices and ample supplies
attracted heavy buying, according to trade sources. About 1.5 to 1.9 MMBopd of U.S. crude,
mostly WTI Midland, will be bound for Asia next month, which would be shy of the record 2.2
MMBopd loaded in April, according to shiptracking data from Kpler.
- Bloomberg is reporting that fuel stockpiles at the Asian energy hub of Singapore have fallen
to a four-year low, leaving the region vulnerable to price volatility in the event of any supply
disruptions. There’s been a spate of scheduled and unplanned refinery outages in Asia in
recent months, curbing output.
Leo Mariani, CFA, Managing Director at Roth MKM

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 23) was up $1.42 on the day, to settle at $77.07
> Prompt-Month Henry Hub (Aug 23) was down $-0.044 on the day, to settle at $2.713 < The DEC23 contract closed at $3.60. It will become the front month contract at the end of October.