Energy Prospectus

Opening Prices:
> WTI is down $1.26 to $35.00/Bbl, and Brent is down 82c to $37.91/Bbl.
> Natural gas is down 0.5c to $1.726/MMBtu.

Closing Prices (stunning reversal today):
> WTI prompt month (JUL 20) was up $0.86 on the day, to settle at $37.12/Bbl.
> In contrast, NG prompt month (JUL 20) was down $0.062 on the day, to settle at $1.669/MMBtu.

Crude oil futures settled up Monday, rebounding from losses of more than 5%, after White House Economic Adviser Larry Kudlow said President Donald Trump was determined not to close the U.S. economy again over a new surge in Covid-19 cases — despite the autonomy for such a decision resting with state governors.

"The President is absolutely disinclined to shut down as is the vice president," Kudlow told the Fox News network. "I think shutting down the economy could be worse for our health than not shutting it down. When you look at the overall numbers and these specific new cases, it’s still rock-bottom and has flattened. We’re watching it very carefully.” < I also saw a report that the are doing a lot more testing and most of the new cases are mild. Worldwide recovery rate is now ~98%.

Kudlow spoke as 20 of the 50 U.S. states, including Texas, South Carolina, Utah, Arizona, North Carolina, Arkansas, Alabama, Oregon, California, Nevada, and Florida reported seven-day rolling average highs for new Covid-19 infections. The total number of U.S. cases since the February outbreak now stands at 2.2 million. < This is still just 0.6% of the U.S. population.

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up 86 cents, or 2.4%, at $37.12 per barrel. It fell as much 5.2% earlier.

London-traded Brent, the global benchmark for oil, gained 99 cents, or 2.6%, to settle at $39.72. It lost 3.8% at the lows of the session.

WTI and Brent both lost just over 8% last week for their worst weekly decline since mid-March. Prior to that, oil had traded virtually one way over six weeks, with WTI gaining 300% at one point from an April bottom of around $10 while Brent showed a 170% rise from a low of beneath $16.

Despite those gains, both benchmarks remain down about 40% on the year.

Monday’s rebound in oil came after Wall Street’s Dow pulled back from a drop of more than 2% earlier to trade just about a quarter percent down at the lunch break.

Crude futures also recovered from their lows on reports that Iraq was living up to its bargain on OPEC+ production cuts, with a commitment to cut at least 15% of its oil exports in June.

“Oil prices are mirroring U.S. equities as lingering virus concerns weigh on the outlook for crude demand,” said Ed Moya, an analyst at New York’s OANDA.

“WTI crude is likely to struggle to break out of its $34-40 range anytime soon. But renewed optimism about OPEC+ production cuts could remain in place too if we see a second wave of Covid-19 concerns intensify as oil producers will refuse to let the market enter into another free fall.”

Last week's news:

On June 10 Reuters reported India's fuel demand rose by nearly 50% in May from the previous month as the country eased coronavirus-led restrictions, Oil Ministry data showed on Wednesday, signalling a slow revival of economic activity. Fuel consumption, a proxy for oil demand in Asia's third biggest economy, totalled 14.65 million tonnes in May, 47.4% higher than in April but still 23.3% lower than a year earlier, the data from the Petroleum Planning and Analysis Cell (PPAC) of the ministry showed. Local sales of refined products in the world's third biggest oil importer and consumer had fallen to their lowest since 2007 in April as the nation imposed a complete lockdown to prevent the spread of coronavirus. Due to the improving demand, Indian refiners are already scaling up crude processing, like their Asian peers.

On June 12 Bloomberg reported that the head of trading house Mercuria Energy Group Ltd. said that a rebound in gasoline demand in China and the U.S. will help drive total global oil demand back to 95% of pre-pandemic levels, or 95 million b/d by the end of 2020.

On June 12 Reuters reported Asian spot liquefied natural gas (LNG) prices remained steady this week, but were still hovering near record lows in response to oversupply and high inventories in the region, several trade sources said. The average LNG price for July delivery into northeast Asia was estimated to be about $2.10 per million British thermal units similar to the previous week, they said. Prices for cargoes to be delivered in August were slightly higher at about $2.20 to $2.30 per MMBtu, they added.

On June 10 Bloomberg reported Royal Dutch Shell (RDS-NC) , the world’s largest liquefied natural gas trader, said it expects buying and selling of the fastest growing fuel to recover to levels seen before the pandemic. Global LNG demand took a severe hit when nations imposed lockdowns to combat the spread of the coronavirus, impacting the fuel’s use in everything from power plants to transport and factories. That came on top of the biggest glut of the fuel the world has ever seen, helped by two mild winters in a row. “We still very much believe that with the current supply-demand outlook, this is a fundamentally strong sector that will grow at a rate that is close to 4% per year, Ben van Beurden, Shell’s chief executive officer, said in an interview. His comments show that Shell is sticking to the optimism showed in its annual LNG Outlook in February, before the Covid-19 pandemic started to ravage markets on a global scale.

On June 11 Bloomberg reported that the OPEC alliance’s production cuts stood at 7.63 million b/d as of June 8, or 79% of the cuts the members agreed to in April, due to aggressive reductions by Saudi Arabia, according to a Kpler report. The group would need to cut by another 2 million b/d before it’s 100% compliant to that deal.

On June 11 Reuters reported that environmental group Colorado Rising dropped plans to place an anti-fracking measure on the state's November ballot citing the COVID-19 pandemic and the fact that it had run out of time to gather enough signatures to meet the threshold.