Energy Prospectus

Opening Prices:
> WTI is up 27c to $41.56/Bbl, and Brent is up 25c to $43.59/Bbl.
> Natural gas is down 2.1c to $1.787/MMBtu.

Today we saw oil go down early then surge back late in the morning. See chart here: https://www.investing.com/commodities/crude-oil
MY TAKE is that the traders shorting oil are putting on very tight stop loss orders, so a small uptick in price can cause a lot of nervous shorts to cover.

Closing Prices:
> WTI prompt month (SEP 20) was up $0.31 on the day, to settle at $41.60/Bbl.
> In contrast, NG prompt month (AUG 20) was down $0.074 on the day, to settle at $1.734/MMBtu.

The Energy Report: Left Out
By Phil Flynn Jul 27, 2020 09:17AM ET

With all of the excitement with a rising stock market and record prices on gold and explosive moves in silver, oil seems to be a bit left out. Yet the same forces that are driving those other markets such as record stimulus and low-interest rates, will also support oil. Oh sure, oil has COVID fears, but there are signs that in some states things are getting better, and there are hopes that we may soon get a vaccine. Yet the numbers on the economic recovery are incredible.

In fact, according to the Wall Street Journal, “stocks, bonds, and commodities are heading for their strongest simultaneous four-month rise on record, highlighting the breadth of the market recovery during the 2020 economic slowdown. Through Thursday, the S&P 500 and S&P GSCI Commodity Index were each up more than 25% since the end of March, while the Bloomberg Barclays US Aggregate Bond Index added more than 3% in that span. If the gains hold during the final week of July, this would be the first time that the gauges all rose that much in a four-month period, according to a Dow Jones Market Data analysis going back to 1976.”

This incredible concurrence of events shows that the economic response from the US central bank and congress is working and helping the economy recover. There are reports that Senate Majority Leader Mitch McConnell will release a $1 trillion pandemic relief proposal today and, if passed, will support recent market moves. It should also be another reason to buy oil as it may be the cheap alternative to chasing gold and silver.

Oil is also getting support from some geo-political risk. The Wall Street Journal reports that military contractors linked to the Kremlin have seized control of two of Libya’s most extensive oil facilities in recent weeks, heightening tensions between Russia and the US over Moscow’s growing footprint in the turbulent North African nation. Since June, armed fighters from the Wagner Group, a Russian firm with ties to the Russian government, have moved into secure Libya’s largest oil field and its most crucial oil-exporting port, Es Sider. The advance has helped Libyan warlord Khalifa Haftar maintain a blockade of the country’s petroleum exports in defiance of US pressure to restart them, according to Libyan and Western officials.

Moscow’s moves show how Libya has become a key front in a struggle between the US and Russia for influence in the Middle East and access to strategic assets. The two nations have also locked horns in Syria, where Russian and American troops patrolling near oil fields in eastern Deir Ezzor province have engaged in roadside confrontations. Stay tuned and read the piece in the Journal.

We like buying the breaks today. We look for a slight bump in gasoline and diesel demand, and that should support prices.

Global news that might impact oil and gas prices.

On July 24 Reuters reported Asian spot LNG prices held steady last week, under pressure from surplus cargoes in the region as inventory levels in top importing countries remain full. Some enquiries for winter cargoes could boost prices in coming months, several trade sources said. The average LNG price for September delivery into northeast Asia was estimated at about $2.45 MMBtu, up five cents from the previous week, they said. Prices for cargoes to be delivered in August were estimated at about $2.35 MMBtu, also up 5 cents from the previous week. Around 20 laden LNG tankers are still floating on waters mainly in Far East and in western Europe, according to data intelligence firm Kpler. Still, a delay in the restart of train 2 at the Chevron-operated Gorgon LNG plant in Australia which has been shut since May for maintenance, could support prices.

On July 24 Platts reported that crude throughput at China's domestic refineries is likely to hit another record high in July as the state owned oil companies, which collectively account for 69% of the country's refining capacity, have boosted their average utilization rate to a six-month-high of 83.6% this month from 80% in June, according to data collected through July 24.

On July 24 IHS Markit reported that Eurozone’s Manufacturing PMI index rose to 51.1 in July vs. June’s mark of 47.4.

On July 24 IHS Markit reported that Germany’s Manufacturing PMI index rose to 50.0 in July vs. June’s mark of 45.2.

On July 24 IHS Markit reported that France’s Manufacturing PMI index fell to 52.0 in July vs. June’s mark of 52.3.

On July 23 Reuters reported a reopening of some major economies locked down due to the coronavirus has lifted global oil prices and encouraged U.S. shale producers to return at least a third of the 2 million b/d curtailed since April. But that bump in output is unlikely to be sustained as shale wells lose up to half their initial output after the first year, and require constant drilling to maintain and increase production. With most new drilling halted and OPEC relaxing curbs that have underpinned the oil-price recovery, shale output will slide again in autumn, said oil executives and analysts. Shale output falls off faster than at conventional oil wells, a factor that will lead to output declining by September. Average U.S. daily oil output will fall below 2019's record 12.2 million barrels per day (bpd) for the next two to three years, analysts said. U.S. pipeline and oil export-terminal projects have been delayed or canceled as shale production forecasts have been cut. "You shut down like this, reduce activity like this, and it is going to be felt for a while," David Dell'Osso, chief operating officer of shale producer Parsley Energy (PE-NC) said in an interview.

On July 24 Reuters reported India's oil imports fell in June, hitting their lowest since October 2011, as refiners curbed purchases due to maintenance turnarounds and weaker fuel demand, data from industry sources showed. India, the world's third biggest oil consumer and importer, received 3.2 million b/d oil in June, a decline of 0.4% from May and about 28.5% from a year ago, the data showed. Last month, India did not import oil from Venezuela for the first time since June 2009, the data also showed.