Energy Prospectus

Opining Prices:
> WTI is down 74c to $40.27/Bbl, and Brent is down 81c to $43.34/Bbl.
> Natural gas is up 2.8c to $2.129/MMBtu.

Closing Prices:
> WTI prompt month (SEP 20) was up $0.69 on the day, to settle at $41.70/Bbl.
> NG prompt month (SEP 20) was up $0.092 on the day, to settle at $2.193/MMBtu

Yesterday's SURGE in natural gas price was a perfect example of what can happen when there is just less FEAR.
The September HH NYMEX gas contract was up over 15% on HIGH VOLUME
> A shift in the weather forecast from mild to hot after the hurricane moves out of the Northeast triggered a 10 cent gain at the open on August 3
> That set off a short covering rally that continued all day. The "Paradigm Shift" away from FEAR of storage filling early was the driver.
> Move over the 200 day moving average changed the technicals from mildly bearish to mildly bullish.
> In addition to the change in the weather forecast, data is showing a rise in LNG and pipeline (to Mexico) exports.
> Large funds have been increasing their long positions for 7 weeks in a row on the belief that the U.S. gas market will be much tighter heading into the next winter heating season. Storage will be above the 5-year average in mid-November, but with supply on steady decline (too few well completions) and demand growing just a normal winter should push Q1 2021 gas prices over $3.00. The January NYMEX contract closed at $3.025 yesterday. EACH MONTHLY CONTRACT FOR 2021 CLOSED OVER $2.60 YESTERDAY.

At 1PM CT natural gas traders are taking the September contract higher and oil traders seem to want to join the party. WTI is up $1.00 to $42.01 at the time of this post.

Somewhat off topic, but nice to know: Despite all the "gloom & doom" about COVID-19 the world is on pace to see a lower than normal average number of human deaths this year. Each year, human deaths are normally in a range of 0.8% to 1.2% of the world's populations. As of August 3rd, an estimated 34.8 million people have died this year; 695,709 from COVID-19 so far or less than 2% of all death. At midnight last night we were 50.5% through 2020, so we are on pace for about 69 million deaths this year or around 0.9% of the world's population. The really important number is that human births are on track to exceed human deaths by ~95 million. MORE PEOPLE = MORE DEMAND FOR ENERGY.

The Energy Report: Crazy Draw
By Phil Flynn Aug 04, 2020 09:52AM ET

Oil again rejected the sub $40.00 a barrel area as talk starts to circulate that we could see a significant drawdown in U.S. crude oil inventory. The whisper numbers are becoming louder as a historic drop in U.S. oil production, as well as a plunge in U.S. oil imports, could set the stage for another historical crude oil supply draw. Last week The Energy Information Administration reported that U.S. crude inventories fell by 10.6 million barrels for the week ended July 24, the largest weekly decline this year.

Some market prognosticators believe that we have an outside chance to beat that record this week. Market calls of draws anywhere from 4 million barrels to 12 million barrels are being thrown around, and it will be interesting to see if the draw is on the massive side, will it shock the oil trade out of its recent tight trading range. We get the first hint today at 3:30 pm central time when the American Petroleum Institute (API) reports its version of the supply data.

RBOB Futures should find support as refiners start to wind down the summer blends of gasoline. With refiners closing and cutting back, it could lead to an RBOB rally. There are concerns that U.S. RBOB demand is stagnating and helping the Brent-WTI spread driving it to a 2-month high. Still, some are worried that if the U.S. recovery stutters as OPEC raises output, it could lead to a new glut.

Reports that Saudi Aramco will delay the release of official selling prices for September crude sales until later this week or early next week, the source says. Aramco typically releases its OSPs by the fifth day of each month; the delay may be due to the Saudi public holiday. Or it could be that they want to see if they get better compliance from OPEC laggards Iraq, Nigeria, and Algeria.

Thank God for Global Warming: Natural Gas got a huge upside breakout with forecasts for a return to hot weather and better export demand on the LNG front. Oil Price reported that “LNG/feedgas export figures provided over the weekend, with Genscape estimating a 740 MMcf/d increase on Saturday.

Reuters is reporting that “Ukraine’s state energy firm Naftogaz said it would not resume buying natural gas from Russia, suspended since late 2015 until Moscow offered at competitive prices and conditions. Ukraine was one of Russia’s largest consumers of natural gas until the relations between the two ex-Soviet republics soured in 2014 when Moscow annexed the Crimea peninsula from its neighbor. Kyiv stopped buying Russian gas in November 2015, increasing purchases from Europe instead.”