Energy Prospectus

Opening Prices:
> WTI is up $1.42 to $43.12/Bbl, and Brent is up $1.43 to $45.86/Bbl.
> Natural gas is up 2.5c to $2.218/MMBtu.

Closing Prices:
> WTI prompt month (SEP 20) was up $0.49 on the day, to settle at $42.19/Bbl.
> NG prompt month (SEP 20) was down $0.002 on the day, to settle at $2.191/MMBtu.

There are two major catalysts behind oil’s move.
> First, yesterday’s API Crude Oil Stock Change report showed that crude inventories have declined by 8.59 million barrels. EIA's estimate was a decline of 7.4 million barrels.
> Second, the U.S. dollar continues to decline, and the U.S. Dollar Index has settled below the 93 level, providing support to all commodities.
and the big surge in ngas prices might be frightening the shorts on oil.

EIA's "estimate" is that U.S. crude oil inventories declined by 7.4 million barrels despite increased oil imports (post GOM hurricane). Heading into this week, the technicals showed a strong resistance level for WTI at $42.50. A close above that would be bullish.

Just remember that EIA's weekly estimates are now just Wild Ass Guesses, as pointed out by their 941 report for May. They over-estimated U.S. oil production in May by 1.5 million barrels per day. The math wizards at EIA always miss the big changes in the market.

"Shale wells enjoy strong initial production rates but suffer from sharp subsequent declines.
Basin production falls quickly unless new wells are constantly drilled and completed to offset
the base declines. Considering US shale production was already falling sequentially back in
November when the oil rig count was above 700, today’s 180 rigs all but guarantee production
will collapse going forward. Nevertheless, the IEA predicts US production will grow by
500,000 b/d from the June lows to the end of the year, presumably driven by shut-in production
being brought back online. Our models tell us this simply cannot happen. Instead of
growing, US production will fall materially from here. As we go to print, the EIA just released
its monthly report with data through May showing production fell by another 2 m b/d
sequentially. This is the largest monthly production drop on record and nearly twice as much
as originally expected by most analysts. Our models tell us more surprises like this are forthcoming."
- Goehring & Rozencwajg, "On the Verge of an Energy Crisis" 8-4-2020

G&R's full report will be emailed to all EPG members today. Read it carefully.

FACT: We need to complete ~1,100 new horizontal shale wells in the U.S. PER MONTH just to hold U.S. oil production flat. With less than 100 frac crews running today, there is NO WAY that U.S. oil production can be stabilized. The rate of decline will slow down a bit in June & July as shut-in production is partially restored, but production declines will accelerate into year-end without a BIG INCREASE in well completions, which there is no indication will happen. (FYI we had over 325 frac crews running in Q1 and U.S. production continued to decline.)