Energy Prospectus

Opening Prices:
> WTI is down $1.28 to $60.86/Bbl, and Brent is down $1.30 to $64.81/Bbl.
> Natural gas is down 1.8c to $2.712/MMBtu.

AEGIS Notes
Crude Oil

Oil demand recovery faces pressure as Indian COVID cases continue to mount (Reuters)
India has reported a global record for new COVID cases for five consecutive days, with cases increasing by 352,991 on Sunday
AEGIS notes the covid surge in India will hurt crude demand on several fronts. Lockdowns in India will limit gasoline and motor fuel demand, while other countries will restrict flights incoming from India, harming jet fuel demand

Citi sees global demand hitting a record-high of 101.5 MMBbl/d between April and August < The most bullish forecast that I've seen.
The bank noted that the surplus across OECD inventories has already cleared, with the remaining overhang in China being used to build a permanent petroleum reserve

Markets East of Suez will loosen by 4.6 MMBbl/d as output increases from OPEC and Iran
Crude oil in floating storage fell by 13% last week, according to Vortexa
Inventories dropped from 112.07 MMBbls to 97.45 MMBbls as of April 23
Asian-Pacific floating stocks declined by 16% week over week to 64.84 MMBbls

OPEC+ meetings start on April 28

Natural Gas

Weather model changes over the weekend showed minor changes from Friday’s forecast
The Commodity Weather Group estimates a gain of 5.6 TDDs with an overall above-average outlook for the Lower 48 over the next two weeks
Heating demand in high demand regions like the East is expected to remain low in early May
Prompt month gas is down 2c in pre-market Monday trading

California to ban fracking permits by 2024
Gov. Gavin Newsom on Friday moved to ban new permits for fracking, a reversal from the governor’s previous statements that he lacked the executive authority to ban hydraulic fracturing (LA Times)
Newsome is also asking the California Air Resources Board to analyze how to end all oil extraction in the state by 2045
“…I have made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil.” Newsome said in a statement Friday
MY TAKE: Unless California builds a lot of nuclear power plants soon, the state is going to lots of power outages in the future.

Last weeks news:

On April 23 Reuters reported the euro zone's recovery from its pandemic-induced economic downturn was much stronger than expected in April as the service industry adapted to lockdowns and made a surprise return to growth, a survey showed. With the continent facing a fresh wave of coronavirus infections, governments have reimposed strict curbs to contain the spread, forcing some businesses to close and encouraging citizens to stay home. That meant the economy was expected to recover at a much weaker rate this quarter than had been expected only a month previously, according to a Reuters poll last week. But IHS Markit's flash Composite Purchasing Managers' Index, seen as a good guide to economic health, rose to a nine month high of 53.7 from March's 53.2, confounding expectations in a Reuters poll for a dip to 52.8. Anything above 50 indicates growth.

On April 22 Reuters reported New York City sued three major oil companies and the top industry trade group in state court, arguing that the companies are misrepresenting themselves by selling fuels as "cleaner" and advertising themselves as leaders in fighting climate change. The lawsuit comes after a federal appeals court this month rejected the city's effort to hold five major oil companies liable to help pay the costs of harm caused by global warming. The lawsuit said ExxonMobil Corp (XOM-NC), BP Plc (BP-NC), Royal Dutch Shell (RDS-NC) and industry group the American Petroleum Institute "have systematically and intentionally misled consumers" through fuel sales at branded stations as "cleaner" and "emissions-reducing" while not disclosing climate impacts.

On April 22 CNBC reported that David Wallace-Wells, author of “The Uninhabitable Earth,” questioned if the U.S. had the ability to actually meet President Joe Biden's climate pledge of reducing the country's greenhouse gas emissions by 50% to 52% by 2030. He was quoted as saying, “the question for me is whether we can even meet these targets because they are unbelievably ambitious given where we are today, and I don’t think we yet have the policy tools or investments necessary to get us there.”

On April 22 Reuters reported Libya's oil production fell to about 1 million b/d in recent days and could drop further due to budgetary issues, the National Oil Corporation said on Thursday. Production fell from about 1.3 million b/d, the NOC said. On Monday the NOC declared force majeure on exports from Hariga oil terminal, operated by its subsidiary Arabian Gulf Oil Co (AGOCO), due to a budget dispute with the central bank. AGOCO said on April 18 it had suspended output because it had not received its budget since September. On Wednesday, another NOC subsidiary, Sirte Oil Company, said it was unable to sustain oil output and may have to halt it completely within 72 hours due to its dire financial situation.

On April 21 Bloomberg reported that the Biden administration dialed back Iranian assessments that the two sides are getting close to an agreement on reviving the 2015 nuclear deal, saying disagreements remain wide on what steps they need to take to come back into compliance, according to a senior State Department official.

On April 21 Bloomberg reported that Chinese traffic and factory activity is not only back to normal, it’s surpassing pre-virus levels. Chinese oil demand in May could be as much as 20% higher than the same period in 2019, according to an analyst at Beijing-based SIA Energy.

Notes this morning from Morgan Stanley

Martijn Rats, CFA – Morgan Stanley
April 26, 2021 1:32 AM GMT

With a year of mobility data from Apple, Waze and Flightrader24 now available, we can start drawing conclusions about how this data correlates with oil demand. For now, it points to an uneven recovery - improving but not racing ahead.
What can mobility data tells us about oil demand? Apple and Waze provide daily mobility reports for a range of countries based on the local use of their routing apps. Monthly data on gasoline and diesel consumption is also available for 27 of those countries. Collectively, they account for slightly over half the world's consumption of gasoline and diesel. As can be expected, Apple's and Waze's mobility indices explain a large part of the variability in transportation fuel demand: for 25 out of 27 countries, we find R-squareds between 45% - 97%. Similarly, we find a useful relationship between daily flight data published by Flightradar24 and global jet fuel demand.So far, improvement but not racing ahead: Most recent mobility statistics point towards gasoline and diesel consumption still running 7-8% below pre-coronavirus levels, at least for the 27 countries within the scope of our analysis. For 25 of those, we can compare this against IEA forecasts - see 1. It appears that the demand recovery trailed IEA estimates in February and March, but largely caught up in April. This analysis points towards and uneven recovery though: strength in the US, UK and Israel - all countries where vaccination rates are high too - but much weaker data in Europe, India and Brazil.

Closing Prices:
> WTI prompt month (JUN 21) was down $0.23 on the day, to settle at $61.91/Bbl.
> NG prompt month (MAY 21) was up $0.060 on the day, to settle at $2.790/MMBtu. < I expect a bullish storage report on Thursday.