Energy Prospectus

Opening Prices:
> WTI is up 46c to $62.37/Bbl, and Brent is up 38c to $66.03/Bbl.
> Natural gas is up 2.2c to $2.812/MMBtu. < JUN21 contract is trading at $2.908 this morning.

AEGIS Notes
Crude Oil

OPEC plans to review its supply hike plans as rising COVID infection in India cloud demand expectations
The technical committee on Monday said that it expects global oil demand to rise 6 MMBbl/d this year
The committee expects that global fuel stockpiles will decline at an average pace of 1.2 MMBbl/d in 2021.
Inventory levels surplus to the five-year average are expected to fall to 8 MMBbls by the end of 2Q2021
> OECD oil inventories are on-track to go below 30 days of demand early in Q3.

Oil producers must start “gently” increasing output, said Lukoil Deputy VP
The company said that the oil market is balanced and will likely never be oversupplied again
The Russian oil company noted that under any climate change scenario, the oil market would be ruled by demand rather than supply

India COVID surge continues to escalate, causing countries around the world to pledge support
On Monday, India reported a record-high of 352,991 cases. This marks the sixth consecutive day of 300k+ new cases being reported
Preliminary estimates by OilX suggest that India's fuel demand could finish the month 350 Mbbl/d lower than March levels. AEGIS notes, a national lockdown has yet to be implemented, and that number could grow significantly if more restrictive lockdowns measures are implemented

Natural Gas

Natural gas gained 6c to $2.79 on Monday for the soon to expire May contract. Prompt gas is higher by about 1% on Tuesday morning.
Strong export demand in the form of LNG and Mexico exports have been a buoy to price during the typically lower demand shoulder-season
LNG feedgas demand continues to hover around 11.5 Bcf/d in April, about 3 Bcf/d higher than the same period last year
US dry gas exports to Mexico are about 1.25 Bcf/d higher this April versus a year ago
> Last year in May & June LNG exports plunged to less than 3 Bcf/day. This year they are expected to stay ~11 Bcf/day thru Q2.

According to Platts, US gas exports to Mexico could reach record highs over the next two weeks
The higher level of exports would be due to rising temperatures in Mexico and recent capacity additions on cross-border and downstream pipelines
The current record for exports to Mexico is just shy of 7 Bcf/d on a pop-weighted temperature in the upper 70’s °F

The Ng strip is solidly above 3.00 with todays move another 5 cents

The producers will do well with 3 dollar prices.

Watch the Dan Deming video at this link: https://www.cmegroup.com/trading/energy ... lobex.html

Traders are starting to realize how difficult it will be to refill U.S. gas storage this summer thanks to demand for U.S. gas exports. < Something that I have been telling you for months in my weekly podcasts.

As storage levels fall below the 5-year average over the next few months, I expect utilities to get into a "bidding war" for supply in Q3.

Key Point: Refilling storage before the next winter heating season is not an option. Utilities across the country MUST have adequate gas in storage to meet customer demand during the winter months. Considering the very high spot prices that they had to pay in February, the bidding war could get very interesting.

Energy Report: Geopolitical Drama
By Phil Flynn
Apr 27, 2021 08:58AM ET

Oil tries for a turnaround Tuesday as reports about an explosion in a Saudi harbor and hopes that the U.S. is getting vaccinated may offset some of the Covid-19 horror stories coming out of India. The Biden administration also has to deal with an event where Iranian ships swarmed a U.S. ship and reports that climate czar John Kerry gave Iran some sensitive information about Israel’s movements in Syria. John Kerry denies it but I don’t think there is a doubt that John Kerry is one of the biggest supporters of the Iranian regime in the United States.

Reuters reported that Saudi Arabia said on Tuesday it had intercepted an explosives-laden boat off the Red Sea port of Yanbu after maritime security firms cited “unconfirmed reports” of an attack on a vessel in the area. A Saudi defense ministry statement on state media did not say whether there had been any damage as a result of the operation by the Saudi navy to intercept and destroy the remote-controlled boat. Still, the report gave oil a risk boost.

Breitbart reported that, “John Kerry, did not share any secret information when he allegedly told his Iranian counterpart about more than 200 Israeli operations in Syria, the U.S. State Department suggested Monday. In leaked audio first obtained by the London-based Iran International and shared with the New York Times, Iranian Foreign Minister (FM) Mohammad Javad Zarif reportedly claimed that “to his astonishment,” Kerry told him about the Israeli operations in Syria.

John Kerry, the architect of the Iranian nuclear accord, may find it harder to get a deal as Iran’s military seems to be running the show and continues to be provocative. Reports broke from the Wall Street Journal that a group of boats from Iran’s elite Islamic Revolutionary Guard Corps harassed two U.S. Coast Guard ships earlier this month in the Persian Gulf, Navy officials said, the first such incident in a year. The incident occurred Apr. 2, just as the U.S. and Iran announced they would conduct negotiations toward renewing the 2015 multilateral nuclear accord.

Those talks began earlier this month in Vienna. The episode hasn’t been previously disclosed. U.S. Navy officials confirmed that three fast-attack crafts and one ship are known as Harth 55, a 180-foot, twin-hulled support vessel, swarmed the two Coast Guard ships while they were patrolling international waters in the southern portion of the Persian Gulf as reported by the Wall Street Journal.

More concerns that the nuclear talks with Iran are a waste of time as the real power in Iran is in the military and not with those doing the negotiating. In the meantime, Iran becomes a bigger threat and trying to appease them does not seem to be changing their aggressive behavior.

Oil still is, short term, trying to find its way. OPEC yesterday acknowledge that India demand is a risk but the Joint Technical committee kept its outlook for demand unchanged. OPEC is optimistic on-demand and with good reason.

Natural gas is getting a boost as the EU acknowledges that the best way to get to net-zero emissions is to transition with natural gas! Yikes, a moment of reality in the world of climate panic!

Closing Prices:
> WTI prompt month (JUN 21) was up $1.03 on the day, to settle at $62.94/Bbl.
> NG prompt month (MAY 21) was up $0.083 on the day, to settle at $2.873/MMBtu.