Energy Prospectus

Opening Prices:
> WTI is down 34c to $64.37/Bbl, and Brent is down 29c to $67.80/Bbl.
> Natural gas is up 1.1c to $2.939/MMBtu.

AEGIS Notes
Crude Oil

Iran nuclear talks resume, as diplomats convened for the fourth round of negotiations to have Iran adhere to its nuclear agreements in exchange for sanctions relief. According to Bloomberg, a U.S. diplomat said on Thursday, “that an agreement could be reached this month
AEGIS notes that if sanctions are removed on Iran then up to 1.5 MMBbl/d of supply could return to the market

U.S. demand for jet fuel slated to jump 20% in June, to exceed 1 MMBbl/d - (Bloomberg)
Demand over the next four weeks stands at around 850 MBbl/d, as implied by scheduled passenger flights
Domestic flights will account for 80% of demand, as the COVID-19 situation has limited international demand

USGC refining margins sustain record-highs not seen since Hurricane Harvey in 2017 - (Argus)
Gulf coast refining margins, as measured against WTI Houston crude based on a 3-2-1 yield, rose to $18.90/bl this week, the second-highest level since September 2017
Refinery runs have increased since Winter-Storm Uri but remain below pre-COVID levels. A strong surge in gasoline demand this summer could give refiners the boost needed to reach pre-COVID levels

Natural Gas

On Friday morning, the natural gas curve was nearly flat to last week’s Friday settle. Longer-dated futures did rise a few pennies, but the prompt contract and Summer 2021 strip were unchanged
Weather for May is forecast to be toward the top of the last 20 years in terms of natural gas weighted heating degree days (HDDs) at 165 (Commodity Weather Group)
May is typically one of the lowest months for overall demand as temperatures in high demand regions average closer to 65°F than other months
The following 6-10 days of model runs show widespread below-average temperatures across the Lower 48 and more normal temps in the 11-15 day window for the US

Natural gas storage added 60 Bcf for the week ended April 30 - much lower than the build in 2020 for the same week
The rise in inventories was closely in line with what analysts were expecting
Inventories now stand at 1.958 Tcf and are 345 Bcf below the year-ago level of 2.303 Tcf and 61 Bcf less than the five-year average storage level of 2.019 Tcf

AEGIS models continue to show a tight daily supply and demand environment.
Strong export demand from LNG and Mexico coupled with lower supply are contributing factors to the market tightness

Other news reports impacting oil and gas prices today. My comments in blue.

Brent tested $70 per barrel on Wednesday but fell back on Thursday. Oil “had a great run, but it got a little bit ahead of itself,” Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago, told Bloomberg. “We’ve hit resistance and prices pulled back,” but it’s hard to see a summer demand boost “being derailed,” he said. Oil is still set to close out the week with another gain. < As I have said many time, oil prices never go up or down in a straight line for extended periods. The paper traders always jump in to harvest gains after a few days of a run up.

Copper hits record high. Copper price hit a record high on Thursday as Chinese investors unleashed fresh demand following a five-day holiday. < Material shortages and high prices will put the brakes on the Green New Deal. Building windmill farms and huge solar arrays will take a lot oil based energy.

Pioneer says consolidation needed. Pioneer Natural Resources (NYSE: PXD) CEO Scott Sheffield said that the shale industry needs even more consolidation. “I hope other privates are taken out that are growing too much,” Sheffield told investors on an earnings call,” Sheffield said.

Wind costs rise due to the commodity boom. The rising cost of steel is forcing Vestas (CHP: VWS) to hike its prices for wind turbines.

Exxon and Chevron cautious in Permian. Neither ExxonMobil (NYSE: XOM) nor Chevron (NYSE: CVX) are rushing to boost production in the biggest American shale play, the Permian, despite the oil price rally this year that has sent WTI prices to above $60 per barrel.

India to import more Saudi oil. After Saudi Aramco cut oil prices for June, Indian state refiners added more orders.

Peak LNG? The viability of LNG import terminals in Europe has dimmed and utilities are looking for alternative uses, according to Bloomberg. Last month, for example, Uniper SE said waning demand for new LNG led it to switch a project to a hydrogen hub. In Ireland, another project has been transformed into an offshore wind project.

LNG market to see deficit. Rystad Energy said that the global LNG market could see a supply deficit in the coming years due to inadequate investment, made worse by the delays in Total’s (NYSE: TOT) massive LNG project in Mozambique.

Commodity boom adds inflation risk. Tight inventories for a long list of commodities are pushing up prices, which is increasing the odds of rising inflation. U.S. Treasury Secretary Janet Yellen rattled markets on Tuesday when she said that interest rates might need to rise.

IEA: metals shortage poses transition risk. The IEA came out with a new report warning that a shortage of critical minerals used in green technologies could slow the pace of energy transition and make it more expensive. The agency urged faster investment in new mining projects.

Closing Prices:
> WTI prompt month (JUN 21) was up $0.19 on the day, to settle at $64.90/Bbl.
> NG prompt month (JUN 21) was up $0.030 on the day, to settle at $2.958/MMBtu.

Nice finish to another solid week.