Energy Prospectus

Opening Prices:
> WTI is up 51c to $65.41/Bbl, and Brent is up 61c to $68.89/Bbl.
> Natural gas is down 2.3c to $2.935/MMBtu.

AEGIS Notes
Crude Oil

Iran could boost oil supply by 1.5 MMBbl/d in 2H2021, according to FGE
Total Iranian oil exports would range from 2.6 MM to 1.2 MMBbl/d
The industry consultant noted that it seems the Biden administration and Iran have been “moving more quickly at the negotiating table.” The U.S. is likely trying to reach a deal sooner rather than later, as Iran will have a presidential election on June 18 that could complicate the return to the accord

A ransomware attack forced the closure of the largest U.S. fuel pipeline on May 7
The Colonial network is the main source of gasoline, jet fuel, and diesel for the East coast. The system has a capacity of around 2.5 MMBbl/d from Houston to North Carolina and another 900 MBbl/d to New York
The pipeline has been down for two days, stoking fears of a fuel supply shortage on the East Coast. According to Bloomberg, if the outage persists, gasoline prices may rise to above $3/Bbl for the first time since October 2014

India COVID cases steady as calls widen for national lockdown (Reuters)
The 366,161 new infections and 3,754 deaths reported by the health ministry were slightly below recent peaks, taking India’s tally to 22.66 million with 246,116 deaths
Many states have imposed lockdowns; however, many are waiting for Prime Minister Modi to announce a measured national lockdown to mitigate the spread

Natural Gas

May weather forecasts show a very cool U.S. pattern that lingers into next week, slowing the path to summer heat
The delay of national warmth will likely put cooling degree days (CDDs) on the lower end of the May CDD incline compared to the prior five years, according to CWG
The month of May is typically when gas traders will focus attention to the number of CDDs versus heating degree days (HDDs) as heating demand dissipates nationally heading into summer

LNG imports into Europe broke its 11-month losing streak of year-on-year losses in April, marking an annual increase, according to S&P Platts
Import levels sustained close to all-time highs for the second consecutive month in response to the heavy depletion of gas storage inventory in Europe
AEGIS notes that gas demand in Europe should remain strong this summer as inventories are low. The current price arbitrage between the U.S. and Europe is open. Strong demand in Asia also requires European landed LNG prices to remain elevated, further providing support for max utilization of U.S. LNG exports this summer

Note from Raymond James Energy Sector Team in Houston

"The current capital spending austerity in the global oil industry - aggregate 2021 budgets are below the previous cyclical trough from 2016 - is, needless to say, bullish for medium-term oil prices. This austerity reflects the interplay of many variables: cumulative exhaustion after three commodity crashes in the past 13 years; pressure from shareholders for greater discipline; ESG considerations; and company-specific operational issues. But the end result is the same: less supply.

No oil producer exemplifies this "better" (ahem) than Petrobras. Throughout the past decade, Brazil's national oil company - and, by extension, Brazil overall - had been regarded as a major supply growth driver for the global oil market. Well, the growth never materialized. Moreover, Petrobras is no longer even pretending that it will grow oil production in the future. With a new CEO taking the helm as of a few weeks ago, we take this opportunity to revisit a prime case study of how the oil industry has learned to live within its means, and effectively given up on growth. Insofar as Brazil stands out, it is the fact that its oil industry has been more affected by COVID - in a direct sense - than arguably anywhere else, but the fundamental story of giving up on growth goes much deeper than the pandemic."

Closing Prices:
> WTI prompt month (JUN 21) was up $0.02 on the day, to settle at $64.92/Bbl.
> NG prompt month (JUN 21) was down $0.026 on the day, to settle at $2.932/MMBtu.