Energy Prospectus

Oil highest since 2018 with Iran deal elusive, OPEC talks due
Bloomberg
June 1, 2021
Updated: June 1, 2021 7:10 a.m.

U.S. crude futures climbed to the highest in more than two-and-a-half years after the OPEC+ alliance forecast a tightening global market, while international efforts to revive a nuclear deal with Iran were yet to reach a breakthrough.

West Texas Intermediate rose as much as 3.2% from Friday’s close to $68.42 a barrel, while global benchmark Brent topped $70, a level it has failed to hold for a sustained period since 2019.

The oil glut built up during the coronavirus pandemic has almost gone and stockpiles will slide rapidly in the second half of the year, according to an assessment of the market from an OPEC+ committee. A ministerial group is gathering in Vienna, before a full meeting that is expected to ratify a scheduled output increase for July.

https://oilprice.com/oil-price-charts/

AEGIS Notes

WTI is up $2.16 to $68.48/Bbl, and Brent is up $1.72 to $71.04/Bbl.

The Trend remains UP and Buyers are in Control above $65.50. Market Driven hedges are available at current prices. Positive market tone (strong price action in response to negative news on Iran) a continuation of the UP Trend. Only a weekly close below $61.50 derails the positive story.

Natural gas is up 6.9c to $3.055/MMBtu.

The Trend is UP. Buyers are in Control above $2.93. A change in Trend requires a Friday close below $2.83. The market stalled at last week’s Control. Closings above $3.02 are needed to advance the UP Trend else we are still stuck in a 5 week range.

Henry Hub Natural Gas

LAST
3.054
CHANGE
+0.068 (+2.28%)

Energy Stat: Inflation Kicking Off the Next Commodity Supercycle; Oil Best Way to Play It
Raymond James
John Freeman

All the way back in July 2020, we had cautioned that unprecedented monetary injections (nearly $5T since 2019) brought with them the prospect of rising inflation, and that investors would be well served to hedge against this by increasing their exposure to oil, specifically, and commodities, in general. Now that the CPI is at its highest level since 2008 and commodities have surged across the board, the question has become one of duration and not occurrence (is this all really transitory?). In today's Energy Stat, we once again revisit the strong historical link between the CPI and oil prices and highlight a few signs (M2 supply, deficits, dollar share of reserves) that inflation could be here to stay. We also demonstrate that commodities are still extremely cheap relative to financial assets while crude screens as one of the cheapest commodities.

In fact, most of the gains in crude could be classified as "reflation" against others (lumber, soy, corn) where we have seen a clear inflation. Lastly, this Stat includes an analysis of the gold-to-oil ratio, another metric that is heralding a bull market for crude. In summation, we believe that we are in the early days of a new commodity supercycle and that oil continues to be one of the best ways to play this theme as well as hedge against the risks of sustained inflation.

Source: Bloomberg, RJ Research

Closing Prices:
> WTI prompt month (JUL 21) was up $1.40 on the day, to settle at $67.72/Bbl.
> Also, NG prompt month (JUL 21) was up $0.118 on the day, to settle at $3.104/MMBtu.