Energy Prospectus

Opening Prices:
> WTI is down 32c to $71.83/Bbl, and Brent is down 45c to $73.94/Bbl.
> Natural gas is down 3.6c to $3.215/MMBtu.

AEGIS Notes
Crude Oil

Oil prices settled nearly unchanged on Wednesday as traders and investors weighed positive U.S. crude oil inventory data against Federal Reserve talks to hike rates. Data from the EIA showed U.S. crude inventories fell 7.35 MMBbl for the week ended June 11, more than double the average expectation from Bloomberg’s survey of analysts.

Offsetting the bullish crude inventory report was the Federal Reserve’s decision to start moving toward an end of its ultra-easy monetary policy. Fed Chairman Jerome Powell said officials would begin talks on tapering massive asset purchases while penciling in two rate hikes by the end of 2023 (Bloomberg).
That Fed action aided a rise in the dollar, hurting crude oil prices on Wednesday afternoon.

Iran is unlikely to increase output or release stored supplies until 4Q as a return to the nuclear deal remains elusive, consultant Energy Aspects (EA) said in a report (Bloomberg). EA sees Iran reaching full capacity of 3.6 MMBbl/d in June 2022 rather than April 2022.

OPEC+ will only agree to increase supply at July 1 meeting if prices rapidly approach $80/Bbl.
Saudis remain cautious, but if prices near $80/Bbl it will face pressure from fellow OPEC+ leader Russia to agree on output boost, according to EA.

Natural Gas

Natural gas futures strengthen late into yesterday's session to limit any further losses. The prompt contract is still down by over 14c from Monday's close of $3.35/MMBtu.
Demand fundamentals have remained strong over the past few days, with LNG flows on track for a 10% week-over-week gain in feed gas flows, despite seasonal maintenance work (Bloomberg)
Dry gas production has also crept lower over the last week. According to data compiled by Platts Analytics, U.S. natural gas production was around 88.7 Bcf/d on June 15, its lowest since Winter-Storm Uri

Further, the persistent and extreme heat wave being felt across the western U.S. is set to continue and even expand over the next couple of days.
Weather patterns have had minimal change over the past few days. Forecasts now show slightly cooler temperatures in the U.S. East and Midwest, contributing to a loss of 3.2 gas-weighted degree days

The EIA is expected to report a 78-Bcf injection for the week ending June 11, which would be less than the 86-Bcf build in the corresponding week of last year
AEGIS notes a rare storage classification in the Pacific region is likely to make this morning's storage stats from EIA look very strange. PG&E reclassified 52 Bcf of gas, which might make it disappear from the EIA survey. Check our email and post after the stat for an explanation of which numbers to trust and which to disregard. Analysts estimates ranged from a build of 66 Bcf to 93 Bcf
A build within this range would bring total stocks near 2.489 Tcf and the deficit to the five-year average near 64 Bcf
The current end-of-season storage number settled at 3.66 Tcf on ICE < Compares to storage level of 3,958 Bcf mid-November 2020 and the 5-year average start of winter storage level of 3,735 Bcf.

"Oil prices are continuing to rise as more people jump on the bullish bandwagon. Suddenly the mainstream press are reporting on the bullish fundamentals for oil that we have been talking about for over a year ago. We warned that there was severe underinvestment in traditional fossil fuels. We warned that Biden’s climate agenda would further exasperate that problem. We warned people that the demand destruction that happened because of the COVID-19 crisis would be temporary and despite the belief by many people at that time that demand destruction for oil and gas would be permanent, and that has already proven to be incorrect. We told people that the historic OPEC production cut along with its co-conspirator Russia would be successful in reducing the oversupply that drove oil prices sub-zero to an all-time low. We told people even before the COVID-19 that the lack of investment in traditional fossil fuels was going to hurt us at some point in the future. The COVID-19 price crash exasperated the problem and now we’re facing a future of ever-tightening supply.

When you look at the global oil market right now, we’re seeing the most significant potential shortage situation that we have seen in many years. We could repeat the type of move for oil that we saw in the run-up to the 2008 financial crisis. The global oil market looks to be undersupplied not only in the short term but in the long term. Even if OPEC raises production and even if Iranian sanctions are lifted, we don’t believe that they have the spare capacity to meet that growing demand."

Above quote from Phil Flynn on June 16, 2021

Why is WTI down today?
> U.S. dollar up in response to Fed meeting notes.
> Paper Traders taking profits.
> "Noise" from Iran that they may be close to a Nuke Deal.

(Bloomberg) -- Oil clung to small losses amid a rising dollar and after Iran signaled it’s closer to reaching an agreement on a nuclear deal.

Futures in New York traded just below little changed after earlier falling as much as 1.1% on Thursday. Iran’s Deputy Foreign Minister Abbas Araghchi said the nation has come closer than ever before in reaching an agreement to revive the 2015 nuclear deal. Oil was also under pressure due to a stronger U.S. dollar, which reduces the appeal of commodities priced in the currency, after the Federal Reserve signaled Wednesday its ultra-easy monetary policy will soon come to an end.

The dollar’s gain and the prospect of more Iranian crude in the oil market will weigh on investors in the short-term, according to Ed Moya, senior market analyst at Oanda Corp. “You have two big events that are likely big headwinds on oil.”

Despite the weakness in headline crude prices on Thursday, the oil market continues to display signs of strength as the pandemic ebbs. Russia’s Sokol crude traded at its strongest level since February 2020, while key swaps tied to the North Sea market that prices much of the world’s crude have rallied in recent days. Citigroup Inc. said Brent could soon top $80 a barrel and pent-up leisure demand, enabled by vaccine roll-outs, will underpin global consumption this summer.

Iran’s Araghchi said fundamental issues still remain to be negotiated and Iranian negotiators will continue talks regardless of Iran’s June 18 election.

“Dollar strength and lower inflation expectations and a general reduction in risk appetite has for now reduced investment appetite in crude oil,” said Ole Hansen, head of commodities strategy at Saxo Bank. “The oil market is not only driven by fundamentals which are currently supportive, but also financial investors buying oil for other reasons, such as momentum, inflation hedge and dollar plays.”

Iran is negotiating with the same guys that gave them billions in cash for nothing under Obama.

Biden doesn't know where he is and what he is doing and the press are trying to pretend everything is normal.

We have become laughing stock of world.

Putin when question on human rights issue shot right back at USA lack of human rights from the Jan 6th peaceful protest/insurection

Closing Prices:
> WTI prompt month (JUL 21) was down $1.11 on the day, to settle at $71.04/Bbl.
> In contrast, NG prompt month (JUL 21) was up $0.002 on the day, to settle at $3.253/MMBtu.

WTI tested support at $70 and buyers moved in quickly, pushing it back to $71. This is very bullish to me. If oil stays over $70/bbl all of my valuations will be moving higher since I am still using $65/bbl for 2H 2021 and 2022.