Opening Prices:
> WTI is unchanged at $73.30/Bbl, and Brent is up 5c to $75.61/Bbl.
> Natural gas is up 1.7c to $3.435/MMBtu.
The oil & gas prices above are much higher than what I am using in all of my forecast/valuation models ($65 for WTI and $3.05 for HH gas for 2H 2021). If these prices hold for the remainder of 2021, all of my stock valuations will be going up 10% to 20%.
AEGIS Notes
Crude Oil
Oil prices are on track for a fifth consecutive weekly gain
> Traders and investors are exceedingly optimistic about demand growth for the remainder of year
> OPEC+ is cautiously mulling adding a 500,000 Bbl/d of oil supply to the market in August when the group meets July 1. Many analysts believe this will do little to remove severe tightness in the crude market. OPEC+'s rapidly declining spare capacity will become a BULLISH statistic as we move deeper into the year.
Iran Update: A U.S. official said “serious differences” remain before sanctions are removed on Iran, but that he hoped an upcoming round of indirect talks would bridge them (Bloomberg)
The WTI forward curve is near its steepest backwardation when measuring on a percentage basis for the next 12 months. < "Backwardation" is bullish as it indicates near-term supply shortages, which cause refiners to bid up oil for near-month delivery.
> The prompt-month contract minus month-13 is at an 11% difference – historically speaking, that’s close to the steepest this time spread has been in the last 15 years. Severe downward-sloping (backwardation) in the curve, is a sign of a very tight oil market.
Natural Gas
The prompt-month (July ’21) Henry Hub contract is on track for a weekly gain of 24c and is at its highest mark since January 2019, and its highest seasonal rate since 2014
> A 24c weekly gain would be the largest since the first week of February
> The Pacific Northwest is slated to get hit by record-setting heat through next week, threatening power grids and causing a spike in demand for natural gas for electricity, which has helped bolster prices. The situation has been exacerbated by low hydro and wind generation. Further, the heat warning stretches from Idaho and Washington through Northern California, limiting states’ ability to import electricity from their neighbors.
> In addition, feedgas flows to U.S. LNG facilities topped 11 Bcf/d on June 24, its first time hitting the mark since June 1. LNG flows are on track for a week-over-week gain of around 1.4 Bcf/d.
The EIA also reported a 55-Bcf injection for the week ending June 18, which was less than the 63-Bcf build expected by Platts
> Inventories for the U.S. are now at a deficit of 513 Bcf to last year and a deficit of 154 Bcf to the five-year average
> The South-Central region reported a 4-Bcf withdrawal from inventories as a heatwave caused an increase in natural-gas-fired power generation. The five-year average injection for the South Central region during the corresponding week is 19 Bcf
Oil & Gas Prices - June 25
Oil & Gas Prices - June 25
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 25
It is becoming LIKELY that HH natural gas prices will move over $4.00 during the winter months.
By Stephen Stapczynski, Ann Koh and Anna Shiryaevskaya (Bloomberg)
-- Natural gas markets around the globe are
rallying as the world’s importers have come to a stark
realization: there isn’t enough supply to go around.
A long, frigid winter drained gas stockpiles from Louisiana
to Germany, and utilities are struggling to build them back up.
But unforeseen supply disruptions and a rebounding global
economy are making it impossible to keep up. That’s setting up a
desperate scenario as hot summer temperatures approach, and it’s
bound to get even worse when demand peaks this winter.
Higher gas prices will make it more costly to keep the
lights on in Madrid or cool apartments in Tokyo, after scorching
heat waves in some regions are already making it more expensive
to run air conditioners. The cleaner-burning fuel is the latest
commodity to add to the global inflation scare as the price of
everything from crude oil to corn and copper surge.
If a gas supply deficit does develop during the winter months, it
could spur European utilities to burn more coal, which has
already started happening, and cause China’s power producers to
curtail supplies to industries and cause blackouts like it did
last winter. Households are set to pay sky-high utility bills
and the worst-case scenario -- albeit unlikely -- is they won’t
have heating or electricity when freezing temperatures hit.
“Supplies are already very tight, and that could get much
worse if there is a cold winter,” said James Whistler, the
global head of energy derivatives at Simpson Spence Young, an
international commodity and ship broker. “We are seeing strong
competition between Europe and Asia, and that is manifesting in
the continuous rally.”
European gas inventories are the lowest in more than a
decade for this time of year, with the region’s benchmark
surging to the highest in almost 13 years, while rates in the
U.S. and Asia have jumped to the highest seasonal level in
years.
The gas sector had long been segmented between geographical
regions, but the ramp-up in new supply of liquefied natural gas
and growing liquidity in spot trading over the past several
years has helped transform it into a genuinely global market.
That evolution comes at a price, as Europe and North Asia now
compete for a finite supply of LNG, which results in bidding
wars that catapult spot rates.
At the center of the action is China, which in a surprise
move is set to overtake Japan as the world’s top LNG importer
for the first time this year. China is stockpiling supplies of
the super-chilled fuel in order to power its booming economy and
help it shift away from dirtier fossil fuels.
“China’s LNG demand in the past years keeps outperforming
even the most bullish analysts,” said Henning Gloystein, global
director of energy and natural resources at consultants Eurasia
Group.
The mad dash is putting Europe at a major disadvantage, as
Asian end-users increase prices to attract supplies away from
the Atlantic. Europe -- where spot prices have rallied by more
than 65% this year -- is facing thin gas inventories amid lower
flows from pipeline suppliers and near record carbon prices.
Europe’s end-users have been forced to depend more on
Russian pipeline supplies. Yet Gazprom PJSC’s unwillingness to
ship extra gas via Ukraine has been one of the key factors that
has catapulted prices at the Dutch Title Transfer Facility, the
spot benchmark for Europe, to the highest level since 2008.
“We see TTF prices rising for the remainder of 2021 as
Asian LNG demand is robust,” said Santosh Gupta, assistant
manager at Drewry Maritime Financial Research. “I don’t see a
catalyst in the short term that would bring down prices.”
Indeed, the situation is made worse by the energy demands
caused by extreme weather -- from last winter’s bitter cold in
Asia to the current heat waves in the Western U.S. and severe
droughts across the globe that have curbed hydro output.
A Hotter World Means Keeping the Lights On Is Harder Than Ever
With fresh memories of record-high Asian spot LNG prices
last winter, the world’s top importers in China, Japan, South
Korea and Taiwan have been busy buying shipments for delivery
between November and February, well ahead of normal, according
to traders surveyed by Bloomberg. China’s importers were scolded
by the government for not being well prepared last winter and
they don’t want to make the same mistake twice, traders said.
The Japanese government last month asked utilities to
ensure stable fuel supplies this summer and winter amid
forecasts for abnormally thin power reserves. Traders at Japan’s
biggest importers said that they have been under more pressure
to stock up on fuel and even restart retired gas-fired power
plants.
There isn’t enough fresh LNG supply to meet this growing
demand. The market had become accustomed to a steady stream of
new mega-export projects, but the industry is currently in the
midst of a lull period, where the next raft of new supply isn’t
expected until the middle of the decade.
In the U.S., the so-called Henry Hub futures prices have
more than doubled over the past year to the highest seasonal
level since 2014. Inventories are 5.8% below normal for the time
of year, the widest deficit since 2019 on a seasonal basis,
signaling tighter supplies for next winter.
Winter Outlook
Shipping restraints could also add to winter woes. The odds
of congestions at the Panama Canal are “very high,” which will
force U.S. LNG cargoes en route to Asia to take longer passages
around the Cape of Good Hope or the Suez Canal, limiting
availability, according to Oystein Kalleklev, chief executive
officer of shipowner Flex LNG in Oslo.
To be sure, there are a few factors that could help the
global gas market avoid a crunch this winter.
An early start of the Nord Stream 2 pipeline, which
connects Russia to Germany and has faced delays because of U.S.
sanctions, could add much-needed supply to Europe and help the
region avoid a crunch. Still, while pre-commissioning work is
currently under way, the timing of first flow remains uncertain.
Likewise, a milder winter could reduce gas consumption and
help utilities coast along with their lower inventory levels.
“Weather will have the final word on both price levels and
volatility patterns,” said Gergely Molnar, an energy analyst at
the International Energy Agency.
Meanwhile, traders may be forced to adapt to this volatile
market as the supply deficit isn’t expected to disappear anytime
soon.
“Supply will likely remain tight for the next two or three
years as the industry makes up for the lack of new supply
investments in 2020 and catches up with robust demand growth,”
said Whistler.
By Stephen Stapczynski, Ann Koh and Anna Shiryaevskaya (Bloomberg)
-- Natural gas markets around the globe are
rallying as the world’s importers have come to a stark
realization: there isn’t enough supply to go around.
A long, frigid winter drained gas stockpiles from Louisiana
to Germany, and utilities are struggling to build them back up.
But unforeseen supply disruptions and a rebounding global
economy are making it impossible to keep up. That’s setting up a
desperate scenario as hot summer temperatures approach, and it’s
bound to get even worse when demand peaks this winter.
Higher gas prices will make it more costly to keep the
lights on in Madrid or cool apartments in Tokyo, after scorching
heat waves in some regions are already making it more expensive
to run air conditioners. The cleaner-burning fuel is the latest
commodity to add to the global inflation scare as the price of
everything from crude oil to corn and copper surge.
If a gas supply deficit does develop during the winter months, it
could spur European utilities to burn more coal, which has
already started happening, and cause China’s power producers to
curtail supplies to industries and cause blackouts like it did
last winter. Households are set to pay sky-high utility bills
and the worst-case scenario -- albeit unlikely -- is they won’t
have heating or electricity when freezing temperatures hit.
“Supplies are already very tight, and that could get much
worse if there is a cold winter,” said James Whistler, the
global head of energy derivatives at Simpson Spence Young, an
international commodity and ship broker. “We are seeing strong
competition between Europe and Asia, and that is manifesting in
the continuous rally.”
European gas inventories are the lowest in more than a
decade for this time of year, with the region’s benchmark
surging to the highest in almost 13 years, while rates in the
U.S. and Asia have jumped to the highest seasonal level in
years.
The gas sector had long been segmented between geographical
regions, but the ramp-up in new supply of liquefied natural gas
and growing liquidity in spot trading over the past several
years has helped transform it into a genuinely global market.
That evolution comes at a price, as Europe and North Asia now
compete for a finite supply of LNG, which results in bidding
wars that catapult spot rates.
At the center of the action is China, which in a surprise
move is set to overtake Japan as the world’s top LNG importer
for the first time this year. China is stockpiling supplies of
the super-chilled fuel in order to power its booming economy and
help it shift away from dirtier fossil fuels.
“China’s LNG demand in the past years keeps outperforming
even the most bullish analysts,” said Henning Gloystein, global
director of energy and natural resources at consultants Eurasia
Group.
The mad dash is putting Europe at a major disadvantage, as
Asian end-users increase prices to attract supplies away from
the Atlantic. Europe -- where spot prices have rallied by more
than 65% this year -- is facing thin gas inventories amid lower
flows from pipeline suppliers and near record carbon prices.
Europe’s end-users have been forced to depend more on
Russian pipeline supplies. Yet Gazprom PJSC’s unwillingness to
ship extra gas via Ukraine has been one of the key factors that
has catapulted prices at the Dutch Title Transfer Facility, the
spot benchmark for Europe, to the highest level since 2008.
“We see TTF prices rising for the remainder of 2021 as
Asian LNG demand is robust,” said Santosh Gupta, assistant
manager at Drewry Maritime Financial Research. “I don’t see a
catalyst in the short term that would bring down prices.”
Indeed, the situation is made worse by the energy demands
caused by extreme weather -- from last winter’s bitter cold in
Asia to the current heat waves in the Western U.S. and severe
droughts across the globe that have curbed hydro output.
A Hotter World Means Keeping the Lights On Is Harder Than Ever
With fresh memories of record-high Asian spot LNG prices
last winter, the world’s top importers in China, Japan, South
Korea and Taiwan have been busy buying shipments for delivery
between November and February, well ahead of normal, according
to traders surveyed by Bloomberg. China’s importers were scolded
by the government for not being well prepared last winter and
they don’t want to make the same mistake twice, traders said.
The Japanese government last month asked utilities to
ensure stable fuel supplies this summer and winter amid
forecasts for abnormally thin power reserves. Traders at Japan’s
biggest importers said that they have been under more pressure
to stock up on fuel and even restart retired gas-fired power
plants.
There isn’t enough fresh LNG supply to meet this growing
demand. The market had become accustomed to a steady stream of
new mega-export projects, but the industry is currently in the
midst of a lull period, where the next raft of new supply isn’t
expected until the middle of the decade.
In the U.S., the so-called Henry Hub futures prices have
more than doubled over the past year to the highest seasonal
level since 2014. Inventories are 5.8% below normal for the time
of year, the widest deficit since 2019 on a seasonal basis,
signaling tighter supplies for next winter.
Winter Outlook
Shipping restraints could also add to winter woes. The odds
of congestions at the Panama Canal are “very high,” which will
force U.S. LNG cargoes en route to Asia to take longer passages
around the Cape of Good Hope or the Suez Canal, limiting
availability, according to Oystein Kalleklev, chief executive
officer of shipowner Flex LNG in Oslo.
To be sure, there are a few factors that could help the
global gas market avoid a crunch this winter.
An early start of the Nord Stream 2 pipeline, which
connects Russia to Germany and has faced delays because of U.S.
sanctions, could add much-needed supply to Europe and help the
region avoid a crunch. Still, while pre-commissioning work is
currently under way, the timing of first flow remains uncertain.
Likewise, a milder winter could reduce gas consumption and
help utilities coast along with their lower inventory levels.
“Weather will have the final word on both price levels and
volatility patterns,” said Gergely Molnar, an energy analyst at
the International Energy Agency.
Meanwhile, traders may be forced to adapt to this volatile
market as the supply deficit isn’t expected to disappear anytime
soon.
“Supply will likely remain tight for the next two or three
years as the industry makes up for the lack of new supply
investments in 2020 and catches up with robust demand growth,”
said Whistler.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 25
FLNG has been buying back their own shares hands over fist.
Back to the US, we should not be shutting coal plants down and hope something else will be there to replace the baseloads
Ny is not allowing any new NG hookups and won't allow any new pipeline from PA to NE. So in New England we buy NG from Russia when we need more of it...duh
Back to the US, we should not be shutting coal plants down and hope something else will be there to replace the baseloads
Ny is not allowing any new NG hookups and won't allow any new pipeline from PA to NE. So in New England we buy NG from Russia when we need more of it...duh
Re: Oil & Gas Prices - June 25
Closing Prices:
> WTI prompt month (AUG 21) was up $0.75 on the day, to settle at $74.05/Bbl.
> Also, NG prompt month (JUL 21) was up $0.078 on the day, to settle at $3.496/MMBtu.
> WTI prompt month (AUG 21) was up $0.75 on the day, to settle at $74.05/Bbl.
> Also, NG prompt month (JUL 21) was up $0.078 on the day, to settle at $3.496/MMBtu.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group