Energy Prospectus

My guess is oil prices will go higher with $80/bbl WTI in mid-Q3. With OPEC+ now in control, $100 WTI will happen if most of their remaining production capacity is needed. By this time next year we may need every drop of OPEC+ oil, including IRAN. U.S. oil production will not rebound to pre-pandemic level (13 MMBbl per day) until the active drilling rig count doubles. That won't happen anytime soon.

June 25 Closing Prices:
> WTI prompt month (AUG 21) was up $0.75 on the day, to settle at $74.05/Bbl.
> NG prompt month (JUL 21) was up $0.078 on the day, to settle at $3.496/MMBtu.

Natural Gas prices are set by regional supply/demand and the North American has adequate supply NOW, but could be under-supplied heading into the 2021-2022 winter. A hot summer followed by a cold start to the winter could send HH ngas over $5 in Q1 2022. Ngas prices in Asia and Europe are over $10 today and our LNG exports should remain at max capacity. Stock prices for AR, EQT, CRK, RRC, GDP and SBOW sb 50% to 100% higher w/i 6 months if Q4 and Q1 ngas prices firm up over $3.50.

Bloomberg 6-25-2021

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, which hit a 13-year high in Europe this week, 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 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 prices have surged on the back of low inventories and high carbon

European gas prices have surged as inventories hit the lowest level in more than a decade for this time of year, while gas prices 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.

Oil prices soar even as consumption remains below trend: Kemp - Reuters News

25-Jun-2021 13:43:29
John Kemp is a Reuters market analyst. The views expressed are his own

By John Kemp
LONDON, June 25 (Reuters) - Global oil consumption is set to return to pre-pandemic levels by the first quarter of 2022, driven by a strong expansion in global manufacturing and freight transport as well as the gradual re-opening of major economies.

Booming consumption from miners, manufacturers, shipping and trucking firms, as well as private motorists, is expected to offset the continued loss of jet fuel consumption from quarantine restrictions on passenger aviation.

Global liquids consumption (including biofuels) is forecast to reach 100.6 million barrels per day (bpd) in March 2022, according to the U.S. Energy Information Administration (EIA).

For the first time since the onset of the epidemic, consumption will surpass the level for the corresponding month in 2019 ("Short-term energy outlook", EIA, June 8).

Global consumption will have bounced back in less than two years, after falling by almost 20% or 20 million bpd at the worst point of the epidemic and lockdowns in April 2020.

The remarkable recovery in economic activity and oil consumption is mostly the result of a rapid deployment of effective vaccines in Europe and North America and strict quarantine controls in China and other parts of Asia.

In wealthier economies, ultra-low interest rates, unprecedented government spending, and generous support for businesses and households have also helped heal the oil market far quicker than seemed likely at the height of the epidemic.

But in the five years before the coronavirus, global consumption was growing at an annual rate of just over 1% or a little over 1 million b/d per year.

Even after the expected strong rebound, global consumption is still expected to be more than 2% or 2 million b/d below its pre-epidemic trend at the end of 2022. < Not sure where John gets this? It only happens in demand drop off in Q4 2022.

The gap between forecast and pre-epidemic trend consumption is an indication of the long-term scarring caused by the coronavirus and associated infection controls.

In effect, the epidemic will have cost the oil industry about 30 months of ordinary output growth, which must be offset by lower prices to stimulate consumption and restrain production, or deliberate restraint by OPEC+, U.S. shale firms and other producers.

In this context, the rise in Brent prices (now around $75 per barrel) to well above the pre-epidemic five-year average ($58) is a measure of how far producers are willing to withhold output to secure higher revenues, even as consumption remains well below the pre-epidemic trend.