Energy Prospectus

Just got back to my desk at 1:30PM CT, so a bit late posting this.

Opening Prices:
> WTI is up 2c to $74.12/Bbl, and Brent is up 15c to $75.31/Bbl.
> Natural gas is down 3.0c to $3.719/MMBtu.

AEGIS Notes >>> Join me on the AEGIS webinar tomorrow (July 14) at 1:30 PM CT
Crude oil

Oil futures rose Tuesday morning as demand keeps rising and OPEC+ members remain in a standoff
The market is poised to significantly tighten if OPEC+ doesn’t resolve a dispute to lift oil output, the EIA said
Early estimates from analysts show another sizable withdrawal from crude oil stocks in the U.S. – government data due Wednesday
The International Energy Agency (IEA) warned that global oil markets are set to “tighten significantly” unless the OPEC+ alliance resolves its impasse and agrees to increase production (Bloomberg)

In the backdrop of rapidly recovering demand, OPEC+ is set to keep output levels unchanged next month due to a Saudi-UAE dispute on quotas
The IEA, in its monthly report, said OPEC+’s deadlock threatens to inflict a “deepening supply deficit,” with “the potential for high fuel prices to stoke inflation and damage a fragile economic recovery,”

AEGIS notes that even if an agreement is reached soon, the cartel will likely miss an August production increase
With August sales fixed and most Gulf countries prepping for an Islamic holiday, the discussion will have shifted to September supply volumes by the time the coalition reconvene, delegates said and reported by Bloomberg

Natural Gas

The prompt-month (August ’21) contract gained 7.5c yesterday, despite mild weather forecasts
The August ’21 Henry Hub contract is up 8c so far in July, as low inventory levels, and extreme heat have led to a tighter market
According to Bloomberg, the Northwestern U.S. is expected to continue seeing above-average temperatures through at least July 26

Bank of America (BAML) raised its gas price forecast for 3Q2021 and 4Q2021
The bank lifted its 3Q2021 and 4Q2021 price forecast to $3.40/MMBtu and $3.40/MMBtu, respectively
BAML estimates the storage deficit will remain “modest” while production edges higher going into 2022

Closing Prices:
> WTI prompt month (AUG 21) was up $1.15 on the day, to settle at $75.25/Bbl.
> NG prompt month (AUG 21) was down $0.053 on the day, to settle at $3.696/MMBtu.

It is important to remember that we are in the middle of the peak demand period for crude oil and investors don't usually pay much attention to the gassers until we get to Q4. There is strong resistance for WTI at $76, but it will not hold against week after week of big draws from U.S. and OECD oil and refined product inventories.
The utilities will get very nervous if we get to September and ngas inventories in the U.S. are well below the 5-year average. That is when the gassers will make a run. Join me tomorrow on the AEGIS webinar.

From OilPrice.com
"Growing uncertainty over the OPEC+ agreement and warnings from the IEA of another oil price war has caused volatility in oil markets to spike. Oil prices were up on Tuesday morning, however, with several analysts expecting Saudi Arabia to get its way eventually in its stand-off with the UAE."

Prospect of Saudi-UAE Deal Still Distant. Despite Russia stepping up its efforts as a diplomatic intermediary, Saudi Aramco and the UAE are still far from finding common ground on the future of OPEC+ production cuts. In its current form, this month’s OPEC+ production quota would get rolled into the next month unchanged, leaving markets even tighter than originally expected.

Saudi Aramco Refuses to Grant Above Term Volumes. According to Reuters reports, Saudi Aramco will supply full-term commitments to at least 5 Asian buyers in August 2021 but it will not supply any incremental volumes beyond that despite being asked to. This news would suggest that fears of OPEC countries starting another price war may be overblown.