Energy Prospectus

The traders will take time to figure out the new OPEC+ agreement.

Pre-opening analysis. SEP21 is now the front month WTI futures contract.
WTI Crude oil traded lower on Monday, breaking below the 71.05 key support (now turned into resistance) barrier, and thereby completing a failure swing top formation. This, combined with the fact that the price is trading below the upside support line drawn from the low of May 21, as well as below the downside resistance line taken from the high of July 6, paints a negative short-term outlook, in our view.

At the time of writing, the black liquid is hovering slightly above the 69.70 level, marked as a support by the low of June 17, the break of which could extend the slide towards the 68.15 or 67.40 barriers, marked by the lows of June 3 and 1, respectively. If the bears are not willing to stop there, then we could experience extensions towards the low of May 28, at 66.15.

Shifting attention to our short-term oscillators, we see that the RSI has just touched its toe below 30, while the MACD remains below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion that further declines may be in the cards for the black gold.

On the upside, we would like to see a recovery back above 75.50, the high of July 13, before we start examining whether the bulls have gained the upper hand. This would also take WTI above both the aforementioned diagonal lines, and may initially target the peak of July 6, at 77.00.

If they manage to overcome that barrier as well, the bulls will find themselves testing territories last seen back in 2014, with the next resistance perhaps being the 79.60 territory. That territory prevented the price from drifting lower between Oct. 16 and 31 of that year, and acted as a strong resistance after it was violated on Nov. 3.
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Oil 4h Elliott Wave Analysis Chart:
WTI is coming lower on intraday charts as expected now seen in late stages of a three wave retracement that can represent a corrective wave four. Ideally energy will turn up again this week from around 69-70 area

Opening Prices:
> WTI is down $2.57 to $69.24/Bbl, and Brent is down $2.44 to $71.15/Bbl.
AEGIS: The Trend remains UP. WTI retreated following news of an agreement to increase UAE’s quota. Market-Driven hedges for producers are available at current prices. With Sellers in Control below $73.00, those participants will look to pressure for sub $70.40 oil and a change in Trend.
MY TAKE: The new agreement is the same as the old agreement until next year. My guess is that today's drop in the oil price is more about the increase in Covid-19 cases, which equals FEAR of travel restrictions.

> Natural gas is up 9.1c to $3.765/MMBtu.
AEGIS: The Trend is UP. Buyers and Sellers continue to vie for Control at $3.68. A change in Trend requires a Friday close below $3.52. Market-Driven hedges for producers are available at current prices.

Energy Report: Delta Vs. OPEC+
By Phil Flynn (Jul 19, 2021 08:51AM ET)

The OPEC+ drama is over and the group decided to leave the market with just enough oil to get by. OPEC+ agreed to raise oil production that on the face of it, would be barely enough oil to keep up with demand. The deal should have supported oil yet more concerns are being raised about the Delta variant of the coronavirus, a highly contagious variant that was first identified in India in December. It is now causing a risk-off situation that is weighing on global markets.

OPEC+ did get their act together in a deal that saved the market from fears of a production war. They announced that they would extend the decision of the 10th OPEC and non-OPEC ministerial meeting (April 2020) until Dec. 31 2022. OPEC said they would adjust upward their overall production by 0.4 mb/d monthly starting August 2021 until phasing out the 5.8 mb/d production adjustment, and in December 2021 assess market developments and participating countries’ performance.

They will continue to adhere to the mechanism to hold monthly OPEC and non-OPEC ministerial meetings for the entire duration of the declaration of cooperation, to assess market conditions and decide on production level adjustments for the following month, and endeavor to end production adjustments by the end of September 2022, subject to market conditions.

Effective May 1 2022, OPEC will also adjust the baseline for the calculations of the production adjustments. They also reiterated the critical importance of adhering to full conformity by taking advantage of the extension of the compensation period until the end of September 2021. Compensation plans should be submitted under the statement of the 15th OPEC and non-OPEC ministerial meeting. The meeting decided to hold the 20th OPEC and non-OPEC Ministerial Meeting on Sept. 1 2021.

Now while some people think that this increase in production is the reason why oil is down, it is not the truth of the matter. The unity within the OPEC+ cartel is very bullish for prices and the amount of barrels that they’re adding to the global market is very small and just enough to get by.

Still, it won’t matter if we do see economies shut down because of this corona virus delta variant. Scattered reports of an increase in hospitalization in some states and reports of the virus spreading are getting traders nervous to start the week. Oil prices are below the lower Bollinger band and we haven’t seen that for some time. We are almost below that technical indicator that we’ve been looking at since last November. That means we’re either extremely oversold or the market is getting ready for a major breakdown. At this point, we don’t expect a major breakdown of the price of oil unless you think the global economy is getting ready to collapse. The only way that we think it’s going to collapse is if the delta variant starts to shut down worldwide economies again.

Natural gas is showing some strength as the summer heat hits big parts of the country and support is coming from strong international LNG demand.

Grain prices are also getting concerned about another blast of hot weather as drought conditions in some parts of the country and too much rain in other parts of the country is stressing US crops. The carryover for many grains is the tightest it’s been in over 10 years and there is concern that if we don’t have a bumper crop, prices could spiral out of control.

Today's drop in the price of oil is based on FEAR of Covid and FEAR that OPEC+ will over-supply the global oil market. IMO both fears are over-blown. I use this website ( https://txdshs.maps.arcgis.com/apps/das ... b9cafc8b83 ) to track Covid cases and deaths in Texas and so far the number of cases and especially deaths is staying way below where they were in January.

Oil prices slid Monday morning, heading for their biggest one-day drop in four months as investors worried that the spread of the Delta variant of coronavirus will halt travel and dent demand for fuel.

U.S. crude futures were recently down 6.4% at $66.98 a barrel, on track for their worst day since mid-March. Prices are now more than 10% below last week’s multiyear peak, a drop that marks correction territory. They are still up sharply for the year.

Traders in recent days have unwound some wagers that oil demand will continue to climb as more consumers get vaccinated and resume normal travel patterns. Hopes for a demand surge have buoyed oil throughout the year, but rapidly climbing coronavirus cases in some parts of the world are forcing investors to pare back their expectations for the economy. Some traders also remain wary of more travel shutdowns, which would have an outsize impact on oil prices.

“If we stagnate or retrace some of the demand increase we’ve seen thus far, the market will move from being undersupplied to oversupplied into the back half of the year,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth, U.S. < I think it is important to remember that OPEC+ is still going to meet each month and they will adjust their production quotas if necessary. However, they probably won't need to. Per IEA, global oil demand exceeded supply by 1.2 million barrels per day and OPEC+ is only planning to increase production by 400,000 bpd each month. U.S. and OECD oil inventories should continue to fall each week through at least August.

Brent crude, the global gauge of oil prices, was recently down 5.7% at $69.41 a barrel.