Energy Prospectus

Opening Prices:
> WTI is down $2.00 to $66.44/Bbl, and Brent is down $1.88 to $68.71/Bbl.
"Last week buyers managed to regain control above $67.50; A change in trend requires a close below $65.15." - AEGIS

> Natural gas is up 5.3c to $3.914/MMBtu.
"The trend is UP, though gas finished within striking distance of its two-week low on Friday as it posted a weekly loss of 27c. A change in trend would require a weekly close below $3.85. Sellers have regained control below $4.00." - AEGIS

AEGIS Notes
Oil

Oil prices retreated for the third straight trading session as the delta variant continues to spread and cause lockdowns
China’s retail sales growth and industrial output is slowing as new movement restrictions have started to weigh on the economy
Oil refining in China has been reduced to the lowest level in 14-months as private operators are forced to scale back (Bloomberg)

Canada is poised to gain more crude takeaway capacity when a key pipeline starts up as early as next month
Enbridge's Line 3 oil pipeline that travels from Alberta to Wisconsin will bring relief to Canadian oil sands producers with the new 760 MBbl/d conduit that replaces the older pipe with less capacity
The pipe could start moving crude oil as early as September 15

Outright bullish bets oil WTI from speculators sank to their lowest level since April 2020 (CFTC)
On a net basis, hedge fund’s long positions were the least bullish in nine months

Natural Gas

Natural gas futures are up this morning, after posting their largest weekly loss last week (7%) since February
The decline last week can be attributed to a bearish inventory report and weather models that have continued to trend cooler
The prompt contract has fallen 29c, after reaching a high of $4.15 on August 5

U.S. LNG feedgas demand hits a two-week high as several facilities ramp up
Last week flows increased to Cheniere’s Sabine Pass LNG, Sempra’s Cameron LNG and Freeport LNG

Prices at Henry Hub are trading near $3.916/MMBtu.
LNG prices in Asia and Europe: JKM prices are at $15.655/MMBtu, while the TTF prompt-month contract is at $15.435/MMBtu
Baker Hughes gas rig count decreased by one rig, to bring the total gas rig count to 102
The major gas basins, Marcellus and Utica remained unchanged, while the Haynesville play lost one rig

Keep in mind as you read this that the International Energy Agency (IEA) forecast of a surplus in the global oil market in 2022 includes their prediction that U.S. oil production will quickly rebound to pre-pandemic levels (~12.9 million BOPD). IMO that will not happen even if WTI goes to $100/bbl.
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On August 10, Reuters reported U.S. crude oil production is expected to fall by 160,000 b/d in 2021 to 11.12 million b/d, the EIA said in a monthly report on Tuesday, a smaller decline than its previous forecast for a drop of 210,000 b/d.
The EIA said it expects production to be relatively flat through October before beginning to rise in November and December and throughout 2022. For 2022, U.S. crude production is expected to average about 11.8 million b/d, a rise of 650,000 b/d, smaller than the previous forecast for a rise of 750,000 b/d. Output hit an all-time annual high of 12.86 million b/d in November 2019, before the coronavirus pandemic crushed demand and prices.
The agency said it expects U.S. petroleum and other liquid fuel consumption to rise 1.58 million b/d to 19.70 million b/d in 2021, compared with a previous forecast for a rise of 1.52 million b/d. U.S. gasoline consumption averaged 8.6 million b/d in the first half of 2021, up from 8.3 million b/d in the second half of 2020 but below the 9.3 million b/d in the second half of 2019, EIA said. "Our latest estimates show that gasoline consumption in May through July was higher than we had previously expected. Growth in employment and increasing mobility have led to rising gasoline consumption so far in 2021," the agency said.
Globally, consumption of petroleum and liquid fuels is forecast to average 97.6 million b/d for all of 2021, a 5.3 million b/d increase from 2020. The EIA forecast that global consumption of petroleum and liquid fuels will increase by 3.6 million b/d in 2022 to average 101.2 million b/d. < MY TAKE: Even if 100% of OPEC+ spare capacity comes back on-line by mid-2022 the world will be "short-oil" unless there is a significant increase in non-OPEC+ production, which is not being forecast by anyone outside of the IEA

Iran Update
On August 11, Bloomberg reported that Iran’s new president picked a hawkish Foreign Ministry veteran with close ties to the military elite to replace Mohammad Javad Zarif as the nation’s top diplomat, underscoring the shift in power that’s clouding the resumption of nuclear talks with world powers. If approved, the anti-Western conservative considered close to the Islamic Revolutionary Guard Corps as well as Lebanon’s Hezbollah militant movement, will steer Iran’s negotiating team once talks resume in Vienna over how to revive the 2015 nuclear deal.

MY TAKE: It is time for Biden to bring the negotiating team home. Iran will ramp up oil exports and continue to test Team Biden, which I don't expect to authorize any military action to enforce the sanctions.

Closing Prices:
> WTI prompt month (SEP 21) was down $1.15 on the day, to settle at $67.29/Bbl.
> In contrast, NG prompt month (SEP 21) was up $0.085 on the day, to settle at $3.946/MMBtu.

MY TAKE: Some traders see lower oil prices as bullish for natural gas because it could lead to less associated gas coming from wells drilled for oil. Plus, each day we are that much closer to the winter heating season. Natural gas is not impacted by Covid related travel restrictions.