Opening Prices:
> WTI is up $1.77 to $81.12/Bbl, and Brent is up $1.56 to $83.95/Bbl.
> Natural gas is down 13.9c to $5.426/MMBtu.
AEGIS Notes
Oil
Crude oil in the U.S. jumped over $81/Bbl Monday morning as oil demand gets a boost from global power crunch
Prices of power fuel sources like coal and natural gas are soaring in Europe and Asia, prompting a switch to oil products such as diesel and kerosene (Bloomberg)
Permian oil output is expected to return to pre-pandemic highs within weeks
The increase in Permian output is being driven by private operators rather than the publicly traded companies that powered previous booms (Bloomberg)
At almost 5 MMBbl/d, the Permian basin is just shy of levels seen right before COVID-19 hit in the spring of 2020
Other major U.S. shale basins are either holding steady or declining, according to Bloomberg
WTI spread positions held by speculators and other reportable traders surged by the most since March 2020 through last Tuesday (CFTC)
Managed money spread positions rose by 51k lots
WTI “other reportable” spread positions climbed by 72k lots
Oil’s steep backwardation has invited bets on oil spreads
Natural Gas
Current weather forecasts predict an unusually warm October
According to Platts, gas-fired heating demand will be at historic lows through at least mid-month
The U.S. pop-weighted temperature avg. for the first half of October is expected to register at 68 °F, the warmest on record going back to at least 2005
The weather will likely keep Residential-Commercial demand behind the historical average
European gas prices fall as Putin pledges to stabilize markets
Gas prices have retreated over the last several trading sessions as Russia has said that it could export record volumes to European countries in order to stabilize gas markets
The prompt TTF contract is down to $29.739/MMBtu after reaching a high of $39.45 on Tuesday, October 5
Qatar Energy Minister Saad Al-Kaabi says the return of LNG infrastructure and Russia’s pledge to supply more gas should help ease prices
Oil & Gas Prices - Oct 11
Oil & Gas Prices - Oct 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 11
Macro View: The Paradigm Shift is now in full force. The Wall Street Gang has gone from belief in falling demand for oil to reality that lack of investment and government policies will result in supply shortages and a prolonged period of high oil, gas and coal prices.
From Wall Street: "S&P futures are trading below fair value and the Bond market closed today for Columbus Day. European shares are trading mostly lower and there was a mostly positive session in Asia overnight. No change in Fed tapering expectations following Friday's disappointing US jobs report. Comes against a backdrop of ongoing worries over global energy crunch. Crude at seven-year peak while coal, LNG, and gas prices at record highs as Europe and parts of Asia deal with falling energy inventories, forcing factories to curtail output, and fueling fears production constraints will exacerbate global supply chain pressures and underpin stagflation risk. China pledged further steps to ensure electricity and coal supply, will release additional copper, aluminum, and zinc from the national reserves. Russia called on Europe to mend ties to avoid future gas shortages. EU-Ukraine meeting potentially influential this week regarding gas crisis. Evergrande still in the spotlight. Latest articles highlight risk of default on and lack of clarity of interest repayments. Spillover concerns linger with focus on highly leveraged property developers. Geopolitical tensions remain elevated after China President Xi repeated vow for Taiwan reunification.
From Wall Street: "S&P futures are trading below fair value and the Bond market closed today for Columbus Day. European shares are trading mostly lower and there was a mostly positive session in Asia overnight. No change in Fed tapering expectations following Friday's disappointing US jobs report. Comes against a backdrop of ongoing worries over global energy crunch. Crude at seven-year peak while coal, LNG, and gas prices at record highs as Europe and parts of Asia deal with falling energy inventories, forcing factories to curtail output, and fueling fears production constraints will exacerbate global supply chain pressures and underpin stagflation risk. China pledged further steps to ensure electricity and coal supply, will release additional copper, aluminum, and zinc from the national reserves. Russia called on Europe to mend ties to avoid future gas shortages. EU-Ukraine meeting potentially influential this week regarding gas crisis. Evergrande still in the spotlight. Latest articles highlight risk of default on and lack of clarity of interest repayments. Spillover concerns linger with focus on highly leveraged property developers. Geopolitical tensions remain elevated after China President Xi repeated vow for Taiwan reunification.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 11
A global energy crisis brought about by continued constraints on crude and natural gas supplies and rising demand pushed crude prices to seven-year highs this week. “Global supply will fall significantly short of demand this month as economic conditions continue to improve, helping to maintain higher commodity prices,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, told the Reporter-Telegram by email.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 11
Closing Prices:
> WTI prompt month (NOV 21) was up $1.17 on the day, to settle at $80.52/Bbl.
> In contrast, NG prompt month (NOV 21) was down $0.220 on the day, to settle at $5.345/MMBtu.
Trading Economics: "WTI crude futures spiked to as high as $82.17 a barrel on Monday morning, the highest price since October 2014, following seven consecutive weeks of gains, on prospects of stronger demand and supply concerns. Oil has benefitted from the soaring prices of natural gas and coal, making it more attractive as a fuel for power generation. At the same time, OPEC+ decided last week to maintain a steady and gradual increase in production."
----------------------
The Energy Report: Crisis Mode
By Phil Flynn (Oct 11, 2021 11:11AM ET)
The global elites are starting to find out that the ridiculous steps they have taken to fight climate change are backfiring, and their cure is worse than the disease. The global energy crisis is becoming more pronounced, and the globe-saving do-gooders now have set the stage on a path of huge economic risk and the potential for more political instability. The lack of exploration & development ("CapEx") spending on fossil fuels as we warned is causing shortages. Agencies like the International Energy Agency (IEA) that incorrectly predicted declining oil demand now have left the markets short of supply.
As I wrote back on March 17:
“The IEA has declared that a “supercycle” in oil demand is unlikely while admitting that the agency underestimated demand in their last report. The IEA has had a long track record of underestimating demand. They also say that oil demand may not return to pre-covid levels for 2 years and warned that some of the covid oil demand destruction may be permanent.”
I thought on a holiday trade day it might be nice to take a look back.
The Biden Administration also owns this crisis because it was the U.S. producer that kept global prices under control. As I wrote Jan. 20 in a report called “ A New Day in America:
"It is a new day for America and for the crude oil market as Joe Biden becomes president. The outlook under his administration is very bullish. The disdain for fossil fuels and worshiping at the altar of climate change will restrict U.S. supply and cause prices to rise. The incoming president has already signaled that on his first day in office he will sign executive orders to revoke the permit for Canada to build the Keystone XL pipeline and rejoin the Paris Climate Accord, and put a temporary moratorium on oil leasing in the Arctic refuge. Oil prices are responding, moving higher even as the dollar starts to rise. The era of higher oil and gasoline prices are here and Americans can look forward to higher prices at the pump.”
I also wrote on Jan. 15:
“With President Joe Biden coming in, it appears fossil fuels are on their way out. In one of the most substantial threats to the global economic recovery. Biden’s war on fossil fuels is already having an impact on oil prices and the threat is increasing as more banks are boycotting investment in fossil fuel projects which will cause higher oil and gas prices and be a drag on U.S. economic growth. Yet, is it a good policy or even legal that banks can conspire as a group to try to force an industry to go bankrupt? That may be a question for legal scholars, but the Trump Administration sees it as the threat that it is."
I also wrote:
The Office of the Comptroller of the Currency issued a rule Thursday that would force banks to lend to gun manufacturers, oil drillers and other controversial industries that some have refused to do business with. Many banks have shown their anger and displeasure with the rule, but it is critical that the U.S. energy industry, which is such a vital part of our economy, should not be demonized because of political correctness and without due process.
In the Energy Report for Tuesday, Jan. 12 I wrote about a theme I have been writing about for a while:
“Oil prices are rising as the market is coming to grips with the fact that cap spending on petroleum is going to be woefully short of what we need. Already Saudi Arabia is sensing an opening, cutting production to raise prices without any fear of a tweet, and is now free to manipulate prices higher. President-Elect Joe Biden could unleash a rash of regulations that will constrict U.S. energy production, giving the Saudis more price power. Shale producers will have a hard time reacting, as not only are they drowning in debt, many banks, because of goals trying to get carbon neutral, will not lend money to the industry for energy projects. Even if they get the money, it is unlikely that will mean more production."
The Wall Street Journal reported that “Most American [oil] companies will have to give priority to paying off debts over boosting production in the wake of the pandemic, analysts say. Even with oil at $50, it would take the 20 largest U.S. shale companies 3.4 years on average to bring debt levels down to healthy levels relative to their overall capitalization, according to consulting firm Wood Mackenzie. In the meantime, we are seeing power and electricity prices spike in Japan and Europe. Strong demand and erratic plans to reduce carbon have left countries struggling to keep the lights on! What is this? California?
As more banks look to boycott U.S. oil and gas companies, it will be the small shale oil producers that will bear the brunt of the pain. In other words, the much-derided “Big Oil” companies will become bigger and stronger, while smaller independents will crack under the weight of more regulations and the inability to secure capital. That is one of the reasons that Exxon Mobil (NYSE:XOM) has surged in stock prices in recent days.
It is also one of the reasons that the Saudis were open to cutting oil production because they have lost their fear of the U.S. shale industry. Shale oil was a nemesis of the OPEC cartel and now it seems that the Biden Administration shares their disdain. Maybe for different reasons, but the result will be the same. Big Oil will get bigger and OPEC and Saudi Arabia will get stronger.
U.S. consumers, of course, will see what is left of their disposable income go into their gas tanks with more of the profit going to foreign oil producers, The market is also going to have to watch President Biden’s actions with Iran. The President has signaled his desire to rejoin the Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), a love that could lift sanctions on Iranian oil which would be another blow to smaller US energy producers.
This is why I have been warning to stay hedged. So now let’s look at some of the headlines of where we are now.
The Wall Street Journal headline today screams that “Oil Price Jumps Above $80 and Natural Gas Races Higher, Turbocharged by Supply Shortages."
"Crude prices are outpacing copper and other commodities by the widest margin in more than a decade, lifted by wagers on constrained production”
Surging natural gas prices are going to cause high fertilizer costs and higher food prices.
The BBC writes:
“Kraft Heinz says people must get used to higher food prices.”
Reuter reports:
“Lebanon’s power supplies were back to normal on Sunday after a blackout the previous day when the country’s two biggest power stations shut down because of a fuel shortage, the Energy Ministry said. The closure piled further hardship on Lebanese struggling with job losses, soaring prices, and hunger wrought by the country’s worsening financial meltdown.”
The FT reports that the record prices being paid by suppliers in Europe and shortfalls in natural gas supply across the continent have stoked fears of an energy crisis should the weather be even marginally colder than normal. Households are already facing steeper bills, while some energy-intensive industries have started to slow production, denting the optimism around the post-pandemic economic recovery.
And while some in the gas industry believe the price surge is a temporary phenomenon, caused by economic dislocations owing to coronavirus, many others say it highlights a structural weakness in a continent that has become too reliant on imported gas.
ZeroHedge reported that Russia’s natural gas giant, Gazprom (MCX:GAZP), raised its 2021 price guidance for natural gas exports while signaling caution on volumes it could ship, as Europe’s energy crisis grows.
According to Bloomberg, the Russian state-controlled exporter that supplies 35% of European gas needs, reiterated that shoring up inventories at home was its top priority, and only after it has refilled its storage facilities by the end of October, would the company look at potentially increasing exports to continental Europe; Wood & Co. and BCS Global Markets wrote in separate notes Friday following a webinar with Gazprom managers. It would, in theory, explain why Russian supplies to Europe remain well below recent levels.
I could go on but it is clear. We took energy for granted and now we all will pay the price.
------------------------------
MY TAKE: Under the leadership of the "Woke Washington Gang" the Middle Class working families are going to hammered by Team Biden's energy plan.
> WTI prompt month (NOV 21) was up $1.17 on the day, to settle at $80.52/Bbl.
> In contrast, NG prompt month (NOV 21) was down $0.220 on the day, to settle at $5.345/MMBtu.
Trading Economics: "WTI crude futures spiked to as high as $82.17 a barrel on Monday morning, the highest price since October 2014, following seven consecutive weeks of gains, on prospects of stronger demand and supply concerns. Oil has benefitted from the soaring prices of natural gas and coal, making it more attractive as a fuel for power generation. At the same time, OPEC+ decided last week to maintain a steady and gradual increase in production."
----------------------
The Energy Report: Crisis Mode
By Phil Flynn (Oct 11, 2021 11:11AM ET)
The global elites are starting to find out that the ridiculous steps they have taken to fight climate change are backfiring, and their cure is worse than the disease. The global energy crisis is becoming more pronounced, and the globe-saving do-gooders now have set the stage on a path of huge economic risk and the potential for more political instability. The lack of exploration & development ("CapEx") spending on fossil fuels as we warned is causing shortages. Agencies like the International Energy Agency (IEA) that incorrectly predicted declining oil demand now have left the markets short of supply.
As I wrote back on March 17:
“The IEA has declared that a “supercycle” in oil demand is unlikely while admitting that the agency underestimated demand in their last report. The IEA has had a long track record of underestimating demand. They also say that oil demand may not return to pre-covid levels for 2 years and warned that some of the covid oil demand destruction may be permanent.”
I thought on a holiday trade day it might be nice to take a look back.
The Biden Administration also owns this crisis because it was the U.S. producer that kept global prices under control. As I wrote Jan. 20 in a report called “ A New Day in America:
"It is a new day for America and for the crude oil market as Joe Biden becomes president. The outlook under his administration is very bullish. The disdain for fossil fuels and worshiping at the altar of climate change will restrict U.S. supply and cause prices to rise. The incoming president has already signaled that on his first day in office he will sign executive orders to revoke the permit for Canada to build the Keystone XL pipeline and rejoin the Paris Climate Accord, and put a temporary moratorium on oil leasing in the Arctic refuge. Oil prices are responding, moving higher even as the dollar starts to rise. The era of higher oil and gasoline prices are here and Americans can look forward to higher prices at the pump.”
I also wrote on Jan. 15:
“With President Joe Biden coming in, it appears fossil fuels are on their way out. In one of the most substantial threats to the global economic recovery. Biden’s war on fossil fuels is already having an impact on oil prices and the threat is increasing as more banks are boycotting investment in fossil fuel projects which will cause higher oil and gas prices and be a drag on U.S. economic growth. Yet, is it a good policy or even legal that banks can conspire as a group to try to force an industry to go bankrupt? That may be a question for legal scholars, but the Trump Administration sees it as the threat that it is."
I also wrote:
The Office of the Comptroller of the Currency issued a rule Thursday that would force banks to lend to gun manufacturers, oil drillers and other controversial industries that some have refused to do business with. Many banks have shown their anger and displeasure with the rule, but it is critical that the U.S. energy industry, which is such a vital part of our economy, should not be demonized because of political correctness and without due process.
In the Energy Report for Tuesday, Jan. 12 I wrote about a theme I have been writing about for a while:
“Oil prices are rising as the market is coming to grips with the fact that cap spending on petroleum is going to be woefully short of what we need. Already Saudi Arabia is sensing an opening, cutting production to raise prices without any fear of a tweet, and is now free to manipulate prices higher. President-Elect Joe Biden could unleash a rash of regulations that will constrict U.S. energy production, giving the Saudis more price power. Shale producers will have a hard time reacting, as not only are they drowning in debt, many banks, because of goals trying to get carbon neutral, will not lend money to the industry for energy projects. Even if they get the money, it is unlikely that will mean more production."
The Wall Street Journal reported that “Most American [oil] companies will have to give priority to paying off debts over boosting production in the wake of the pandemic, analysts say. Even with oil at $50, it would take the 20 largest U.S. shale companies 3.4 years on average to bring debt levels down to healthy levels relative to their overall capitalization, according to consulting firm Wood Mackenzie. In the meantime, we are seeing power and electricity prices spike in Japan and Europe. Strong demand and erratic plans to reduce carbon have left countries struggling to keep the lights on! What is this? California?
As more banks look to boycott U.S. oil and gas companies, it will be the small shale oil producers that will bear the brunt of the pain. In other words, the much-derided “Big Oil” companies will become bigger and stronger, while smaller independents will crack under the weight of more regulations and the inability to secure capital. That is one of the reasons that Exxon Mobil (NYSE:XOM) has surged in stock prices in recent days.
It is also one of the reasons that the Saudis were open to cutting oil production because they have lost their fear of the U.S. shale industry. Shale oil was a nemesis of the OPEC cartel and now it seems that the Biden Administration shares their disdain. Maybe for different reasons, but the result will be the same. Big Oil will get bigger and OPEC and Saudi Arabia will get stronger.
U.S. consumers, of course, will see what is left of their disposable income go into their gas tanks with more of the profit going to foreign oil producers, The market is also going to have to watch President Biden’s actions with Iran. The President has signaled his desire to rejoin the Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), a love that could lift sanctions on Iranian oil which would be another blow to smaller US energy producers.
This is why I have been warning to stay hedged. So now let’s look at some of the headlines of where we are now.
The Wall Street Journal headline today screams that “Oil Price Jumps Above $80 and Natural Gas Races Higher, Turbocharged by Supply Shortages."
"Crude prices are outpacing copper and other commodities by the widest margin in more than a decade, lifted by wagers on constrained production”
Surging natural gas prices are going to cause high fertilizer costs and higher food prices.
The BBC writes:
“Kraft Heinz says people must get used to higher food prices.”
Reuter reports:
“Lebanon’s power supplies were back to normal on Sunday after a blackout the previous day when the country’s two biggest power stations shut down because of a fuel shortage, the Energy Ministry said. The closure piled further hardship on Lebanese struggling with job losses, soaring prices, and hunger wrought by the country’s worsening financial meltdown.”
The FT reports that the record prices being paid by suppliers in Europe and shortfalls in natural gas supply across the continent have stoked fears of an energy crisis should the weather be even marginally colder than normal. Households are already facing steeper bills, while some energy-intensive industries have started to slow production, denting the optimism around the post-pandemic economic recovery.
And while some in the gas industry believe the price surge is a temporary phenomenon, caused by economic dislocations owing to coronavirus, many others say it highlights a structural weakness in a continent that has become too reliant on imported gas.
ZeroHedge reported that Russia’s natural gas giant, Gazprom (MCX:GAZP), raised its 2021 price guidance for natural gas exports while signaling caution on volumes it could ship, as Europe’s energy crisis grows.
According to Bloomberg, the Russian state-controlled exporter that supplies 35% of European gas needs, reiterated that shoring up inventories at home was its top priority, and only after it has refilled its storage facilities by the end of October, would the company look at potentially increasing exports to continental Europe; Wood & Co. and BCS Global Markets wrote in separate notes Friday following a webinar with Gazprom managers. It would, in theory, explain why Russian supplies to Europe remain well below recent levels.
I could go on but it is clear. We took energy for granted and now we all will pay the price.
------------------------------
MY TAKE: Under the leadership of the "Woke Washington Gang" the Middle Class working families are going to hammered by Team Biden's energy plan.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 11
He was right about everything except the hedges as he assumed Biden would let Iran ship oil.
The politicians in Iran are just as dumb as ours as they didn’t capitalize on Biden’s dementia.
I find it amusing that the people that caused this mess are telling everyone it’s not their fault.
The solution is to transition faster. Big climate conference in a few weeks, it will ll be fun
Watching them lie
Why doesn’t the lame stream press have guys like Phil Flynn on?
The politicians in Iran are just as dumb as ours as they didn’t capitalize on Biden’s dementia.
I find it amusing that the people that caused this mess are telling everyone it’s not their fault.
The solution is to transition faster. Big climate conference in a few weeks, it will ll be fun
Watching them lie
Why doesn’t the lame stream press have guys like Phil Flynn on?