Energy Prospectus

Opening Prices:
> WTI is up $1.54 to $109.80/bbl, and Brent is up $1.84 to $112.74/bbl.
> Natural gas is down -7.2c to $8.711/MMBtu.

AEGIS Notes: Oil on track for consecutive weekly gain

Crude Oil

Oil set to rise for a second week in a row
> WTI rose toward $110 a barrel, up 5% this week
> EU banning Russian crude and U.S.’s plan to refill its strategic reserves weighed on the oil price
> Backwardation remains in the oil curve; calendar spreads have widened out as the front of the curve outpaced that of the back

U.S. announces plans to refill oil reserve
> DOE said it will call for bids this fall for companies to sell it 60 million barrels of crude
> Delivery window in 2023 to be when “oil prices and demand are expected to be significantly lower”

EIA projects domestic output to increase by 820,000 b/d to 12.01 million bpd this year, before climbing to 940,000 b/d in 2023 to a record 12.95 million bpd
> “The growth profile that EIA has, and some of the other think-tank firms, I think it’s too aggressive over the next two years for U.S. oil production,” shale giant Pioneer Natural Resources’ CEO Scott Sheffield said on Thursday
> Oil industry's inflation is rising, and executives see little reason to anticipate cost pressures on everything from steel pipe to frack sand to abate anytime soon

Natural Gas

The prompt-month (Jun' 22) gas contract is up by 7.2c this morning, near $8.711 < Pulled back to $8.46 at the time of this post
> Lower-48 dry gas production is up this morning at 94 Bcf/d, its highest level since April 23, according to Criterion
> Feedgas demand is at 12.2 Bcf/d, as a fall in Cameron LNG feedgas volumes offsets the increase at Freeport LNG Train 1

The EIA reported an injection of 77 Bcf for the week ending April 29
> Responses to the survey ranged from 41 Bcf to 81 Bcf
> It was lower than the five-year average injection of 78 Bcf and above the 53 Bcf addition reported during the corresponding week in 2021
> Current inventory levels fell to 1.567 Tcf, while the deficit to last year narrowed to 382 Bcf, and the deficit to the five-year average expanded to 306 Bcf
Keep in mind that refilling the U.S. natural gas storage system is NOT OPTIONAL. Utilities must refill storage to at least 3.5 Tcf to make it through a cold winter without regional shortages. Plus, right now it looks like we will have another La Nina winter. Back-to-back La Nina winters have been some of the coldest winters on record for the eastern half of the U.S.

U.S. energy company Sempra Energy said on Thursday it sees a final decision on the new Cameron LNG train in 2023 (Reuters)
> Sempra said in its first-quarter earnings release that Cameron LNG plans to complete development work on the fourth liquefaction train in the summer of 2023 and expects the company "to be in a position to make a final investment decision thereafter."
> Japan's Minister of Economy, Trade, and Industry was in Washington yesterday and asked U.S. energy secretary Jennifer Granholm to invest in U.S. LNG infrastructure to help the country reduce its reliance on Russian energy exports < Trump would ask Japan to pay for it.
> Russian oil and gas imports account for 4%, and 9% of its total imports in 2021

Trading Economics:
"WTI crude futures surged above the $110-per-barrel level on Friday morning and were on track for their second straight weekly advance as concerns about tight global supply ahead of the European Union's impending embargo on Russian oil outweighed uncertainties about global economic growth and weak demand. Oil prices jumped more than 5% this week, buoyed by the EU's proposal to phase out supplies of Russian crude in six months and refined products by the end of 2022. The proposal also included a ban on all shipping, brokerage, insurance, and financing services offered by EU companies to transport Russian oil in a month. On top of that, OPEC seems reluctant to pump more oil into the market to resolve any market tightness, sticking to the current strategy of gradually reducing record supply cuts. Keeping a lid on prices were lingering concerns about weak global growth and demand, particularly from top consumer China due to renewed coronavirus-induced lockdown." < It seems clear to me (after 7 months in a row of not coming close to their quota) that OPEC+ is out of spare capacity that can be quickly brought to the market. Saudi Arabia and UAE say they have more spare capacity, but not enough to offset declines by other cartel members.

"US natural gas futures fell to $8.4 per million British thermal units after hitting a near fourteen-year high of $8.98 earlier in the session, but is set for a more than 15% jump over the week, with different interpretations over domestic inventory levels driving volatility in the market. The latest EIA report showed a 77 bcf injection into US natural gas storage, which was 9 bcf more than expected, but well within the 5-year average of 78 bcf. Therefore, the gap between current and historical inventory levels remained almost unchanged at 16%, dimming the likelihood of a proper refill ahead of next winter, especially with the risk of an early start to the summer cooling season and soaring overseas demand, mostly in Europe. Prices in Europe are almost triple the price in the US, which is keeping LNG exports running at full capacity, as the region tries to wean off Russian supplies." < I expect the deficit to the 5-year average amount of natural gas in U.S. storage to grow in May. If so, I think we see the NYMEX futures for NOV22 to FEB23 go over $10.00 within a few months.

Keep an eye on coal prices. The Btu content of coal sets the bottom for the price of natural gas. Gas-to-coal fuel switching this summer is the only way to allow more gas to go to storage.

At $374/ton coal is up 289% in the last twelve months.
See: https://tradingeconomics.com/commodity/coal

I expect the deficit to the 5-year average amount of natural gas in U.S. storage to grow in May. If so, I think we see the NYMEX futures for NOV22 to FEB23 go over $10.00 within a few month

That's what I'm watching for..highly interested in this topic. Thank you for including this in your weekly video

Closing Prices:
> Prompt-Month WTI (Jun 22) was up $1.51 on the day, to settle at $109.77
> Prompt-Month Henry Hub (Jun 22) was down $-0.740 on the day, to settle at $8.043 < Profit taking by the LONGS on a very big move up.

https://www.linkedin.com/video/event/ur ... 420074496/

aegis