Energy Prospectus

Oil & Gas Prices:
> WTI is down $1.18 to $114.08/bbl, and Brent is down $1.09 to $115.20/bbl. < WTI was up $0.79 to $116.05 at the time of this post.
> Natural gas is up 28.3c to $8.979/MMBtu. < HH ngas was up $0.24 to $8.94 at the time of this post.

AEGIS Notes
Oil

Saudi Arabia is prepared to increase oil supply if Russian production falls significantly as a result of increased sanctions (FT)
> There have been talks about the Saudis and the UAE increasing output immediately, which may be revealed at the OPEC+ monthly meeting on Thursday, but nothing has been agreed upon yet, reported Financial Times < "immediately" is not possible.
> Production increases planned for September could be brought forward to July and August

China's oil demand is expected to rise as the country emerges from a long period of COVID-19 lockdowns (BBG)
> This will put additional strain on a market that has already tightened as a result of Russia's invasion of Ukraine
> Some analysts predict oil demand will increase by 0.6 MMBbl/d this month compared to April, rising to 1 MMBbl/d day in the second half of the year < Demand for oil (primarily transportation fuels) ALWAYS increases by 1.5 to 2.0 million bpd during the summer (June to Sept).

European Union members are still debating a possible Russian seaborne energy embargo as Hungary raised new concerns, stalling momentum toward a decision
> EU ambassadors will meet again today to discuss the prospects for their sixth sanctions package, which requires a unanimous vote from all 27 EU countries
> Recently, Hungary also requested the right to sell Russian crude, but the proposal was denied during the EU leaders' conference
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MY TAKE: U.S. and OECD petroleum inventories at too low to support economic growth. Diesel inventories are so low that rationing might be necessary. There is no Quick Fix; we have a global Energy Crisis that Washington and OPEC can't fix.

Note received 6-1-2022 from Piper Sandler Equity Research:
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Opec non-Story – We Expect Nothing out of the Ordinary

Tomorrow’s meeting of Opec+ ministers will most likely rubber-stamp another pro-forma 400+ kb/d monthly increase in the group ceiling, for July – there’ll be two more months to go afterward
> We did some reporting and thinking after we received a number of incoming questions on yesterday’s WSJ Opec story. The story reported that ‘delegates’ were considering a break with Russia so as to ‘allow’ some members to begin to produce more than they’d otherwise be ‘allowed’ to produce.
> Markets supposedly took this as a bearish signal and a midday reversal in Tuesday’s oil price action ensued …

First off, we think that Monday’s oil trading reversal had much to do with money-flows and a broader bearish turn in ‘sentiment’

Second, we do not think that the Opec story holds much water
> The WSJ story ran yesterday under the headline, “OPEC Weighs Suspending Russia from Oil-Production Deal”, which looked to us like a leaked story to Benoit Faucon, which is not unusual, to fly a test balloon.
> Either way, the story holds little water in our view, because:
>> It’s unlikely that Russia would go along with being sideline
>> Nor would Saudi Arabia countenance such an afront to Russia
>> Attempts at side-lining a member of significant standing would also open up a can of worms
>> Last but not least: The allegedly mooted move only has benefit in theory, since no one member is actually in a position to produce oodles more oil

Closing Prices:
> Prompt-Month WTI (Jul 22) was up $1.61 on the day, to settle at $116.87
> Prompt-Month Henry Hub (Jul 22) was down $-0.211 on the day, to settle at $8.485