Energy Prospectus

Opening Prices:
> WTI is up $1.53 to $120.94/bbl, and Brent is up $1.45 to $122.02/bbl.
> Natural gas is up 5.2c to $9.345/MMBtu.

AEGIS Notes
Oil

The EU's ban on seaborne imports of Russian oil will result in an 18% decline in the country's fuel output by the end of 2023, according to EIA’s monthly report
> Russian production of liquid fuels set to reach 9.3 MMBbl/d in 4Q23 from 11.3 MMBbl/d in 1Q22
> The probability that existing, or future sanctions, reduce Russia's oil production more than planned raises oil price concerns, added the agency

U.S. Treasury Secretary Janet Yellen stated that the US is in talks about a possible oil buyers block, which would allow Russian oil to remain on the market but reduce revenue for the country
> Yellen added that the goal is to “keep Russian oil flowing into the global market to hold down global prices and try to avoid a spike that causes a worldwide recession” but that “the objective is to limit the revenue going to Russia”

Diesel futures in the United States are growing faster than gasoline futures (BBG)
> During intra-day trading on Tuesday, NY diesel futures were trading at a premium of more than 20 cents a gallon to gasoline futures
> Diesel's unseasonal strength demonstrates how reliant the world is on the U.S. to supply the most extensively used oil product in Europe
MY TAKE: Thanks to our brilliant leadership and "The Green Bad Deal" we now have less refining capacity. I am concerned that the U.S. may soon need to ration diesel. The world runs on diesel.

Natural Gas

U.S. power consumption is on track to reach record highs in 2022 and 2023 as the economy grows, says EIA
> The EIA projected power demand will climb to 4,010 billion kilowatt-hours (kWh) in 2022 and 4,019 billion kWh in 2023 from 3,930 billion kWh in 2021
> The all-time record for the U.S. was set in 2018 at 4,003 kWh, but then faltered in 2020 because of the pandemic
> The EIA said natural gas's share of power generation will hold at 37% in 2022, the same as 2021, then slide to 36% in 2023, while coal's share will drop from 23% in 2021 to 21% in 2022 and 20% in 2023 as renewable output rises. < Wishful thinking again that wind and solar reduce fossil fuel consumption; not this decade.

Qatar selects Exxon, Total, Shell, and Conoco for $30B mega-LNG expansion project (Reuters)
> The North Field expansion will boost Qatar's LNG output by 64% by 2027, strengthening its position as the world's top LNG exporter and helping to guarantee long-term supply of its gas to Europe
> The North Field Expansion (NFE) plan includes six LNG trains that will ramp up Qatar's liquefaction capacity from 77 mtpa (10.08 Bcf/d) to 126 mtpa (16.5 Bcf/d) by 2027

Goldman Sachs predicts $140 oil as gas prices spike near $5 a gallon. CNN Business.
High oil and gasoline prices will need to rise even higher this summer to incentivize new production and discourage consumption, according to Goldman Sachs. The Wall Street bank is now forecasting Brent crude oil prices will average $140 a barrel between July and September, up from its prior call of $125 a barrel. Brent is currently trading at about $120 a barrel. Worse, Goldman Sachs said summer retail gas prices are going to need to spike to levels normally associated with $160 oil in order to curtail demand. "A large spike in prices remains quite possible this summer," Goldman Sachs strategists wrote in a report to clients.

Wondering why natural gas price is suddenly so high? The booming U.S. LNG export industry. Seeking Alpha.
US natural gas prices tripled from the 10-year average, now linked to global prices, with 7 LNG export terminals now operating and 15 more approved. Exports of Liquefied Natural Gas (LNG) from the US to the rest of the world jumped by 18% over the first four months of 2022, to an average of 11.5 billion cubic feet per day (Bcf/d), compared to the annual average in 2021, according to the EIA. There has long been a small LNG export terminal in Alaska. But the first large-scale export terminal began operating in 2016, by which time fracking had created a natural gas glut in the US, and its price had collapsed. LNG export operators arbitraged the cheap price of natural gas in the US and the much higher prices they could get globally by exporting LNG.

Bank of America analysts have said WTI oil, the US benchmark, could jump around 16% to $140 a barrel this summer based on current trading patterns.

BofA analyst Paul Ciana said in a note Tuesday that recent trading patterns in WTI oil were "bullish" — that is, suggestive that prices are heading higher. He noted that prices rose to $130 a barrel in March before cooling, but are now on the up again, suggesting there is momentum behind the asset.

"Price has corrected and rounded out a bullish continuation pattern pointing to $140 a barrel this summer," Ciana wrote. Ciana added that historically prices have tended to move higher when WTI crude has traded above $115 a barrel. WTI has traded above this level since the start of June.

Many in investing are skeptical of chart analysis, however, arguing that an asset's past moves are not a reliable guide to the future. Yet analysts at UBS said Wednesday that there are plenty of economic reasons to expect oil to keep rising: chief among them the loosening of COVID lockdowns in China.

"We expect near-term oil prices to be supported by China's economic reopening and the Northern Hemisphere summer season," UBS Wealth Management chief investment officer Mark Haefele said in a note to clients.

Haefele said investors should consider investing in oil futures as a way to benefit from the reopening of China this summer.

Closing Prices
> Prompt-Month WTI (Jul 22) was up $2.70 on the day, to settle at $122.11
> Prompt-Month Henry Hub (Jul 22) was down $-0.594 on the day, to settle at $8.699