Energy Prospectus

Opening Prices:
> WTI is down $1.63 to $113.68/bbl, and Brent is down $1.62 to $116.89/bbl.
> Natural gas is up 32.2c to $7.742/MMBtu.

AEGIS Notes
Oil

WTI trades lower at around $113.68/Bbl
> The Fed raised interest rates by 75 basis points in an effort to battle rising inflation
> The dollar index rose to its highest level since 2002 as a result of the largest interest rate increase by the U.S. central bank since 1994
> With the dollar strengthening, foreign currency holders pay more for oil priced in dollars, which curtails demand

Last weekend, national retail gasoline prices surpassed $5/gal for the first time (BBG)
> The oil market is battling a trifecta of strong demand growth, disruptions in the crude supply, and rising fuel costs as a result of a lack of refining capacity
> “The markets moved faster and the fundamental tightness is deeper than what we would have thought three or six months ago,” said Jeff Currie, head of commodities research at Goldman Sachs

Natural Gas

Russia's Gazprom move to cut supplies of gas to Germany could spell trouble come wintertime < IMO "trouble" s/b "Europe is screwed"
> On Wednesday, Gazprom announced a further cut to flows on its Nord Stream 1 pipeline to 40% of capacity
> Gazprom cited delays getting Siemens Energy equipment that was undergoing maintenance in Canada, but German regulators say that the explanation was technically "unfounded" and aimed at driving up gas prices
> The prompt-month (July ’22) TTF price rallied by $7.108, or 23.9%, to $36.807, in response to the reduced flows

The EIA is expected to report an injection of 89 Bcf for the week ending June 10
> Responses to the survey ranged from 78 Bcf to 96 Bcf
> It will be compared to the five-year average injection of 79 Bcf and above the 28 Bcf addition reported during the corresponding week in 2021
> Current inventory levels would fall to 2.088 Tcf, while the deficit to last year would narrow to 337 Bcf

The Rollercoaster ride continues:
NEW YORK (Reuters)
Oil prices rebounded from earlier losses after the United States announced new sanctions on Iran, and as supply concerns remain at the forefront for energy markets that have seen prices soar throughout the year.

The market had been lower earlier as interest rate hikes in the United States, Britain and Switzerland fed concerns about a slowdown in global economic growth.

Brent crude futures were down 45 cents, or 0.4%, to $118.07 as of 12:21 p.m. EDT (1621 GMT) while West Texas Intermediate (WTI) crude futures rose 27 cents to $115.55 a barrel.

Analysts said the decision by the United States to impose sanctions on Chinese, Emirati and Iranian firms that help export Iran's petrochemicals boosted buying, as it underscores the difficulty of a revival of the 2015 U.S.-Iran nuclear accord.

In addition, Libya's oil output has collapsed to 100,000-150,000 barrels per day (bpd), a fraction of the 1.2 million bpd seen last year, and analysts remain concerned that country could have ongoing problems delivering oil amid unrest.

That is hitting already-tight supply, while the International Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million bpd.

Prices slipped more than 2% overnight after the U.S. Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.

"Once you raise rates that high also and you know it’s going to happen for next month, a lot of retail customers have tough time trading once you start increasing their costs of trading," said Robert Yawger, director of energy futures at Mizuho in New York.

On Thursday, European stocks tumbled after a surprise rate hike from Swiss National Bank. [MKTS/GLOB] This was followed by a rate hike by the Bank of England.

Optimism that China's oil demand will rebound as it eases COVID-19 restrictions is also supporting the price outlook. < In my opinion, the Chinese Covid Lockdown going on and off is the only thing keeping oil prices from going a lot higher. Goldman Sachs still saying they expect Brent to average $140/bbl in Q3 and WTI just slightly lower.

"Looking into next year, there is a clear deficit in supply. While a recession could yet come along to change this, the current set-up remains bullish for the oil price and oil stocks," Bernstein analysts said in a note.

Still, Bernstein estimated global inventory levels at 48 days of demand cover, below the long-term average of 55 days.

Closing Prices:
> Prompt-Month WTI (Jul 22) was up $2.27 on the day, to settle at $117.58
> Prompt-Month Henry Hub (Jul 22) was up $0.044 on the day, to settle at $7.464

Even our highly profitable upstream companies in the Sweet 16 and Small-Cap Growth Portfolio have been sucked down by FEAR and the Bear Market. Hang tough, Q2 results are going to be very good.