Energy Prospectus

Opening Prices:
> WTI is up $2.41 to $106.68/bbl, and Brent is up $2.33 to $112.38/bbl.
> Natural gas is up 3.4c to $6.273/MMBtu.

AEGIS Notes
Oil

U.S. Energy Secretary Granholm met with top U.S. refiners yesterday to discuss measures for battling rising energy prices (Reuters)
> Granholm reportedly backed off a potential ban on U.S. fuel exports and signaled interest in potentially relaxing smog-reducing gasoline regulations
> Despite agreeing to continue discussions, both parties exited the meeting without reaching a consensus on a long-term solution < What a surprise!

Indian imports of Russian crude increased 50-fold as other nations shun its crude (BBG)
> Since April, oil imports from Russia have made up approximately 10% of India's total purchases, up from a mere 0.2% over the previous 12 months
> Nearly half of the Russian crude exports now travel to Asia, down from two-thirds at the beginning of 2022, according to Gazprom Neft Chief Executive Officer Alexander Dyukov
Why don't we sanction India???

EIA’s most closely watched oil data - The U.S. Weekly Petroleum Status Report, won't be released this week as scheduled due to a system issue
> The EIA delayed the release of all reports except for its Weekly Natural Gas Inventory report scheduled for this week due to electricity problems that resulted in an unidentified hardware breakdown
> EIA anticipates providing a status update on pending reports on Monday
Am I the only person that thinks this is funny? The U.S. Department of Energy has an "electricity problem".

Natural Gas

Natural gas futures are slightly higher this morning but are expected to finish lower on the week
> The EIA reported a 74-Bcf injection for the week ending June 17
> The injection was slightly larger than the 70-Bcf injection expected by analysts, though survey responses ranged from 40 to 96 Bcf
> Natural gas inventories are 305 Bcf, or 12.3%, less than the year-ago level of 2.474 Tcf and 331 Bcf, or 13.2%, below the five-year average of 2.500 Tcf
> So far, weather has been very supportive of gas demand, with abnormal heat in Texas offsetting some of the gas demand losses from Freeport LNG < My GUESS is that storage will be ~3.5 Tcf at the end of the refill season. So, we will start the winter heating season with storage over 300 Bcf below the 5-year average. Only a mild summer or more LNG export facilities going offline will allow storage to be full.
> So far, weather has been very supportive of gas demand, with abnormal heat in Texas offsetting some of th demand losses from Freeport LNG

A Kentucky-based Aluminum smelter shut down because of soaring energy costs
> On Wednesday, the company announced that it would close its largest smelter in the U.S. The facility is the largest producer of military-grade Aluminum in North America
> They said they expect to keep the plant idle for 9-12 months until energy prices normalize < What if this the "New Normal" thanks to our insane energy policy?
> AEGIS notes that the closure is important for the gas market and could be the first sign of possible demand destruction for natural gas in the form of power. > So far in 2022, The U.S. power sector’s natural gas consumption has been robust as the U.S. has benefitted from soaring energy prices globally. An aluminum plant uses around 400 MW of electricity, on average

By Peter Nurse

Investing.com -- Oil prices traded higher Friday, helped by continued tight supply, but the market is still heading for a second weekly fall on fears that tight monetary policy will push the global economy into recession.

The crude market has been helped by comments from the Libyan oil minister, who said late Thursday that the National Oil Corporation chairman was withholding production data from him.

He had said earlier in the week that Libya's oil production has risen in the past week to around 700,000 to 800,000 barrels a day, but these figures must now be in doubt as an increase in political tension and protests at energy fields and ports has severely curtailed production in this country, home of Africa’s largest oil reserves.

That said, the crude market is on course for its second consecutive losing week amid concerns that interest rate hikes by a number of central banks, and the Federal Reserve in particular, will severely limit global economic activity.

Fed Chair Jerome Powell said on Thursday the central bank's focus on curbing inflation was "unconditional", suggesting more interest rate hikes ahead, which he added raised the “possibility” of recession.

“The move lower in oil appears to be almost exclusively driven by macro influences, while oil fundamentals still remain supportive,” said analysts at ING, in a note. “We just have to look at the time spreads, which have not followed the flat price lower over the week…This suggests that there is tightness in the market right now and we would expect this to only grow as we lose more Russian supply.”

Next week sees the latest meeting of the Organization of Petroleum Exporting Countries and allies to discuss the group’s production levels. < OPEC+ is out of spare capacity. The questions is, will they admit it.

The cartel, known as OPEC+, is widely expected to stick to its plan to boost output by 648,000 barrels a day in July and by the same amount in August, despite the plans of U.S. President Joe Biden to visit Saudi Arabia, the de facto leader of the group, to plead the case for lower crude prices. < Why should Saudi Arabia do anything to help Joe Biden? He has been anti-oil since day one and he has been soft on Iran.

Also likely to emerge next week will be the delayed inventory data from the U.S. Energy Information Administration, after the official body was unable to publish this week’s figures on Thursday due to technical problems. < Still LOL that our Department of Energy had an energy problem.

“This delay comes at a crucial time for the market when there are plenty of concerns over the tightness in refined product markets,” ING added.