Energy Prospectus

Opening Prices:
> WTI is up $1.57 to $111.14/bbl, and Brent is up $1.89 to $116.98/bbl.
> Natural gas is up 15.6c to $6.657/MMBtu.

AEGIS Notes:
Oil

Oil is trading higher at $111.14/Bbl and is up nearly 50% this year
> Although concerns about a global economic slowdown have weighed on futures, demand is still strong
> The risk of disruptions in Russian supply due to the conflict in Ukraine is another factor supporting crude and refined products

French President Macron informed President Biden at the G7 conference (BBG), that the UAE is producing "at maximum" capacity and Saudi Arabia can only add roughly 150 MBbl/d of additional crude production
> The remarks follow Macron's discussion of OPEC's crude production with UAE President Sheikh Mohammed bin Zayed, and after the UAE Energy Minister stated that the nation is close to its approved OPEC+ quota
> Macron also stressed that the UAE had issued a warning, stating that Saudi Arabia did not possess "huge capacities" that could be produced in less than six months

This week's OPEC+ meeting is expected to be straightforward as the group moves toward the conclusion of a two-year agreement on oil supplies (BBG)
> The cartel is expected to continue its policy stance, a supply increase of 648 MBbl/d, due for August
> However, the OPEC+ countries' discussions will become more difficult in the coming weeks as they are expected to fill the supply gap caused by sanctions on fellow member Russia
MY TAKE: These meetings are now meaningless. OPEC+ is now out of spare production capacity. Saudi Arabia may be able to add a tiny amount of additional production, but the cartel is no longer able to come close to their official quotas.

Beginning this week, the Biden administration will hold lease sales for new oil and gas drilling on public lands and, for the first time, it will put new regulations in place for producers
> The administration is anticipated to put up for sale portions of federally held land in seven Western states for drilling
> Additionally, the department stated that it will increase the fees that oil companies must pay to the government in exchange for the oil they extract, increasing royalty rates from 12.5% to 18.75% for new sales < Another reason that upstream companies are NOT going to drill a lot of wells on these new areas.

Natural Gas

Joint venture operators seek an extension to build Mountain Valley Pipeline
> The request would give the companies four more years to complete the Mountain Valley Pipeline, which began construction in February 2018 < So, this pipeline won't be any help this winter or the next 3-4 winters.
> The pipeline is 94% complete and would bring around 2 Bcf/d of gas from the Marcellus/Utica to the Mid- and South Atlantic regions of the United States
> A Mountain Valley spokesperson said on June 27 that it continues to target a full in-service for the 304-mile pipeline project in the second half of 2023

France begins preparing for further cuts to Russian gas flows
> France is less reliant on Russia than some of its neighbors, importing around 17% of its gas from the country
> France’s electricity grid is being further strained by unexpected maintenance at its nuclear facilities
> The country has called for a 10% reduction in energy consumption over the next two years
> French gas users who consume more than 5 GWh per year would be the first group subject to load-shedding. This group would include large industrial sites in the refining, chemical, and glass sectors, which could push inflation higher
MY TAKE: The standard of living for most Europeans is going to decline thanks to their leaders incredibly bad decisions.

>increasing royalty rates from 12.5% to 18.75% for new sales < Another reason that upstream companies are NOT going to drill a lot of wells on these new areas.

Who is gouging whom??? ... a 50 % increase??

You are right. If I were them , I'd say we are not interested. You do it and make a public statement like they did when they were advertising they were going woke.

From Reuters:

News that China relaxed some COVID-19 quarantine rules helped lift stocks and oil prices as investors hoped for a revival in global growth.

China slashed the quarantine time for inbound travellers by half in a major easing of one of the world's strictest COVID-19 curbs, which have deterred cross-border travel and resulted in international flights running at just 2% of pre-pandemic levels.

China's strict zero-COVID regulations have been a drag on activity in the world's No. 2 economy, but an easing of travel restrictions and reopening of major cities from lockdowns boost optimism that growth can get back on track.

U.S. crude recently rose 1.38% to $111.08 per barrel and Brent was at $117.50, up 2.09% on the day.

Major oil producers Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly. < If SA and UAE are tapped out, the cartel's production will go on decline in Q3.

OilPrice.com notes on Libya

- The conflict between two rival governments in Libya is set to worsen as calls to replace the head of the national oil company (NOC), Mustafa Sanalla, intensify. Meanwhile, skirmishes in the country show no sign of letting up.

- If Libya’s NOC does shut down all ports in the Gulf of Sirte (see below for detail), total exports could drop as low as 400,000 b/d, bringing the tally of idled production capacity to 800,000 b/d.

- Political talks held in Geneva between the Tripoli and Benghazi governments failed spectacularly earlier this month, leaving prospects for a comprehensive settlement at a low point.

- Even before the NOC ultimatum, Libyan production had fallen to 700,000 b/d recently, almost halving from output rates earlier this year as key producing fields remain blocked by the Petroleum Facilities Guard.

Trading Economics:
"Oil prices rose for the third session on Tuesday, with WTI crude futures trading above $110 per barrel amid reports that the UAE and Saudi Arabia are producing near capacity, while political unrest in Libya and Ecuador threatened to tighten supply further. UAE Energy Minister Suhail al-Mazrouei said Monday that the country was producing near maximum capacity based on its quota of 3.168 million barrels per day under the agreement with OPEC+. Meanwhile, Libya’s National Oil Corp said it might have to declare force majeure in the Gulf of Sirte area unless oil terminals there resume operations, while Ecuador’s Energy Ministry said the country could suspend oil output completely amid anti-government protests. Elsewhere, G7 countries reached an agreement to find ways to impose a price cap on Russian oil while hopes of a revival of demand from the world's second-biggest economy rose as China continues to ease Covid-19 restrictions."

Closing Prices:
> Prompt-Month WTI (Aug 22) was up $2.19 on the day, to settle at $111.76
> Prompt-Month Henry Hub (Jul 22) was up $0.050 on the day, to settle at $6.551