Energy Prospectus

Opening Prices:
> WTI is up $0.97 to $99.50/bbl, and Brent is up $0.67 to $101.36/bbl. < Soon after the market opened, WTI spiked to $103.30.
MY TAKE: A big move at the open is when computers take over the trading because of very tight stop loss orders put on late yesterday. This morning is probably a lot of short covering.
> Natural gas is up 25.0c to $5.76/MMBtu.

AEGIS Notes
Oil

Russia announced that it plans to seize control of the Sakhalin-1 Oil and Gas project, one week after taking over the neighboring Sakhalin-2 project (Reuters)
> The Sakhalin-1 project is currently operated by ExxonMobil, Japan’s SODECO, and India’s ONGC
> According to the Russian head of the energy committee, Pavel Zavalny, the move was the “obvious next step”
> Although Russian President Vladimir Putin signed an order last week to seize control of Sakhalin-2, no formal decision has been made on Sakhalin-1

The Caspian Pipeline Consortium, which exports Kazakh crude from a key terminal on the Black Sea, requests the Russian court to delay the order halting oil loadings < MY TAKE: If this pipeline shuts down, Brent goes quickly over $120/bbl.
> The CPC handles around 1%, or 1.2 MMBbl/d, of global oil announced on Wednesday that a Russian court had ordered it to halt operations for 30 days due to concerns regarding oil spills
> A further shutdown would remove additional oil from a tight market as shipments were already halted in June for the removal of mines

Shanghai has experienced a major spike in COVID cases since late May (BBG)
> The doubling of cases raises concerns that the pursuit of Covid Zero may force China's financial center back into lockdown
> Shanghai reported 54 local COVID cases on Wednesday, including two that were detected outside of quarantine. There were 338 infections reported nationwide on Wednesday < Note that the number of cases above is a tiny percentage of Shanghai's population. Is it possible that China is using this to keep a lid on oil prices since they are a major importer of oil? Just a thought.


Natural Gas

The EIA is expected to report an injection of 73 Bcf for the week ending July 1
> Responses to the survey ranged from 70 Bcf to 85 Bcf
> That compares with a build of 25 Bcf during the same week a year ago and a five-year average injection of 60 bcf
> This week’s inventory print would lift stockpiles to 2.324 Tcf, about 11.7% below the five-year average and about 12% below the same week a year ago
> Aegis notes that if the 73-Bcf injection is confirmed, it would be slightly looser than the modeled five-year weather-adjusted injection of 60 Bcf

Why is oil up today?

This is a BIG DEAL: "The real reason why oil may be about to spike sharply higher comes out of Texas where an imminent power shock may lead to widespread oil infrastructure shutdowns."

READ THIS: https://www.zerohedge.com/markets/oil-s ... ower-shock

Trading Economics:
"Oil, bolstered by a broad-based market rally, rose by 5% to above the $103 level on Thursday as stimulus measures out of China lifted risk appetite. Still, WTI crude futures are down more than 4% so far this week, as investors weigh prospects of falling demand due to slowing growth and signs that supply remains tight in the global market. Surging inflation has prompted aggressive monetary tightening across major economies, escalating concerns that a looming recession will dampen energy demand. Also, Shanghai reported the highest number of Covid-19 infections since late May, raising concerns about the recovery of the world’s biggest crude importer. Still, the Energy Information Administration reported that US crude inventories expanded by the most in eight weeks, defying expectations for a 1.043 million barrel drop. Meanwhile, the US and its allies have discussed trying to cap the prices of Russian oil between $40 and about $60 a barrel, according to Bloomberg."

Note that the increase in U.S. commercial crude oil inventories was more than offset by the declining Strategic Petroleum Reserve and oil imports. Per EIA's detailed report, U.S. crude oil production is up only 300,000 higher than it was the last week of December 2021 (11.8 million bpd to 12.1 million bpd).

Closing Prices:
> Prompt-Month WTI (Aug 22) was up $4.20 on the day, to settle at $102.73
> Prompt-Month Henry Hub (Aug 22) was up $0.787 on the day, to settle at $6.297

I believe HH gas will go over $7.00 when the Freeport LNG export facility comes back online in October. There is very little chance that the utilities can refill ngas storage before the winter heating season arrives in November.