Energy Prospectus

Opening Prices:
> WTI is down $3.66 to $101.13/bbl, and Brent is down $3.10 to $103.92/bbl. < Drifted back to $102 at the time of this post.
> Natural gas is up 37.5c to $6.409/MMBtu. < Moved up to $6.59 at the time of this post.

AEGIS Notes
Oil

U.S. Energy Secretary Jennifer Granholm is scheduled to meet with officials from the Quad group of countries, which includes Australia, India, and Japan
She is expected to use talks with countries including Japan and India to build support for a new effort aimed at capping the price of Russian oil
> “We want to put on the table the option of joining a buyers’ group that will have greater market power to be able to lower the price, and therefore lower the price of Russian oil and lower the profits to Putin,” said Granholm on Monday

China has discovered its first case of a highly transmissible Omicron subvariant in Shanghai
> The number of new cases rose to 69 from 57 a day earlier in Shanghai and the nation reported 352 new cases on Sunday
> The discovery of the new subvariant and the highest number of daily new cases in Shanghai since May could lead to another round of mass testing, which could hurt fuel demand
MY TAKE: Using these tiny number of new cases of a less deadly "subvariant" seems like an attempt to keep oil prices low, so China can get a better deal on imported oil. Unless the Chinese hospitals are filling up with serious Covid cases, is this a reason to keep millions of citizens in lockdown?


Natural Gas

U.S. natural gas futures are trading higher this morning, near $6.409
> The gas-weighted cooling degree-day total is currently up around 8 CDDs from Friday's level of 374.3 CDDs at 382.9 CDDs
> Lower-48 dry gas production hit another year-to-date high over the weekend and is just above 96.9 Bcf/d this morning
> ERCOT is under a conservation alert as Texas faces painfully hot temperatures that could lead to record-high demand. AEGIS notes that hot weather in the region has so far been very bullish, offsetting some of the lost Freeport LNG volumes < Some homes across the street from our house in Sugar Land lost power yesterday afternoon at the time it was ~104 degrees. Not sure if it had anything to do with problems on the Texas power grid. We have two AC units and they were both running 99% of the time over the weekend.

Nord Stream 1 pipeline is shutting down for maintenance on Monday. However, there are fears in Europe that Russia will not turn the supply back on
> "Everything is possible, everything can happen," German economy minister Robert Habeck said. "It could be that the gas flows again, maybe more than before. It can also be the case that nothing comes."
> Gazprom has already cut gas flows to Germany via the Nord Stream 1 by 60% from last month due to an equipment hold-up in Canada. Canada has said that they will waive the sanctions in order to return the part to Europe and restore gas flows
> If the situation deteriorates, Germany may begin rationing supplies of natural gas with industry-first to receive supply cuts. < Let this sink in: If Germany is forced to ration ngas during the summer, what's going to happen in the winter????

U.S. natural gas rallied as much as 10% to a two-week high on Monday following forecasts for hotter than usual weather to continue across much of the country, including in Texas where the ERCOT grid operator asked consumers to conserve energy.

I SEE THE REASON AS :

ERCOT SAYS, NOT ENOUGH WIND!!!!!

Trading Economics:
"WTI crude oil futures erased earlier declines and traded above the $104 per barrel mark on Monday, as renewed supply concerns prevailed over deepening fears of a global economic slowdown. Russia threatened to suspend flows from the CPC pipeline that takes oil from landlocked Kazakhstan to Russian export terminals in the Black Sea, responsible for more than 1% of global supply. In the meantime, traders monitored the G7's possible price ceilings for imports of Russian oil in an attempt to limit Moscow’s revenues while reducing the detriment to Europe’s ongoing energy crisis. Earlier in the session, crude prices were over 3% lower on the possibility that Chinese cities could return to strict Covid lockdowns after testing for cases of a highly transmissible Omicron subvariant. Prolonged fears of a global recession weigh on market sentiment, as major central banks pledge aggressive rate hikes to combat surging inflation."
MY TAKE:
> If Putin shuts down the CPC pipeline, that will be a MAJOR blow to the global oil market.
> FEAR of a recession is much worse than the potential of an actual recession (with very low unemployment) impacting oil demand.
> China's handling of these tiny Covid outbreaks is starting to look like a ploy to keep a lid on oil prices. Plus, our media seems to be hyping it more than the low number of new cases seem to justify.

Trading Economics
"US natural gas futures extended gains to over 10% to trade above $6.6 per million British thermal units (at $6.47 when I posted this), nearly a three-week high, buoyed by strong domestic and international demand. US weather forecasts show temperatures are set to rise in the coming two weeks while demand from Europe remains elevated as Nord Stream pipeline gas flows are down amid seasonal works. Refinitiv expects average US demand including exports to rise to 99.0 bcfd this week from 96.2 bcfd last week. In addition, EIA data showed US utilities added 60 billion cubic feet of gas to storage during the week ended July 1, much less than market expectations of 74 billion cubic feet."
MY TAKE:
> Weather is ALWAYS the primary drive of natural gas demand. Hurricane Risk will increase by the end of July.
> Demand spike to 99 bcf per day is the largest weekly demand number that I've seen in the summer. During the winter, demand often spikes over 120 bcfpd.
> Europe is totally screwed if Putin stops sending them ngas thru Nord Stream 1 pipeline.
> If Team Biden cares about Europe, we need to get Freeport LNG back online ASAP.
> The "Sanction War" is being lost by the West. Our idiot leaders need to focus on a negotiated end to the needless killing in Ukraine. If they don't, the citizens of Europe are going to be crushed by high energy prices. Might be a good time to invest in German firewood.
> Some of you may disagree, but is extending the war in Ukraine by sending them $50+ Billion of modern weapons worth the damage to Europe, not to mention the mounting death tool. There will be thousands of weather-related deaths in Eastern Europe this winter.

Closing Prices:
> Prompt-Month WTI (Aug 22) was down $-0.70 on the day, to settle at $104.09
> Prompt-Month Henry Hub (Aug 22) was up $0.392 on the day, to settle at $6.426