Oil & Gas Prices - July 15

[dan_s]

Opening Prices
> WTI is up $2.49 to $98.27/bbl, and Brent is up $2.75 to $101.85/bbl.
> Natural gas is down -10.6c to $6.494/MMBtu.

The new chief of Libya’s National Oil Corporation has vowed to lift the blockade and increase crude production to 1.2 MMBbl/d in a week
> Libya's production has dropped by about 50% during the past six months due to political unrest and under-investment in infrastructure
> The NOC will also aim to expand output to 3 MMBbl/d within the following two years, according to the new chief, Bin Qadara

The Russian government is reportedly drafting a plan to establish a national oil benchmark next year amid western sanctions that have caused the Urals grade to trade at a considerable discount to Brent (BBG)
> Key Russian ministries, domestic oil producers, and the central bank plan to launch oil trading on a national platform in October
> The move comes amid discussions among Western countries on capping the price of Russian crude

China's oil refining improved last month as plants increased production in response to a tentative rebound in fuel demand following a series of anti-virus lockdowns
> The largest oil importer's refiners processed 13.42 MMBbl/d of crude last month, up 5% from May but down almost 10% from the same time last year
> However, more comprehensive data revealed that China's GDP increased by 0.4% in 2Q22, at the height of China's latest Covid outbreak, which was the second-weakest expansion since the Wuhan outbreak

Natural Gas

U.S. natural gas futures have extended yesterday’s losses, trading 10.6c lower near $6.494
> Prices were up early yesterday on reports of a large drop in production and improving weather forecasts
> Lower-48 dry gas production is currently down by around 0.5 Bcf/d on the week
> The gas-weighted cooling degree day for July has shaped up, increasing around 6% or 22 CDDs to 396 CDDs, which would place it in the top three Julys for gas demand since 2000
> The EIA also reported a 58-Bcf injection in inventories for the week ending July 8, which was in line with the five-year average and analysts’ expectations
> Yesterday’s storage print comes on the back of two huge misses by analysts, which had cast uncertainty as to where yesterday’s storage number would come in. The outage at Freeport LNG and volatile production have likely swayed analysts’ models over the last several weeks
> AEGIS has updated its end-of-season forecast and has the number at around 3.5 Tcf, well below the five-year average but much improved on our early season trajectory of 3.3 Tcf
> The fall in end-of-season (injection) expectations has resulted in a strong selloff in near-term contracts, and the winter premium has all but collapsed as the chances of a supply scarcity event during the winter have fallen

LNG developers are ramping up efforts to fill the void caused by the Freeport LNG outage
> New fortress energy is in the approval process for an offshore natural gas export deepwater port that would add 1.68 Bcf/d of LNG export capacity by 2023
> Delfin LNG is also in the approval process for an offshore deepwater port. First proposed in 2013, the developers believe the project will add 1.7 Bcf/d of capacity and would enter commercial operations by 2026
> Aegis notes that LNG exports have been the primary source of demand growth for natural gas in the U.S. over the last several years, and there are no new facilities until at least 2024. U.S. is running its export facilities at full tilt to capitalize on soaring int’l prices, with TTF averaging $50+/MMBtu and JKM above $39. Still, the Freeport outage has limited capacity to around 11.5 Bcf/d

[dan_s]

Closing Prices:
> Prompt-Month WTI (Aug 22) was up $1.81 on the day, to settle at $97.59
> Prompt-Month Henry Hub (Aug 22) was up $0.416 on the day, to settle at $7.016M

MY TAKE: Oil price reacting more to "What will the Fed do next?) and the rising US dollar than the fundamentals. Global oil market is still very tight. Natural gas more tied to the regional fundamentals of high demand and no chance of storage refilling before winter arrives.