Oil & Gas Prices - July 22

[dan_s]

Opening Prices:
> WTI is down $1.04 to $95.31/bbl, and Brent is down $0.61 to $103.25/bbl.
> Natural gas is up 15.8c to $8.09/MMBtu.

AEGIS Notes
Oil

China reported 826 new Covid cases on Wednesday and 935 on Tuesday, pushing the country's Covid-19 cases to a two-month high this week (BBG)
> While most of the outbreak has not affected big cities, lockdowns have been implemented in some neighborhoods, and as part of China's zero-Covid policy, major lockdowns and mass testing of large cities are anticipated to follow
> The lockdowns have hurt Chinese crude demand as the nation's June crude imports fell to a four-year low of 8.75 MMBbl/d which is 21.8% less than May imports of 45.83 MMBbl/d

India has increased its purchases of crude from Russia's far eastern ESPO blend, a grade that Chinese oil refiners typically prefer
> Four vessels are transporting Russian ESPO oil to India, compared to three vessels in June and one in April, according to Vortexa
> The trade is typically not appealing to Indian buyers due to the long distance from the Russian loading port of Kozmino and the fact that ESPO crude cargoes are often transported by smaller vessels

Natural Gas

Gas prices were trading almost 3% lower earlier this morning but have since rallied to eclipse $8
The near-term strips are trading higher week-over-week
> Summer 22: +13.1%, at $7.97
> Winter 22/23: +11.4%, at $7.67
> Summer 23: +2.4% at $4.941
> Winter 23/24: +2.2%, at $5.26
I have increased the ngas prices used in my forecast models to $7.00 for Q3, $7.50 for Q4 and $5.00 for 2023.

Yesterday, the EIA reported a 32-Bcf injection, which was another huge miss by analysts. The consensus analysts' estimate was 44 Bcf
> The build compared meekly to the 50 Bcf increase in the comparable week last year and a five-year average injection of 41 Bcf
> The total 32 Bcf build lifted working gas in storage to 2,401 Bcf, though stocks were 270 Bcf lower than a year earlier and 328 Bcf below the five-year average

Weather forecasts have backed off slightly over the week as the gas-weighted cooling degree day total for July is now at 386 CDDs from a high of 398 CDDs on July 14. The total would still come in as a top-three July going back to 2000, even with the recent decline in CDDs

The Nord Stream pipeline is back online, and flows are around 40% of capacity, the level before the pipeline was brought offline for ten days of planned maintenance.

Both, the JKM and TTF prices for LNG cargos are down by -2.5% (-68c), and -1.4% (-98.6c) week-over-week at around $38.095, and $46.60/MMBtu, respectively

Delfin seeks more time to construct an offshore LNG export facility
> Delfin LNG has asked federal regulators to extend the amount of time it has to put the onshore part of its proposed Gulf of Mexico floating LNG export project off Louisiana into service until September 2023, with the offshore part of the terminal expected to be operational in 2026
> Delfin is one of several North American LNG export projects that delayed decisions to start construction in recent years in part because coronavirus demand destruction made customers unwilling to sign long-term deals needed to finance the multibillion-dollar facilities. Delfin has struggled to secure sufficient support for the floating Deepwater terminal since proposing the project in 2013
> Earlier this month, trading firm Vitol took a stake in the project with a 15-year supply deal for 0.07 Bcf/d or 0.5 Mtpa. The total capacity of the facility is expected to be 1.8 Bcf/d
> However, the lower cost compared to other grades from the Persian Gulf and West Africa is what likely prompted the purchase

[dan_s]

Natural gas prices rising in US, dampening hopes for lower inflation. The Guardian.
The price of natural gas in the US has risen by nearly half in the past month, as drought and the war in Ukraine continue to bite and millions of Americans turn up their air conditioners in a heatwave. Natural-gas futures jumped 48% this month, including 10% on Wednesday, to $8.007 per million British thermal units (btu). The rise has come as other energy costs, including oil, have begun to drop from their June peaks. A ferocious continental heatwave is projected to last into August. On Wednesday Joe Biden announced a group of measures to tackle the climate emergency, though he held back from declaring a national climate emergency as some had hoped.

Big-oil was right about natural gas being a bridge to renewables. Forbes. Opinion.
Today’s news includes the threat that Russia will continue the recent cuts in gas supplies that Gazprom, the state gas company, has imposed. Moscow may not fully reconnect the Nord Stream 1 pipeline that carries gas under the Baltic Sea to Germany at the end of scheduled maintenance today. Gas from Russia is down to a third of what it was a year ago. The European Commission President Ursula von der Leyen said she anticipated a full disruption of gas supply from Russia. The President issued warnings for the EU to prepare for gas rationing to deal with these cuts. Her proposal is “for countries to cut gas demand by 15 percent from August until March next year.”

At the time of this post, the price of HH natural gas (AUG22 NYMEX contract) was $8.23/MMBtu.

[dan_s]

Brent was trading at more than $104/bbl at the time of this post and the gap over WTI has widened to more than $8/bbl.

To me this looks like the WTI "paper traders" are being forced to sell their open long positions and there aren't enough "physical buyers" to take the contracts off their hands. The opposite may be happening to the paper traders that shorted too much natural gas.

[Fraser921]

Aegis on now

https://www.linkedin.com/video/event/ur ... 508818944/

Interesting comment on NG.. Fell hard due to outage but coming back towards 9 due to weather

Gassers report next week

rrc on monday then
ar on tuesday

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 22) was down $-1.65 on the day, to settle at $94.70
> Prompt-Month Henry Hub (Aug 22) was up $0.367 on the day, to settle at $8.299 < Quite a week for gas.

Lots of "noise" and FEAR impacting oil prices. FEAR of the Fed, FEAR of recession, FEAR of Covid and FEAR of idiots running the country.

FEAR is also driving up the gas price. FEAR of hurricane season and FEAR of a winter that will begin with storage level very low.

Low diesel inventories are a REAL concern.