Oil & Gas Prices - August 1

[dan_s]

Opening Prices: The Roller-Coaster Ride continues
> WTI is down $4.33 to $94.29/bbl, and Brent is down $3.68 to $100.29/bbl.
> Natural gas is down -35.5c to $7.874/MMBtu.

AEGIS Notes
Oil

Russian oil loading data from its western ports is expected to decline by ~5% in August to ~175 MBbl/d from July’s 184 MBbl/d (Reuters)
> Although Russia's oil production increased to 9.78 MMBbl/d in June, up 0.5 MMBbl/d from May, it was still 0.9 MMBbl/d below its OPEC+ production quotas
> Meanwhile, observed crude exports from Saudi Arabia in July climbed to the highest level since April 2020 due to a surge in cargoes to India and China, according to tanker-tracking data by Bloomberg. Exports were about 7.5 MMBbl/d in July compared with a revised 6.631 MMBbl/d in June
> Iraq’s crude exports to the EU rose to their highest level in more than three years in July, even as overall flows edged lower
> OPEC will meet this week to talk about its September output. The market's outlook is clouded by conflicting reports regarding production expectations for September; while some OPEC members predicted that output would remain stable into the following month, others have suggested that it may grow as the U.S. has called for more supplies

Both European factory activity and Asian manufacturing output experienced declines in July (BBG)
> In Europe, amid the continuing threat of Russian energy supply cutoffs, PMI (Purchasing Manager Indexes) for Italy, France, Germany, Spain, and the UK all showed contractions, as had been suggested by first estimates from July 22nd
> China, South Korea, and Taiwan showed the largest declines in factory activity in Asia as COVID-19 has slowed the rebound in manufacturing
> A temporary uptick in industrial activity in China, the world's largest importer of crude oil, was put to an end by new Covid-19 lockdowns as the manufacturing PMI dropped to 49 in July from 50.2 the previous month, much below analyst expectations

Natural Gas

Natural gas prices are down 4.28% this morning
> Overall gas production has fallen 1.9 Bcf/d compared to Friday with every region showing a decrease.
> Temperature forecasts are materially cooler for the U.S. and have fallen in line with the 10-year average
> AEGIS notes that cooler temperatures in August should reduce demand from the power generation sector

Asia's LNG demand slipping as Europe crisis keeps price sky-high (Reuters)
> The price of spot LNG in Asia climbed last week to the highest so far this year, but slipping demand in the top-consuming region shows the market is still being driven largely by Europe's gas crisis
> The surge in prices in Asia isn't because of strong demand from the region, in fact the reverse is the case with imports declining so far this year
> China has been especially soft when it comes to LNG demand, with July's imports forecast to be down 14.1% from the same month in 2021
> Even as Asia's LNG demand moderates, Europe's continues to surge as buyers seek LNG as an alternative to now-uncertain Russian pipeline supplies with European imports up 56.1% from the same period in 2021

[Fraser921]

Only thing i can think of, is recession fears and hope peace might break out in Ukraine
The Russians let one ship leave after bombing Odessa 2 days ago

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 22) was down $-4.73 on the day, to settle at $93.89
> Prompt-Month Henry Hub (Sep 22) was up $0.054 on the day, to settle at $8.283

Trading Economics:
"Oil prices extended losses on Monday, with WTI crude futures sinking almost 6% to below $93 a barrel, close to levels not seen since March. PMIs for China and Europe showed weakness in factory activity as Covid-19 flare-ups and a weakening global outlook weighed on demand. Traders now await the OPEC+ meeting outcome, where the oil cartel is likely to stick to its policy of modest supply increases amid capacity constraints and underinvestment in oil fields, keeping the global supply tight. In July, oil prices in July were down almost 7%, the first back-to-back monthly loss since late 2020."

"US natural gas futures corrected to below $8/MMBtu (but bounce back in afternoon trading) as easing summer heat over the following weeks prompted some profit-taking after a massive rally that drove prices to a record level of $9.7/MMBtu in late July. Still, natural gas prices are expected to remain elevated, with choppy production levels and strong demand for US LNG being the primary driver. Russia's Gazprom has cut natural gas flows through the Nord Stream pipeline, citing issues with turbines, delivering only 33 million cubic meters daily, roughly 20% of its capacity, forcing European buyers to find replacements."

MY TAKE: FEAR of recession and FEAR of what OPEC+ might do on Wednesday caused the oil price dip at the open. Computers did most of the oil trading. IMO the FEARs are overblown. HH gas sold off in the morning just because of the big drop in the oil price. The natural gas market is extremely tight in the U.S. and even tighter in the global market. A recession will not have much impact on natural gas demand. The "gassers" are the safe place for now.