Oil & Gas Prices - Aug 2

[dan_s]

Opening Prices:
> WTI is up $0.19 to $94.08/bbl, and Brent is up $0.15 to $100.18/bbl.
> Natural gas is down -34.7c to $7.936/MMBtu.

AEGIS Notes
Oil

China drew down its crude stockpiles last month, an indication that oil demand in the world's largest crude importer is recovering from severe virus lockdowns
> Onshore crude stockpiles decreased from 1.05 billion barrels in June to 1.02 billion barrels as of July 28, according to data analytics company Kayyros
> The company monitors stockpiles at 237 storage ports and refineries around China using satellite data
> China's inventories grew significantly in 2Q22, reaching their highest level this year due to movement restrictions
> The recent increase in demand could help sustain crude prices around the world, which have dropped by more than 10% over the past few months, but a slowdown in China's economy and the possibility of additional lockdowns may limit the recovery

The U.S. announced yesterday that it imposed sanctions on Chinese and other firms that helped to sell Iranian oil and petrochemical productions to East Asia as the U.S. continues to put pressure on Iran to cut back on its nuclear program
> Six companies—four from Hong Kong, one from Singapore, and one from the UAE—were sanctioned by the U.S. Treasury and other state departments
> The move represents the third round of Iran-related sanctions against Chinese firms in the last two months
> Iran’s Foreign Ministry spokesperson said in a statement following the news that Iran will respond “decisively and firmly”
MY TAKE: When Iran gets weapons grade uranium we better be very careful about stuff like this. History will show that the US allowing Iran to proceed with a uranium enrichment program was really dumb.

Natural Gas

Natural gas futures are down 4.62% today following a 50-cent rally yesterday
> The temperature forecast for august continues to move lower on average with the week ending 8/19 setting up to be the coolest since mid-June
> Gas production has moved lower for the second day in a row with today’s data showing a decline of 1.93 Bcf/d

BP says gas output rises 7% on year in Q2
> BP on Aug. 2 reported a Q2 jump in gas production and underscored its expectation that high energy prices would continue into the autumn
> BP reported production of 4.71 Bcf/d in Q2, up from 4.44 Bcf/d this time last year < Compares to EQT's ngas production of 5.24 Bcf/d in Q2
> Despite an increase, production is 0.19 Bcf/d lower than Q1 of this year, which BP attributed to the base decline

MY TAKE: The big rally in gas prices near the end of July was a "short covering rally", which was never expected to stick. The "Paper Traders" are very active in the NYMEX futures market, so we can expect big swings in price as the front month contract expiration date approaches. As winter approaches and ngas storage is still way below the 5-year average is when the real "Bidding War" gets serious. Keep an eye on Miss La Nina.

[Fraser921]

NG always rally's into the settlement then it sells off hard the following week. I've seen this happen many months now.

Someone is playing games to cause pain on the hedgers

[dan_s]

They are not playing games. It is caused by Paper Traders that are hanging on to their positions too long. It called GREED and it is extremely risky.

Paper traders cannot physically deliver gas, so they MUST close their positions before the front month closes. Too many short positions heading into the close in July and few physical buyers created the rally. If they do not close their shorts they have to go into the physical spot market and get actual gas to deliver to the Henry Hub. That can get extremely expensive.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 22) was up $0.53 on the day, to settle at $94.42
> Prompt-Month Henry Hub (Sep 22) was down $-0.577 on the day, to settle at $7.706