Oil & Gas Prices - Aug 4

[dan_s]

Opening Prices:
> WTI is up $0.37 to $91.03/bbl, and Brent is down $0.08 to $96.70/bbl.
> Natural gas is down -6.0c to $8.206/MMBtu.

AEGIS Notes
Oil

Americans are officially driving less than they did in the summer of 2020 when travel restrictions due to the pandemic all but stopped transportation (BBG)
> The four-week average of U.S. gasoline consumption, the best indication of the country's demand, is currently more than 1 MMBbl/d below pre-Covid seasonal averages, according to EIA data
> U.S. refiners are reducing their gasoline yields in order to increase their production of diesel and jet fuel due to the low summer driving demand
> Refiners cut gasoline yield to 57.5% in July, compared with 60.9% a year earlier and 63.4% in July 2020, according to EIA data

U.S., European, and Iranian diplomats are returning to Vienna on Thursday in an effort to revive the 2015 nuclear agreement (Reuters)
> U.S. Special Envoy for Iran Rob Malley will travel to Vienna but said he did not anticipate making much progress
> Meanwhile, Nasser Kanaani, a spokesman for Iran’s Foreign Ministry, said Tehran was ready to reach a deal that guarantees its rights
> The EU, which is coordinating the talks, has made a fresh proposal to rescue the landmark 2015 agreement, which eased sanctions on Iran, including on oil exports, in return for it curbing its atomic program
< MY TAKE: If our "diplomats" (elite idiots) do ANYTHING that allows Iran to get weapons grade uranium they should be hung. This is also why draining the US Strategic Petroleum Reserve is extremely dangerous. If Iran lobs a tiny nuke into Israel, the global oil market will go crazy.

Saudi Arabia increased oil prices for buyers in Asia to record highs even though there are signs of declining demand as economies slow
> State producer Saudi Aramco increased its Arab Light grade for next month’s shipments to Asia to $9.80/bbl above the regional benchmark
> That is a 50c increase from August. Traders and refiners anticipated a larger increase of $1.50 according to BBG
> Additionally, Aramco raised prices for all U.S. grades by 50 cents per barrel. It was the first change Aramco has made for U.S. customers since May
What this tells me is that Aramco is not having any trouble finding buyers for their oil. The global crude oil market remains very tight.

Natural Gas

The EIA releases its weekly natural gas storage report today
> Median analyst expectations are for an injection of 28 Bcf, while the range of the survey is from 19-44 Bcf
> This follows the previous week's report of 15 Bcf
> The total amount of gas in storage is currently 2,416 Bcf, which is 345 Bcf below the five-year average and 293 Bcf less than this time last year

This is a VERY BIG DEAL: Natural gas prices rallied above $8 yesterday on news that Freeport LNG would be allowed to resume partial operations in October
> The Freeport LNG facility has been offline following a fire on June 8
> Freeport is the second largest U.S. LNG exporter with a capacity of 2.14 Bcf/d and supplies about 20% of U.S. LNG exports
> Yesterday Freeport released a statement saying that an agreement has been reached with federal regulators allowing the facility to resume partial operations in early October, which the company believes will enable the delivery of approximately 2 Bcf/d
> AEGIS notes that LNG exports are a significant source of demand for U.S. natural gas and the return of Freeport may tighten the market just ahead of the withdrawal season
MY TAKE: If we have a typical La Nina winter that begins with US ngas storage 300 Bcf below the 5-year average, the Bidding War for physical gas is likely to push HH gas price over $10. Once we get past October its all about the weather for natural gas prices.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Sep 22) was down $-2.12 on the day, to settle at $88.54 < My stock valuations are based on WTI averaging $100 in Q3.
> Prompt-Month Henry Hub (Sep 22) was down $-0.144 on the day, to settle at $8.122 < My stock valuations are based on HH ngas averaging $7.00 in Q3.

NGL prices have also moved above what I was using in my forecast models.