Energy Prospectus

Opening Prices:
> WTI is up $1.03 to $94.09/bbl, and Brent is up $1.07 to $102.06/bbl.
> Natural gas is down -17.6c to $9.12/MMBtu.

AEGIS Notes
Oil

Oil is trading nearly 1% higher at about $94/Bbl amid fears of tight supplies
> No recent progress in renewing the 2015 nuclear agreement has been made yet, which would enable Iran to resume oil exports to the international market
Libyan unrest raises concerns that exports may be suspended

The U.S. and Iran are still at an impasse over the nuclear agreement (BBG)
> Iran said they will wait "at least" until September 2 before responding to the U.S. draft, according to state-run Nour News
> Tehran continues to "carefully review the US' response" also at an "expert level"
> If an agreement is reached, Iran may have as much as 93 MMBbl of crude and condensate that could be dispatched immediately, according to ship-tracking firm Kpler < Keep in mind that even if Team Biden and the Supreme Leader of Iran come to an agreement, it must be approved by the U.S. congress. The process of final approval could take months.

The Biden administration is threatening government action to address exports since fuel inventories in the New York area are at a seasonally low level (BBG)
> Energy Secretary Jennifer Granholm sent a letter last week to companies like Exxon Mobil Corp., Valero Energy Corp., and Phillips 66 warning that if refiners don't restrict exports to replenish domestic inventories, the administration may take "emergency measures" < This could really screw up the global economy as many countries depend heavily on imports of refined products from the U.S., especially diesel and liquified petroleum gases (LPG) that is used for cooking.
> East Coast (PADD 1) distillate stocks are currently at a six-week high of 27.5 MMBbl after they hit a seven-year low (26.1 MMBbl) at the end of July

Natural Gas

Natural gas prices are down about 2% this morning < At the time of this post it has bounce back to $$9.30.
> The weather forecast for the next two weeks has shifted warmer by a significant amount, with lower 48 temperature forecasts up by 9 degrees
> While temperatures are expected to be above the 10-year average, they will begin to move lower throughout September
> Production increased over the weekend, coming close to the record of 98 Bcf/d

Canada sees west coast LNG revival as world scrambles for gas (Reuters)
> Canadian companies are attempting to build LNG export facilities on Canada’s west coast for export to global markets, with 18 projects proposed and two underway
> The focus has been on smaller plants, as excessive costs have stopped other Canadian LNG facilities in the past
> As Canada currently has no LNG export plants, gas not used in its domestic market can only be exported to the U.S.

Oil edges higher as supply concerns eclipse Fed’s rate stance. Bloomberg. < WTI is trading at $96.09, up 3.26% at the time of this post.

Oil climbed as traders weighed risks to the supply outlook against pledges from leading central banks to raise interest rates further. West Texas Intermediate rose toward $94 a barrel, reversing an earlier decline, after gaining 2.5% last week. In Libya, clashes between militias in the capital left at least 23 dead, sparking fears of further upheaval in the OPEC nation. While Libya’s output so far remains stable, investors are watching for signs that the violence may again put oil shipments at risk just as Europe reels from an energy crisis. Crude is on course for a third straight monthly drop on concern global growth will slow as central banks tighten policy aggressively, hurting consumption. To counter that weakness, Saudi Arabia raised the possibility last week that the Organization of Petroleum Exporting Countries and its allies could cut output, drawing support from fellow members.

HH natural gas now trading at $9.51

Interesting notes from BofA Securities this morning
> Gasoline demand doesn't swing a million bbls week to week. Imperfect sampling by EIA
looks like a root cause for extreme volatility.
> Saudi's latest put places the mkt on alert. If the target is $100 oil, the implication
is a new era for US E&Ps. Stay long.

Over the 4 decades that I have been following EIA and IEA reports, they understate demand and when they make a mistake, they seldom admit it.

IMO a couple weeks ago EIA significantly understated gasoline demand. It was a clear mistake. Maybe they were directed by Team Biden to do it, but more likely just the nerds following their models without stepping back and saying "Yeh, this can't be right, let's dig a little deeper."

Closing Prices:
> Prompt-Month WTI (Oct 22) was up $3.95 on the day, to settle at $97.01
> Prompt-Month Henry Hub (Sep 22) was up $0.057 on the day, to settle at $9.353

MY TAKE:
It is now clear to just about everyone on Wall Street (well maybe half of them) that OPEC is out of spare capacity. Recession or no recession, the "Right Price" for oil is somewhere in the $90 to $120 range; I'm using the low end of the range in my forecast models, but the smart money (Buffett) is betting on the high end. We cannot keep draining the SPR and Putin is going to win the Sanctions War. It is so sad that the leaders we have elected in the OECD countries are a bunch of idiots when it comes to energy. They sure know how to spend money. I doubt that the next Paris Climate Accord meeting will be well attended.