Energy Prospectus

Opening Prices:
> WTI is down $2.09 to $68.08/bbl, and Brent is down $1.94 to $72.85/bbl.
> Natural gas is down -2.6c to $2.228/MMBtu.

AEGIS Notes with my comments in blue
Oil

Oil trades lower following two consecutive weeks of losses
> July ’23 WTI lost $2.17 this morning to trade around $68/Bbl
> Despite the market being expected to tighten in 2H2023 due to increasing demand in China and India, economic woes in U.S. and Europe weigh on prices < It will be interesting to see if IEA makes a big change in their Oil Market Report forecast (due to come out this week) of a very tight global oil market by the end of this summer. IEA was not counting on Saudi Arabia cutting production by another million bpd.
> Weak Chinese export data, a lower-than-forecasted 0.2% CPI growth, and a 4.6% drop in May's PPI have intensified uncertainties about crude demand
> The U.S. Fed is expected to skip an interest rate hike after a year of increases on Wednesday, a move likely to buoy energy demand < We need Fear of the Fed to fade a bit.

Saudi Oil Minister Highlights OPEC+'s Proactive Approach Amid Market Instabilities (Bloomberg)
> Saudi and OPEC+ tackle market uncertainties and short sellers with strategies including Saudi's July production cut of 1 MMBbl/d, said Prince Salman on Sunday
> The minister emphasized OPEC+'s proactive, preemptive, and precautionary approach, noting that the countries investing in oil production, like the UAE, Algeria, and Iraq, will receive higher output quotas

Oversupply Concerns Spark Goldman's Crude Price Forecast Revision (Bloomberg)
> Goldman cuts oil price projections, increases 2024 supply outlook for Russia, Iran, and Venezuela by 0.8 MMBbl/d
> December forecasts for Brent and WTI crude are now $86/Bbl and $81/Bbl, down from $95/Bbl and $89/Bbl < My forecasts are based on WTI averaging $75 in Q2, $80 in Q3 and $90 in Q4. It will take a big drop in Chinese demand for me to lower my Q4 oil price forecast.
> Jeff Currie, Goldman's commodities research head, referring to their third price revision in six months, said, "We have never been this wrong for this long without seeing evidence to change our views"

US natural gas futures fell below $2.3/MMBtu after mild weather last week kept demand for the fuel low and allowed utilities to inject more gas into storage. The latest EIA report showed US utilities added 118 billion cubic feet of gas into storage, slightly more than market expectations of a 113 bcf increase. Despite this setback, natural gas prices in the US are on course for an over 5% weekly gain, recovering from two consecutive periods of losses, in anticipation of increased demand from air conditioning usage amid forecasts for warmer weather. The number of cooling degree days (CDDs) in the coming two weeks is expected to rise to 167, above the 30-year normal of 149, according to Refinitiv.

"Climate the Same" is now going on in Houston. Triple digit temps this weekend will ramp up ACs and natural gas demand for power generation.

Trading Economics:

WTI crude futures extended losses to nearly 5% to below $67 per barrel on Monday, the lowest in over five weeks, as concerns about weakening demand in top consumer China and rising Russian crude supply outweighed Saudi Arabia's plans to slash output. Russian oil exports to China and India rose to record levels in May even after the implementation of the European Union’s embargo and the Group of Seven’s price cap mechanism that started in early December. On the other hand, Saudi Arabia, the world's largest oil exporter, announced earlier this month its intention to reduce output by 1 million barrels per day to 9 million bpd in July, the lowest level in years amid an effort to bolster crude prices. Meanwhile, investors are cautious ahead of a busy week ahead with the US inflation rate and interest rate decisions from the Federal Reserve, the ECB and the BoJ.

FEAR of the Fed & Recession still has a grip on oil traders.

This week's EIA Oil Market Report will draw lots of attention.

Closing Prices:
> Prompt-Month WTI (Jul 23) was down $-3.05 on the day, to settle at $67.12
> Prompt-Month Henry Hub (Jul 23) was up $0.012 on the day, to settle at $2.266

Something weird is going on with oil.
> U.S. Petroleum inventories are all below normal for this time of year. Crude oil inventories -2%, Gasoline inventories -8% and Distillate inventories -16% to the 5-year average.
> Saudi Arabia announces a 1 million bpd supply cut that very few people were expecting.
> No sign of a global recession.
> U.S. oil production is flat and the active drilling rig count is falling.
> Team Biden announces plans to refill the SPR.
> June to Sept is the high demand period for transportation fuels.