Energy Prospectus

Opening Prices:
> WTI is up $2.01 to $69.13/bbl, and Brent is up $2.20 to $74.04/bbl.
> Natural gas is up 6.9c to $2.335/MMBtu.

AEGIS Notes
Oil

Oil rebounds from a three-month low as U.S. inflation cools in May
> July ’23 WTI gained $2.01 this morning to trade around $69/Bbl
> Equities trade higher while the U.S. Dollar weakened relative to its recent highs
> U.S. inflation slowed in May, strengthening the argument for the Fed to halt interest-rate hikes this week after a year-plus of hikes
> Annual growth of both CPI and core CPI, which excludes food and energy, slowed down, with inflation increasing at a two-year low rate of 4% in May

China unexpectedly cut short-term interest rates on Tuesday to stimulate growth, with reports of a comprehensive stimulus package also under consideration

Resilient Russian exports, concerns about an economic slowdown, and sluggish Chinese trade data continue to weigh on prices, countering Saudi’s recent production cut announcement

Voluntary cuts lower OPEC output; Cartel warns of the uncertain economic outlook for 2H2023 (WSJ)
> Core OPEC's May oil output fell by 0.46 MMBbl/d to 28.06 MMBbl/d following voluntary cuts from OPEC+ members and unexpected outages
> While Saudi Arabia, UAE, and Kuwait cut oil output, increased production from Iraq, Nigeria, Angola, Iran, Libya, and Venezuela may neutralize potential price impacts
> The cartel maintains its global supply/demand forecasts for 2023, where it sees global oil demand increasing by 2.35 MMBbl/d, reaching 101.91 MMBbl, while non-OPEC oil supplies are expected to grow by 1.4 MMBbl/d to 72.61 MMBbl
> However, the producer group cautioned of potential economic uncertainty and decelerated growth in 2H2023

Natural Gas

Natural gas prices are higher by 3% to $2.34, reversing losses from yesterday
Weather forecasts shifted warmer in the South Central region by 8.2 °F and 11.3 °F in the Northeast
Temperatures across most of the two-week forecast period are still below normal but are expected to rise to the 10-year average by the end of June
Weather-driven gas demand is expected to rise steadily over the next two weeks, with most of the increase coming from the South Central region
It is much warmer than normal in Texas and Louisiana and expected to get HOT this weekend.

Sempra Energy asks FERC to act on LNG expansion application (S&P)
Sempra is asking FERC to act on their application to double capacity at the proposed Port Arthur LNG facility and saying that the expansion has been “inexplicably delayed” since filing their application in February 2023
FERC is performing an additional review of the expansion project after coming under pressure from environmental groups to consider the impact of several major LNG export plants along the gulf coast
Sempra has argued that the additional review is unnecessary given that review and public scoping for the project have been underway for four years now

Oil and Gas stocks: 3rd qtr and next year?

Reuters reported China's crude oil imports in May rose to the third-highest monthly
level on record, customs data showed on Wednesday, as refiners built inventories and stepped
up operations after maintenance in April. Crude imports in May totaled 51.44 million tonnes,
or 12.11 million barrels per day (bpd), according to data from the General Administration
of Customs. That was up 12.2% from the 10.79 million bpd of crude imported in May last
year. Shipments to the world's largest oil importer increased significantly month on month,
up 17.4% on April's 10.32 million bpd. Despite a mixed macroeconomic picture, a build-up in
inventories has helped to sustain crude import demand. Refinery maintenance at key plants did
not significantly reduce crude throughput, while refinery runs have increased in recent weeks.
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June thru September is the highest demand period of the year for transportation fuels. It is also when demand for natural gas used for power generation spikes. Triple digit temperatures across Texas and Louisiana this weekend will have AC units running a lot longer per day.

This week's IEA "Oil Market Report" should draw a lot of attention.

Closing Prices
> Prompt-Month WTI (Jul 23) was up $2.30 on the day, to settle at $69.42
> Prompt-Month Henry Hub (Jul 23) was up $0.074 on the day, to settle at $2.340

Trading Economics
"WTI crude futures rebounded above $69 per barrel on Tuesday, after diving more than 4% in the previous session, supported by a weaker dollar while investors continue to monitor demand and supply. Data showed a bigger-than-expected fall in the US inflation rate, supporting the case for a pause in the Fed rate hiking campaign and hurting the dollar. The oil market has been under pressure after softer-than-expected economic data in the US and China fueled demand concerns in the world’s two biggest oil consumers. Still, OPEC left its forecast for 2023 global oil demand growth steady in June. On the supply side, Russian oil exports to China and India rose to record levels in May, offsetting Saudi Arabia’s intention to reduce output further in July. Goldman Sachs has downgraded its year-end price outlook for WTI crude again to $81 from $89, and that of Brent crude to $86 from $95, citing rising supply and waning demand."

"US natural gas futures rose above $2.3/MMBtu, extending a 3.8% gain in the previous week boosted by higher demand and lower supply. An anticipated heatwave from June 21-28 is likely to boost demand for gas to produce power for air conditioning. Additionally, the domestic output is falling from May's record level of 102.5 bcfd. On the other hand, gas flowing to U.S. LNG export plants dropped to a five-month low due to maintenance at several facilities, including Cheniere Energy Inc's LNG.A Sabine Pass in Louisiana."

My Q2 forecasts are based on $75/bbl WTI and $2.25/mcf for HH ngas. As of today, it looks like actual oil prices will be around $73 for WTI and $2.25 for HH ngas. Each company's forecast model is adjusted for the impact of hedges and regional differentials.