Energy Prospectus

Opening Prices:
> WTI is up $0.65 to $68.92/bbl, and Brent is up $0.70 to $73.90/bbl.
> Natural gas is up 5.8c to $2.4/MMBtu.

AEGIS Notes
Oil

Oil reverses some of yesterday’s losses following the Fed’s rate hike pause
> July ’23 WTI gained 62c this morning to trade around $69/Bbl
< The U.S. Fed left interest rates unchanged on Wednesday but hinted at least half of a percentage point hike by year-end
> Equities trade higher while the U.S. dollar weakened to its lowest in nearly four-weeks
> AEGIS expects oil prices to see support in 2H2023 as OPEC+ and Saudi voluntary cuts coincide with rebounding demand, causing outsized global inventory withdrawals

China’s strong oil demand and industrial output signal demand optimism (Bloomberg)
> China's apparent oil demand increased by 17.1% in May to 14.6 MMBbl/d from 2022 levels, albeit lower than April’s 15.1 MMBbl/d
> Additionally, the nation’s industrial output rose by 3.5% Y-o-Y, according to China’s National Bureau of Statistics
> Furthermore, IEA, in its monthly report, increased the global oil demand growth forecast by 0.2 MMBbl/d to 2.4 MMbbl/d, attributing nearly 60% to China's demand rebound < I HIGHLY RECOMMENDED THAT ALL OF YOU READ CAREFULLY the summary of IEA's June "Oil Market Report" that was released yesterday. I posted it with my comments to this board yesterday.

Natural Gas

Natural gas prices are higher by 3.5% this morning to $2.43, the highest level since May
> Despite temperatures in the South Central region forecast to be elevated relative to average levels over the next two weeks, Lower 48 temperatures as a whole are expected to remain mostly below average until the end of June
> The EIA will release its weekly natural gas storage report today
> The median estimate, according to the Bloomberg survey, is for an injection of 94 Bcf, while the survey ranges from 84 to 101 Bcf

Rio Grande LNG secures additional financial support (BBG)
> TotalEnergies and Global Infrastructure Partners have agreed to purchase stakes in the project and the developer, NextDecade, helping push the project towards a final investment decision
> Rio Grande LNG is expected to secure an FID by the end of the second quarter
> The first phase of the project will have a capacity of 2.3 Bcf/d, slated for an in-service date of 2027

Netherlands to close Europe’s largest gas-producing field this year (BBG)
> The Dutch government has announced they will accelerate the timeline of the Groningen field closure and will shut down production in less than four months
> The site was originally planned to be shut down in October 2024 due to concerns about an increasing number of earthquakes
> Gas prices in Europe jumped 30% following the announcement as market participants evaluate prospects of an even lower gas supply

Trading Economics:
"WTI crude futures steadied above $70 per barrel on Thursday as traders assessed the impact of China’s interest rate cuts and the US Federal Reserve’s hawkish pause on demand. China’s central bank has now lowered two key lending rates this month for the first time in nearly a year to support the economic recovery, prompting markets to reassess the demand outlook in the world’s top crude importer. The US Fed also held off on a rate hike at its June meeting while hinting at two more quarter-point rate increases by the end of the year. The IEA said in its monthly report that global oil demand will rise by 6% between 2022 and 2028. Meanwhile, official data showed that US crude inventories surged by 7.919 million barrels last week, the most in 17 weeks and compared with market expectations of a 0.51 million draw. Gasoline and distillate stockpiles also increased more than expected."

"US natural gas futures extended gains above $2.50/MMBtu, the highest in three weeks buoyed by a smaller-than-expected stock build, along with increased demand and decreased supply. US utilities added 84 billion cubic feet of gas into storage, falling short of market expectations of a 95 bcf increase, the EIA said. Furthermore, a projected heatwave from June 23-30 is expected to drive up demand for gas, particularly for power generation used in air conditioning. On the supply side, domestic gas output is declining from the record level of 102.5 bcfd seen in May. However, gas flowing to US LNG export plants has decreased due to maintenance activities at various facilities, including Cheniere Energy Inc's Sabine Pass LNG in Louisiana."

Natural gas prices have spike up to over $12/mcf in Europe after the Netherlands announced the shutdown of a large natural gas field.

Closing Prices:
> Prompt-Month WTI (Jul 23) was up $2.35 on the day, to settle at $70.62
> Prompt-Month Henry Hub (Jul 23) was up $0.191 on the day, to settle at $2.533 < Heat wave is spreading across the South and demand for power generation will burn up a lot of natural gas.