Energy Prospectus

Opening Prices
> WTI is down $0.79 to $68.58/bbl, and Brent is down $0.82 to $73.36/bbl.
> Natural gas is up 1.0c to $2.801/MMBtu.

Oil extends losses amid growing concerns over interest rate hikes
> August ’23 WTI lost 78c this morning to trade around $68.59/Bbl
> Equities and the U.S. dollar trade lower
> Despite policymakers' tough stance on interest rates, the ECB President implied that the rate hike trend may not end anytime soon
> Persistent Russian crude exports, coupled with Western nations' strict monetary policies and China's slow recovery, weigh on prices
> However, Chinese Premier Li Qiang said Tuesday that the government would roll out more practical, effective measures to boost domestic demand

Major Russian Export Terminal's Maintenance Work Temporarily Hinders Crude Shipments (Bloomberg)
> Russia's seaborne crude oil exports dropped by roughly 0.98 MMBbl/d last week due to planned maintenance work at the Primorsk loading site (West)
> This temporary dip is a recurrent annual occurrence seen over the past few years, indicating it's a scheduled interruption
> Pacific region shipments also decreased by 0.2 MMBbl/d, but this doesn't indicate a production cut given the area's premium export prices and shorter delivery times to major markets
> Despite these temporary reductions, Russia's refineries have ramped up crude processing rates to a peak level since April

Natural Gas

Natural gas prices are trading lower after rallying to the highest level in two months yesterday
> Lower 48 temperatures are currently forecast to be in line with the 10-year average over the next two weeks
> LNG feedgas levels at Sabine Pass have recovered by about 1-Bcf/d, with early nominations indicating the facility is taking about 3.5-Bcf/d
> Pipeline exports to Mexico are currently elevated to last year by 1-Bcf/d

Pacific gas storage deficit continues to shrink (S&P)
> Inventories in the Pacific region, which includes California, Oregon, and Washington, are currently 191-Bcf or 23.3% below the five-year average
> Last week, the region posted its largest weekly storage build of the season so far, at 15-Bcf
> The Aliso Canyon storage facility currently holds the majority of stored gas on the SoCal system, with 30.1-Bcf of the total 61.5-Bcf
> As inventories in the Aliso Canyon facility track towards max capacity of 41.16-Bcf, market participants await a decision by CPUC to increase the max capacity to 68.6-Bcf

More than half of the US is at risk of electricity shortfalls due to summer heat (EIA)
> According to a recent report by NERC, or the North American Reliability Corporation, about two-thirds of the US is at risk of electricity shortages resulting from excessive heat
> The regions flagged as being at risk are the Western Interconnection, ERCOT, SPP, MISO, SERC Central, and New England
> Some of the risks to power supply mentioned in the report are fuel delivery risks, new environmental regulations limiting coal plants, limited supply of electrical transformers, and unexpected tripping of wind and solar assets

Trading Economics at 2PM CT
Oil
"WTI crude futures fell to around $68 per barrel on Tuesday ahead of US fuel consumption data, as market focus shifted towards macroeconomic factors and concerns regarding potential interest rate hikes. Investors awaited inventory reports from the American Petroleum Institute and the government, with expectations of a decline in US inventories for the week ending June 23. Concerns about potential interest rate hikes by major central banks, including Europe and the US, weighed on investor sentiment. Additionally, the slow post-pandemic recovery in China continued to hinder the market outlook. Nevertheless, a glimmer of hope emerged with Chinese Premier Li Qiang's commitment to implementing measures aimed at stimulating demand and revitalizing markets." < Fear of the Fed offsets bullish fundamentals. Hopefully we will get confirmation early in July that Saudi Arabia is actually slashing supply by 1 million bpd.

Natural Gas
"US natural gas futures surged above $2.7/MMBtu, the highest in 15 weeks driven by a combination of diminished supply and increased demand. Meteorological predictions of predominantly hotter-than-normal weather conditions spanning from June 24 to July 8 elevate the demand for power generation, particularly for air conditioning purposes. On the supply side, domestic gas output is declining from the record level of 102.5 bcfd seen in May due in part to ongoing maintenance activities affecting pipelines in the Haynesville shale region, spanning across Arkansas, Louisiana, and Texas, as well as other basins. However, gas flowing to US LNG export plants has decreased due to maintenance work carried out at several sites, including Cheniere Energy Inc's Sabine Pass in Louisiana and Freeport LNG in Texas. Last week, natural gas prices advanced 4%, the third consecutive week of gains." < Same comments as yesterday. IMO ngas is just down today a few cents because of big decline in oil prices.

Closing Prices:
> Prompt-Month WTI (Aug 23) was down $-1.67 on the day, to settle at $67.70
> Prompt-Month Henry Hub (Jul 23) was down $-0.028 on the day, to settle at $2.763