Energy Prospectus

Opening Prices:
> WTI is up $0.17 to $67.87/bbl, and Brent is up $0.13 to $72.39/bbl.
> Natural gas is up 0.3c to $2.766/MMBtu.

AEGIS Notes
Oil

Oil is relatively unchanged amid persistent demand concerns
> August ’23 WTI gained 16c this morning to trade around $67.87/Bbl
> Equities trade higher, and the dollar strengthened, making commodities priced in USD expensive for holders of other currencies
> Rising interest rates and moderate demand from China, the top oil importer, have weighed on oil prices which are at a near two-week low amid recession fears < Rising interest rates make it more expensive to hold oil in inventory, which lowers oil prices at the front of the strip as refiners don't want to hold large physical inventories. This in turn increases risk of supply problems in the event of a weather event like a hurricane that keeps tankers out of the Gulf of Mexico.
> Many analysts forecast a tighter market in 2H 2023 due to continuing OPEC+ supply cuts and Saudi Arabia's voluntary July reduction < See Rystad Energy article post here yesterday.

Imminent Oil Market Deficit Expected, Says Standard Chartered (Bloomberg)
> Standard Chartered forecasts Q3 2023 shift towards oil deficits, pushing prices beyond $74-$76/Bbl
> Deficits of 1.33 MMBbl/d in July and 1.7 MMBbl/d in August, after an April surplus of 1.41 MMBbl/d, indicate high oil price risk, according to a note to clients on June 27
> The bank forecasted Brent to reach $88/Bbl in Q3 and $93/Bbl in Q4
> Currently, money managers are overly bearish in crude, despite significant upside price risk and relative lack of downside potential, said analysts Emily Ashford and Paul Horsnell < As I have posted here many times, the fundamentals point to falling petroleum inventories (that are already low) in Q3 2023, but Fear of the Fed and Fear of Recession are keeping a lid on oil prices.

Natural Gas

Natural gas prices are mostly unchanged, ahead of the July contract expiry
> LNG feedgas nominations surged higher by 1-Bcf/d to about 13-Bcf/d, as the Sabine Pass facility has brought two trains back online
> Lower 48 gas demand is expected to rise slightly and average about 73-Bcf/d over the next two weeks as temperatures rise to the 10-year average

Mountain Valley Pipeline seeks final FERC permission needed for full construction (S&P)
> MVP has asked federal regulators to grant the final permits required to complete the construction of the 2-Bcf/d Appalachian pipeline
> Developers of the pipeline have asked FERC to approve all construction operations and lift a stop-work order on a section of the line in the Jefferson National Forest
> Debate is shifting towards MVP’s Southgate extension, which expands the pipeline into North Carolina, as developers await a FERC extension to the construction deadline

Sempra asks regulators for permission to boost the workforce at Port Arthur LNG (S&P)
> If approved, Sempra will be able to increase the total workforce from 3,000 to 6,000 workers, on a 24-hour schedule, with the intention of speeding up construction
> Sempra told FERC that without the changes, “LNG cargo delivery dates may not be achieved”
> The project’s first phase is planned to come online in 2027, with a capacity of 1.75-Bcf/d

Overall for oil, "it's a bull-bear battle in a very small ring," Phil Flynn, senior market analyst at The Price Futures Group told MarketWatch on
Wednesday. It's a "recession versus a supply squeeze."

Traders are "trying to decide whether we are going into a recession based on price structure that suggests over supply, versus the possibility it is
predicting supply tightness later this year," he said, adding that the market has been very "sensitive to comments by central bank leaders."

On the supply side, the U.S. SPR has just one more release to go, and Saudi Arabia's voluntary oil production cut goes into effect July 1, said Flynn.
Also, there's "talk that the Saudis are considering making the 1 million barrel a day cut permanent. That could lead to early July fireworks!"
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In the battles of Fear vs Fundamentals, the Supply/Demand Fundamentals usually win.

I'm super scared of a recession The big one.

Biden can keep pissing away money with no consequences?

Look at this. The guy bet on higher prices and is bankrupt

https://oilprice.com/Latest-Energy-News/World-News/Andurands-Oil-Hedge-Fund-Crashes-After-Oil-Price-Bet-Goes-Awry.html

and Biden will screw the world with this

https://www.haaretz.com/israel-news/2023-06-07/ty-article/.premium/major-progress-made-in-nuclear-talks-between-u-s-and-iran/00000188-94bd-df21-a1b8-b7bd413d0000

Oil could go to a 50 handle

Re Fear of the Fed

Fed Chair Powell has made it clear that interest rates will be raised until the economy falters and inflation is lowered to 2%. There are many in the market that believe he is bluffing and will stop raising. Others feel that Powell is looking at his legacy and doesn’t want failed control of inflation on his watch. But of course there is the political wrath of the Biden Crime Syndicate touring the country touting Bidenomics that knows no legal bounds. What a mess. It’s not fear of the Fed as they have been clear, it’s fear of the long awaited recession and its unknown magnitude and duration that should be concerning. Much like waiting in the direct path of an approaching hurricane. It seems just fine and there are doubts that it will be as devastating as anticipated.

Closing Prices:
> Prompt-Month WTI (Aug 23) was up $1.86 on the day, to settle at $69.56
> Prompt-Month Henry Hub (Jul 23) was down $-0.160 on the day, to settle at $2.603

My opinion: The Fear of Recession is much worse than reality of a mild recession. We have full employment in this country and as long as consumers keep spending we are not likely to see a major recession. Inflation is bad, but it has been much worse. The global oil market is tight and will soon get a lot tighter. This world runs on oil & gas and even Team Biden can't change that. You should all read the full text of the Rystad Energy article posted here yesterday.

I certainly understand your opinion and hope yours is right. On the other hand my experience over the years investing in the oil & gas market is when fear truly sets in and there is a dearth of buyers, prices drop like a falling knife. There is too much uncertainty in the world and at home with a totally inept government and Fed to go full risk on in my opinion. I am happy to keep a stash of dry powder to place should a significant drop occur. My downside is earning 5%+ while I wait to see if the storm gathers steam and heads our way. If oil goes above 80 Saudi will likely put there curtailed production back in the market assuming they really have it to spare. With an election coming and assuming Biden stays out of the big house and in the White House, I expect he will do everything in his power to keep a lid on oil prices via favorable appeasements of Iran and Venezuela.

Good posts all around…

I don’t think the heavy stuff is coming for quite awhile…..

https://www.youtube.com/watch?v=pmm-ZGNCv-8