Energy Prospectus

Trading Economics:
WTI crude oil futures surged above $79.50 per barrel on Monday, marking their fifth consecutive gain, driven by supply disruption concerns amid rising Middle East tensions. WTI is up more than 9% since last Monday.
> Over the weekend, an Israeli airstrike in Gaza killed at least 80 people, worsening the conflict, while Hamas questioned participating in Thursday's ceasefire talks.
> Positive US economic data and speculation about a possible US interest rate cut, due to easing inflation, also supported oil prices.
> On the other hand, OPEC reduced its 2024 global oil demand growth forecast to 2.11 million barrels per day from 2.25 million, citing weaker data and softer Chinese demand. < IMO this is bullish for oil prices (we are in "upside down world") because it reduces the risk of OPEC lifting their production quotas.
> OPEC+ has extended its output cuts until September with a gradual phase-out starting in October.
> The International Energy Agency will update its more conservative 2024 demand growth forecast of 970,000 bpd this week.

US natural gas futures traded around $2.20 per MMBtu, the highest in three weeks supported by a return of warmer temperatures and positive reports.
> According to the US Energy Information Administration (EIA), utilities added 21 billion cubic feet (bcf) of gas to storage during the week ending August 2, and storage levels were 14.9% above the 5-year average, a decrease from 39% above in March and 19% in June.
> Meanwhile, gas production in the Lower 48 states averaged 102.9 billion cubic feet per day (bcfd) in August so far, slightly down from 103.4 bcfd in July but still below the record high of 105.5 bcfd set in December 2023.
> Looking ahead, major US natural gas producers are planning to further reduce production in the latter half of 2024, after prices fell nearly 40% over the past two months.

Per EIA's Short-Term Energy Outlook dated August 6 with my comment in blue

Although crude oil prices have fallen recently, we continue to expect crude oil prices will rise in the second half of 2024 (2H24).
The Brent crude oil spot price ended July at $81 per barrel (b), compared with an average for the month of $85/b. We expect the Brent price will return to between $85/b and $90/b by the end of the year. < In my forecast models I am using WTI prices of $80 for Q3 and $82.50 for Q4. I do expect EIA's weekly petroleum updates to continue to show declining crude oil inventories through mid-September. OECD petroleum inventories are low when measured on Days of Consumption, which is how all commodity inventories should be measured.

Rising crude oil prices in our forecast are the result of falling global oil inventories. We estimate global oil inventories decreased by 0.4 million barrels per day (b/d) in 1H24 and will fall by 0.8 million b/d in 2H24.
Inventory withdrawals stem in part from ongoing OPEC+ production cuts. Although we expect crude oil prices to rise in the coming months, our forecast for the annual average Brent crude oil price in 2025 is down from a forecast of $88/b in our July STEO, owing mostly to reduced oil consumption.

World oil consumption. We forecast that global consumption of liquid fuels will increase by 1.1 million b/d in 2024 and 1.6 million b/d in 2025, down from a forecast of 1.8 million b/d in our previous STEO. Most of the reduction in our oil consumption forecast is in China, where we expect slowing economic growth will continue to reduce diesel consumption. < It will take a MAJOR GLOBAL RECESSION to lower demand for oil-based fuels in 2025. There are more people (consumers) and more vehicles that run on gasoline or diesel each year.

Natural gas markets.
Following a very hot July across much of the United States, we expect slightly milder weather in August will reduce natural gas consumption. We forecast natural gas consumed to generate electricity generation will average 46 billion cubic feet per day (Bcf/d) in August, down 2% from July. Dry natural gas production in our forecast for August stays close to its level in July. Because of falling consumption and flat production, we expect the Henry Hub price to stay relatively low, remaining below $2.50/MMBtu through October. However, we expect seasonal increases in consumption for space heating, along with a ramp up in liquefied natural gas (LNG) exports from new facilities in Texas and Louisiana, will push the Henry Hub price to average about $3.10/MMBtu from November through March. < I am currently using HH natural gas prices of $2.25 for Q3 and $2.75 for Q4 in my forecasts models. The gas prices for Q3 may need to be lowered, but the gas price for Q4 may need to be raised. An average of $2.50 for 2H 2024 does look reasonable to me. I do adjust for regional differentials and for each companies' hedges.

Note received at 1:46pm CT from HFI Research:

It's funny how fast things change in just a week in the market. In our last week Monday's WCTW titled, "Beginning Of The End." We said:

As the global crowded trades unwind, all correlations go to 1. But during times of turmoil, specialists can find pockets of opportunity that the generalists are unaware of. In the energy space, we are seeing those pockets of value now. There's a big disconnect between fundamentals and price, and we think over the coming weeks, this disconnect will correct itself.

For the first time in a very long time, both our oil and natural gas market signals have turned bullish.

Since then, both oil and natural gas have appreciated meaningfully, and we issued a trade alert to readers last week that we have exited our natural gas long position. We explained why in this article.

As for our oil position, we remain long.

The roadmap ahead, in my opinion, is getting clearer. We are seeing many of the signals we pointed out heading in our direction, and if I am right, then oil prices will spike into the end of September and October.

Get ready for the oil price ride...
https://x.com/ELuttwak/status/1822774003578417453?t=iSB34b_hqkEzCSmXlKQEkg&s=19

The real question is why hasn't Team Biden enforced sanctions on Iran to shut down their oil revenues? Whose side is Team Biden really on?

Because Obama is running the show..And look at his track record on Iran.

None of the situation with Israel would have happened if they had just enforced Trump's sanctions against Iran's oil sales. The money from oil sales is what supports all of the Iranian proxies.

CNN, ABC, CBS and NBC will never discuss this fact.