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Crude Oil Market Shows More of the Same
By: Christopher Lewis | August 2, 2022
• Crude oil markets have done very little during the session on Tuesday, as it looks like we are willing to settle into a short-term range at the moment.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market rallied ever so slightly during the trading session on Tuesday as it looks like we are trying to stay within the same range that we have been trading in for the last several weeks. If that’s the case, then it’s very likely that we could get a short-term bounce. That short-term bounce will probably start to find selling rather quickly though, as the range is something in the neighborhood of just seven dollars.
The $100 level above looms large as resistance, especially now that the 50 Day EMA is racing towards it. Breaking through all that would be a win for the bulls, but right now that does not look likely. If we were to break down through the $90 level, this market could fall apart rather quickly.
Brent Crude Oil Technical Analysis
Brent markets of course look very similar, as they are straddling the 200 Day EMA. The $105 level has been resistant, and now that the 50 Day EMA is approaching that level, it should start to attract even more attention to the downside. That being said, it does look like we are trying to bounce a bit, although it’s not necessarily going to be a huge move. At this point, you could start to make the argument for a bearish flag, but that has not been confirmed, so that’s just something to keep in the back of your head. All things being equal, this is a market that I think continues to see a lot of choppiness, and not necessarily clarity anytime soon.
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Natural Gas Markets Plunge
By: Christopher Lewis | August 2, 2022
• Natural gas markets have plunged again during the session on Tuesday as it now looks like we are heading to the 50 Day EMA.
Natural Gas Technical Analysis
Natural gas markets plunged on Tuesday as the heat in the United States is finally going away. Because of this, it drives down a bit of demand for the natural gas markets, which coupled with the idea that the Europeans will not be buying LNG sets this market up for a return to somewhat normal conditions. Granted, supply has dwindled over the year or so since the pandemic, but the lack of a heat wave in the United States will give the industry at least a reasonable shot at the recovery of supply.
The 50 Day EMA sits at the $7.37 level and could be thought of as the next target. Breaking down below that level opens up the possibility of an attempt to get down to the $7.00 level. Breaking it then opens up a move down to the 200 Day EMA. This is a market that I think continues to see a lot of volatility in what has been a ridiculously huge range. We are obviously going to continue to see a lot of noise, but ironically, it may be winter when we see the most stabilization in pricing.
This is typically the worst time of year for pricing, but nothing has been normal about this year, to say the least. If some type of peace can be found between the Russians and the Ukrainians, that will drive prices through the floor. Granted, it has absolutely nothing to do with Henry Hub, but the markets don’t seem to be paying attention to that from time to time. If there is a recession in the United States, demand should drop from an industrial point of view as well.
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America's biggest warehouse is running out of room. It's about to get worse
By: Reuters | August 2, 2022
SAN BERNARDINO, Calif. (Reuters) - America's largest warehouse market is full as major U.S. retailers warn of slowing sales of the clothing, electronics, furniture and other goods that have packed the distribution centers east of Los Angeles.
The merchandise keeps flooding in from across the Pacific, and for one of the busiest U.S. warehouse complexes, things are about to get worse.
Experts have warned the U.S. supply chain would get hit by the "bullwhip effect" if companies panic-ordered goods to keep shelves full and got caught out by a downturn in demand while shipments were still arriving from Asia.
In the largest U.S. warehouse and distribution market - stretching east from Los Angeles to the area known as the "Inland Empire" – that moment appears to have arrived.
"We're feeling the sting of the bullwhip," said Alan Amling, a supply-chain professor at the University of Tennessee.
The sprawl of Inland Empire warehouses centered in Riverside and San Bernardino counties grew quickly in recent years to handle surging demand and goods imported from Asia.
That booming area, visible from space, anchors an industrial corridor encompassing 1.6 billion square feet of storage space that extends from the busiest U.S. seaport in Los Angeles to near the Arizona and Nevada borders. That much storage space is nearly 44 times larger than New York City's Central Park and 160 times bigger than Tesla Inc's new Gigafactory in Texas.
But a consumer spending pullback now threatens to swamp warehouses here and around the country with more goods than they can handle - worsening supply-chain snarls that have stoked inflation. Retailers left holding unwanted goods are faced with the choice of paying more money to store them or denting profits by selling them at discount.
Inland Empire warehouse vacancies are among the lowest in the nation, running at a record 0.6% versus the national average of 3.1%, according to real estate services firm Cushman & Wakefield.
The market is poised to get even tighter as shoppers at Walmart, Best Buy and other retailers retreat from early COVID-era spending binges.
BINGE TO BACKLOG
While U.S. consumer spending remains above pre-pandemic levels, retailers and suppliers are raising alarms about backlogs in categories that have fallen out of fashion as consumers catch up on travel and struggle with the highest inflation in 40 years.
Last week, Walmart said surging food and fuel prices left its lower-income customers with less cash to spend on goods, and Best Buy said shoppers were curbing spending on discretionary products like computers and televisions. Those cautionary signals followed Target Corp's alert that it was saddled with too many TVs, kitchen appliances, furniture and clothes.
Suppliers - ranging from barbecue grill maker Weber Inc to Helen of Troy Ltd, a consumer brands conglomerate that includes OXO kitchen tools - also have warned of slowing demand and an urgent need to clear inventories.
While the U.S. economy was downshifting, goods kept pouring in at near-record levels.
Imports to U.S. container ports that process retail goods from China and other countries jumped more than 26% in the first half of 2022 from pre-pandemic levels, according to Descartes Datamyne. Christmas shipments and the reopening of major Chinese factory hubs could goose volumes further.
Meanwhile, cargo keeps flooding in to the busiest U.S. seaport complex at Los Angeles/Long Beach. During the first half of this year, dockworkers there handled about 550,000 more 40-foot containers than before the pandemic started, according to port data.
Christmas toys and winter holiday decor landed on those docks in July, along with some patio furniture for Walmart and stretch pants, jeans and shoes for Target, said Steve Ferreira, CEO of Ocean Audit, which scrutinizes marine shipping invoices.
Retailers ordered most of those goods months ago and many are destined for the Inland Empire's already jam-packed warehouses.
"It's a domino effect. Now the inventory is going to really build up," said Scott Weiss, a vice president at Performance Team, a Maersk company with 22 warehouses in greater Los Angeles.
Demand for space in the Inland Empire is so intense that when 100,000 to 200,000 square feet of space frees up, it "gets gobbled up in a second," said Weiss.
SEARS AND PARKING LOTS
Investors have almost 40 million square feet under construction in the Inland Empire - including Amazon.com Inc's biggest-ever warehouse - and at least 38% is spoken for, said Dain Fedora, vice president of research for Southern California at Newmark, a commercial real estate advisory firm.
While Amazon's 4.1 million square-foot facility rises on former dairy land in the city of Ontario, the online retailer has been shelving construction plans in other parts of the country.
Amazon is the biggest warehouse tenant in the Inland Empire and the nation. Its decision to scale back on building, coupled with rising interest rates and the slowing economy, is sidelining other would-be Inland Empire warehouse builders, area real estate brokers and economists told Reuters.
Meanwhile, the scramble for space continues.
Trucking company yards and spare lots around the region have already been converted to makeshift container storage, so entrepreneurs are marketing vacant stores as last-resort warehouses in waiting.
Brad Wright is CEO of Chunker, which bills itself as an AirBNB for warehouses, and works with everyone from state officials to the owners of vacated big-box stores to find new places to stash goods.
During a recent tour at the former Sears anchor store in San Bernardino's Inland Center mall, Wright and a potential tenant strolled past collapsed ceiling tiles, sagging wall panels and idled escalators while working out how forklifts would navigate the abandoned space. Wright sees the empty stores as one answer to easing the log jams.
"There's a lot of them sitting around, and they're in good locations," he said.
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Energy insiders buying the dip even more heavily than before
By: Variant Perception | August 2, 2022
• Energy insiders buying the dip even more heavily than before.
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Slow Days. The Energy Report
By: Phil Flynn | August 2, 2022
A slowing economy and low liquidity are giving oil futures a dog days of summer slide. Even reports that the Biden administration is going to toughen up sanctions on Iran ahead of talks, is being ignored because the trade realizes that the move is just a move by Biden to try to look tough ahead of renewed Iranian nuclear talks. Some traders are pointing to the risk-off attitude because of concerns about House Speaker Nancy Pelosi’s trip to Taiwan as China has made threats against the third in the line of succession to the President of the United States. While that may be causing some concern, it really seems to be the lack of enthusiasm within the US in a technical recession and global economic data that is less than spectacular.
Yesterday, The Institute for Supply Management’s index of U.S. manufacturing activity was 52.8 in July as a drop in new orders signaled declining demand for factory products. That was its lowest reading since June 2020 and down from 53 the prior month according to the Wall Street Journal.
Oil prices are also cautious ahead of the OPEC Plus meeting. There has been some speculation that perhaps OPEC and their favorite coconspirator Russia, might engineer a surprise and increase production more than what they originally had agreed upon. Reuters News reported that eight OPEC+ sources spoken to by Reuters, two said a modest increase for September will be discussed at the Aug. 3 meeting and five said output would likely be held steady. This comes on reports yesterday that Libya lifted its force majeure on its oil production and exports, with the Oil Ministry and the National Oil Company (NOC) now saying that production has reached 1.2 million bpd–the level it was at prior to the declaration of force majeure in April.
Joe Biden has been raising expectations that OPEC was going to give us something in return for his historic fist bump visit to Saudi Arabia and hanging out with Crown Prince bin Salman. According to Bloomberg News, “OPEC+ could formally agree to continue with the monthly increases of about 400,000 barrels a day it has adopted over the past year, with the understanding that only part of this would be implemented because of several members’ capacity constraints. The group is collectively pumping about 2.8 million barrels a day below its collective target.”
So what we’re saying, in reality, is that any talk or an agreement by the OPEC cartel to raise production will only be modest and only is an olive branch by Saudi Arabia to the Biden administration in return for warming relations. Even if Saudi Arabia can follow through and promise a few more barrels of oil, it’s still going to be insignificant in the whole scheme of things.
In reality, the market action for oil seems to be adjusting for slowing demand but we believe they are going to be surprised in just a couple of weeks because we believe the demand destruction argument it’s not going to be as bad as the market thinks it’s going to be. Yes, the manufacturing data from the United States yesterday was disappointing but stays still in expansion. The job market is slowing but there are still more jobs available than people looking for work. The Wall Street Journal reported that U.S. job openings are estimated to have remained robust in June while easing from higher levels earlier in the year amid a broader economic slowdown.
Economists surveyed by The Wall Street Journal estimated the Labor Department will report there were 11 million openings in June, down from the record of 11.9 million in March but still historically high. Dante DeAntonio, an economist at Moody’s Analytics, estimated that job openings fell below 11 million in June. The Labor Department will release its estimate of June job openings and the number of times workers quit their jobs on Tuesday at 10 a.m. ET.
At the same time, global oil inventories are very tight despite the fact we’ve seen record releases from the global strategic petroleum reserves. The question markets are going to have to answer is what’s going to happen when the global strategic reserve releases end in October just ahead of winter. Javier Blass of Bloomberg tweeted out, “US released 4.6m barrels from the SPR last week (~660,000 b/d), the smallest weekly release since late April. All the barrels released were sour. Crucially (for the first time ever?) there are more sweet barrels left inside the SPR than sour: 235m vs 234.9m.”
Natural gas prices dipped to key support yesterday near 776. They’re pulling back again today and volatile trade in a market that is focused on the weather but also on the Freeport LNG export terminal. Reporters seem to suggest that the Freeport LNG terminal will start to reopen in October which means that US LNG will start making its way to Europe ahead of what could be a very challenging winter for the European continent.
The Business Insider Zahra Taye reports that, “The European natural gas crisis is getting even worse, according to Bank of America. In a Monday research note, the investment bank highlighted Russia’s actions to limit supply to the region, adding that winter stockpiles could run low. “The European gas situation is quickly moving from our ‘bad’ to our ‘ugly’ scenario in the past month,” the bank said.
Russia has shaken energy markets since it invaded Ukraine and more recently jolted Europe after cutting the supply of natural gas to the region. In July, Russia’s state-run energy giant Gazprom, slashed flows to just 20% along the Nord Stream pipeline, a week after it cut flows completely for a 10-day maintenance period. Russia is Europe’s largest individual energy supplier and accounts for 40% of the region’s natural gas consumption.
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Oil sinks about 4% after weak factory data sparks demand concerns
By: Stephanie Kelly | August 1, 2022
NEW YORK (Reuters) - Oil prices dropped about 4% on Monday as weak manufacturing data in several countries weighed on the demand outlook while investors braced for this week's meeting of OPEC and its producer allies on supply.
Brent crude futures fell $3.94, or 3.8%, to settle at $100.03 a barrel, having fallen to a session low of $99.09 a barrel.
U.S. West Texas Intermediate crude fell $4.73, or 4.8% to settle at $93.89 a barrel, after hitting a low of $92.42.
A break for Brent prices below the support level of $102.68 could trigger a drop into a range of $99.52 to $101.26, Reuters technical analyst Wang Tao said. [TECH/C]
Factories across the United States, Europe and Asia struggled for momentum in July as flagging global demand and China's strict COVID-19 restrictions slowed production, surveys showed on Monday, likely adding to fears of economies sliding into recession.
Brent and WTI both ended July with a second straight monthly loss for the first time since 2020 as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.
Analysts in a Reuters poll reduced their forecast for 2022 average Brent prices to $105.75, their first downward revision since April. Their estimate for WTI fell to $101.28.
However, questions about global supply loom in the oil market.
"There is still a disconnect with economic data and what we're seeing on the supply side," said Phil Flynn, an analyst at Price Futures group. "The oil market is still very tight, and the market is going to be on edge going into OPEC."
The Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, meet on Wednesday to decide on September output.
Two of eight OPEC+ sources in a Reuters survey said that a modest increase for September would be discussed at the Aug. 3 meeting. The rest said output is likely to be held steady.
U.S. President Joe Biden visited Saudi Arabia last month.
"While President Biden's visit to Saudi Arabia produced no immediate oil deliverables, we believe that the kingdom will reciprocate by continuing to gradually increase output," RBC Capital analyst Helima Croft said in a note.
While OPEC+ aimed to have fully unwound its record output cuts by this month, data showed the group as of June was still almost 3 million barrels per day short of its output target as some producing countries struggle to bring wells back on line.
Also weighing on prices was a rise in Libyan oil production, which hit 1.2 million bpd, up from 800,000 bpd on July 22, after the lifting of a blockade on several oil facilities.
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$WTI crude oil potentially made a weekly cycle low 2 weeks ago
By: CyclesFan | August 1, 2022
• $WTI crude oil potentially made a weekly cycle low 2 weeks ago, on week 17, but hasn't confirmed it yet as it needs to close above 105.78 to confirm that. When it confirms that the low is in, the next weekly cycle high is likely to be lower than the June high.
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Crude Oil Markets Continue to Show Signs of Hesitation
By: Christopher Lewis | August 1, 2022
• Crude oil markets have fallen rather hard to kick off the session on Monday, as it looks like we are running out of momentum.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has plunged to kick off the week on Monday to slice through the 200 Day EMA. By doing so, the market looks as if it is ready to continue being very noisy, and perhaps ready to plunge down to the $90 level. Obviously, there are a lot of moving pieces at the moment, not the least of which is the fact that the global economy may be slowing down. If that’s going to be the case, then demand for crude oil will drop. On the other hand, there are also concerns about supply, so that does keep a little bit of a firm footing in this market occasionally. Watch the $90 level, that will be crucial.
Brent Crude Oil Technical Analysis
Brent markets also have fallen rather hard during the Monday session to slice below the $100 level by the time New York got on board. At this point, it looks like the market is going to test the 200 Day EMA underneath, which will attract a lot of attention in and of itself. Because of this, I think this is a market that will be very noisy, and we may have to pay close attention to the $95 level. If we break down below there, or if the WTI grade breaks down below the $90 level, we could see a plunge in crude oil.
All of this being said, it does look like we are still very much in consolidation with both grades of oil, so short-term traders continue to push it back and forth, and that is something to be aware of.
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Natural Gas Markets Gap Lower
By: Christopher Lewis | August 1, 2022
• The natural gas markets gap kick off the trading session on Monday, showing signs of weakness yet again.
Natural Gas Technical Analysis
Natural gas markets have gapped lower to show signs of weakness yet again at the open on Monday. By doing so, the market is well below the $8.00 level, but it is showing signs of volatility. Given enough time, I do think that we continue to go lower simply because we got far too overstretched. There are other reasons obviously, not the least of which will be the fact that the heat wave in the United States is essentially over. The Americans are not supplying the Europeans with natural gas, so what’s going on over there only has a somewhat backdoor effect on this market.
The 50 Day EMA underneath is more likely than not going to be the target in the short term, although we could get the occasional bounce. Those bounces that show signs of exhaustion will be selling opportunities for what I can tell, and I will use them as such. With that being the case, I like the idea of shorting at the first signs of exhaustion after we do bounce because it should give you plenty of room to run.
Natural gas markets have been all over the place, mainly due to the Russian gas situation in the European Union, but one day, people woke up and realize that this is a US-based contract and that the United States cannot supply enough LNG to make up the difference. Once that happened, we started to see the market selloff. The most recent shot higher had more to do with the exacerbated and volatile situation. That particular move made quite a bit more sense, just as a pullback from here now that it’s out of the forefront does.
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Oil tumbles after weak factory data sparks demand concerns
By: Reuters | August 1, 2022
• Oil prices dropped early on Monday as investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.
LONDON (Reuters) – Oil prices dropped sharply on Monday as weak manufacturing data from China and Europe weighed on the demand outlook while investors braced for this week’s meeting of officials from OPEC and other top crude producers on supply.
Brent crude futures were down $3.77, or 3.6%, at $100.20 a barrel by 1319 GMT, having fallen to a session low of $99.75.
U.S. West Texas Intermediate crude was down $4.59, or 4.7%, at $94.03, after hitting a low of $93.49.
A break for Brent prices below the support level of $102.68 could trigger a drop into a range of $99.52 to $101.26, Reuters technical analyst Wang Tao said. [TECH/C]
Factories across Asia and Europe struggled in July as flagging global demand and China’s strict COVID-19 restrictions slowed production, surveys showed on Monday, adding to concerns about economies sliding into recession.
S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) for the euro zone fell to 49.8 in July from June’s 52.1, falling below the 50 mark separating growth from contraction for the first time since June 2020.
The Caixin/Markit PMI eased to 50.4 in July from 51.7 the previous month, well below analyst expectations, data showed on Monday.
“[China] was already facing an uphill challenge, to put it mildly, with regards to its growth target this year and the fact that manufacturing activity is slowing again doesn’t bode well,” said Oanda analyst Craig Erlam.
Brent and WTI both ended July with a second straight monthly loss for the first time since 2020 as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.
Analysts in a Reuters poll for the first time since April reduced their forecast for 2022 average Brent prices to $105.75 a barrel. Their estimate for WTI fell to $101.28.
The Organization of the Petroleum Exporting Countries (OPEC)and allies including Russia, together known as OPEC+, meet on Wednesday to decide on September output.
Two of eight OPEC+ sources in a Reuters survey said that a modest increase for September would be discussed at the Aug. 3 meeting. The rest said output is likely to be held steady.
U.S. President Joe Biden visited Saudi Arabia last month.
“While President Biden’s visit to Saudi Arabia produced no immediate oil deliverables, we believe that the kingdom will reciprocate by continuing to gradually increase output,” RBC Capital analyst Helima Croft said in a note.
While OPEC+ aimed to have fully unwound its record output cuts by this month, data showed the group as of June was still almost 3 million bpd short of its output target as some producing countries struggle to bring wells back on line.
The group’s new secretary general, Haitham al-Ghais, reiterated on Sunday that Russia’s membership in OPEC+ was vital for the success of the output pact, Kuwait’s Alrai newspaper reported.
Also weighing on prices was a rise in Libyan oil production, which hit 1.2 million barrels per day (bpd), up from 800,000 bpd on 22 July, after the lifting of a blockade on several oil facilities.
U.S. oil production also continued to climb. The country’s rig count rose by 11 in July, increasing for a record 23rd month in a row, data from Baker Hughes showed. [RIG/U]
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Earnings Preview: Occidental Petroleum Corp. (NYSE: OXY)
By: 24/7 Wall St. | August 1, 2022
• After markets close on Tuesday, these four companies will release their quarterly earnings reports.
Occidental Petroleum
Like virtually every other oil producer, shares of Occidental Petroleum Corp. (NYSE: OXY) have posted a big gain (145.5%) over the past 12 months because of the soaring price of crude. Oxy also benefits as one of Warren Buffett favorite’s. Berkshire Hathaway now owns almost 20% of Occidental. The company has applied some of its windfall of the past year to reducing its long-term debt by $10 billion. It still owes about $25.7 billion to repay borrowing to acquire Anadarko in 2019.
Of the 27 brokerages covering the stock, 14 rate the shares a Hold, and 10 have a Buy or Strong Buy rating. At a current price of around $65.80, the upside potential based on a median price target of $70.00 is 6.4%. At the high price target of $105.00, the upside potential is 59.6%.
Second-quarter revenue is forecast at $9.81 billion, up 15% sequentially and up 63.3% year over year. Adjusted EPS is pegged at $3.03, up 42.9% sequentially and a gigantic 847% year over year. For the full 2022 fiscal year, analysts expect Oxy to report EPS of $10.59, up 315%, on revenue of $36.39 billion, a gain of 38.3%.
Occidental stock trades at a multiple of 6.2 times expected 2022 EPS, 8.1 times estimated 2023 earnings of $8.09, and 12.3 times estimated 2024 earnings of $6.34 per share. The stock’s 52-week range is $21.62 to $74.04. Occidental pays an annual dividend of $0.52 (yield of 0.79%). Total shareholder return for the past year is 146.8%.
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Earnings Preview: Coterra Energy Inc. (NYSE: CTRA)
By: 24/7 Wall St. | August 1, 2022
• After markets close on Tuesday, these four companies will release their quarterly earnings reports.
Coterra Energy
Shares of natural-gas producer Coterra Energy Inc. (NYSE: CTRA) have added 63.8% to their value over the past 12 months. At their peak in early June, shares were up almost 150%. Demand for natural gas has skyrocketed in Europe as the continent sprints to replace reduced supply from Russia before the winter heating season begins. In addition, analysts expect Coterra to share the bulk of its free cash flow ($1.05 billion in the first quarter) with investors through dividends and share buybacks.
Of the 26 brokerages covering the stock, 13 rate the shares a Hold, and 12 have a Buy or Strong Buy rating. At a current price of around $30.60, the upside potential based on a median price target of $35.00 is 14.4%. At the high price target of $46.00, the upside potential is 50.3%.
Second-quarter revenue is forecast at $2.23 billion, up 32.8% sequentially and up by a massive 587% year over year. Adjusted EPS is pegged at $1.28, up 26.3% sequentially and up 392% year over year. For the full 2022 fiscal year, analysts currently expect Coterra to report EPS of $4.78, up 112.4%, on revenue of $8.51 billion, an increase of 146.8%.
The company’s stock trades at a multiple of 6.4 times expected 2022 EPS, 7.8 times estimated 2023 earnings of $3.95, and 10.2 times estimated 2024 earnings of $2.98 per share. The stock’s 52-week range is $14.28 to $36.55. Coterra pays an annual dividend of $0.60 (yield of 1.96%). Total shareholder return for the past year is 110%.
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Fearing Demand Destruction. The Energy Report
By: Phil Flynn | August 1, 2022
Forget the tight physical oil market. Forget the fact that once the Strategic Petroleum Reserve releases end that we can see global supplies of oil plummet. Oil prices are starting the month of August on a negative note with fears of the Fed aggressively raising interest rates to ward off inflation and fear of the probable empty promises from OPEC achieved by Biden to raise production to cool off global energy prices. Yet data is raising fears of oil demand destruction even as supplies are very tight.
Bloomberg News Reported that, “European factory activity plunged and Asian manufacturing output continued to weaken in July amid lingering supply-chain complications and a slowing global economy.
Purchasing managers’ indexes for the euro area’s four largest members all indicated contraction, with shrinking confirmed for the region as a whole after an initial estimate on July 22. In Asia, it was China, South Korea and Taiwan that took the biggest hit.
In Asia, data showed China’s factory activity unexpectedly contracted in July, reversing earlier economic momentum as sporadic covid-19 outbreaks weigh on the recovery. The official manufacturing purchasing managers index fell to 49 from 50.2 in June. That compares with the 50.3 median estimate in a Bloomberg survey of economists.
At the same time oil prices plummeted when it was reported that Libya’s national oil company the NOC, lifted its force majure on oil exports and claim that their oil production was back up to 1.2 million barrels of oil a day.
We get weak market action on a Monday in August as the dog days of summer set in. There are some risk factors to the demand side of oil, but the reality is that the science that we are seeing is that the demand destruction argument is being overplayed. If global demand is so bad, then why did the United States have to export a record amount of oil and gasoline and diesel last week? if demand is so bad then why did Saudi Arabia raise your selling price for oil last week?
I know that U.S. oil exports are probably going to fall this week and but it’s clear that based on what we’re seeing in the physical market and what we’re seeing from Saudi Arabia, that does not suggest a substantial drawdown. In fact I would say that the demand risks to the oil market are to the upside. Remember the global oil market is playing with one hand tied behind its back and that is China.
China’s economy has slowed pretty dramatically because of their covid policies and the risk is that when they start to reopen, the demand side will far exceed the supply side. Obviously the war in Ukraine is a big issue.
The markets are looking at the fact that a grain shipment has left the Ukraine port as hope that Russia will be somewhat reasonable in the future when it comes to their dominance of energy supply to Europe. Reuters reported that the first Ukraine grain ship bound for Lebanon left port and Turkey says there are more ships to follow. Reuters wrote that, “A ship carrying grain left the Ukrainian port of Odesa for Lebanon on Monday under a safe passage agreement, Ukrainian and Turkish officials said. This is the first departure since the Russian invasion blocked shipping through the Black Sea five months ago. Ukraine’s foreign minister called it “a day of relief for the world”, especially for countries threatened by food shortages and hunger because of the disrupted shipments.
Oil bears got excited last week when OPEC suggested that maybe just maybe they might add a few extra barrels on top of the 400,000 barrels they previously agreed to increase production by. Reuters reports that OPEC’s new secretary general said that Russia’s membership in OPEC+ is vital for the success of the agreement, Kuwait’s Alrai newspaper reported on Sunday, quoting an exclusive interview with Haitham al-Ghais. He said OPEC is not in competition with Russia, calling it “a big, main and highly influential player in the world energy map”, Alrai reported. OPEC+ is an alliance of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia.
Any increase by OPEC, even a modest one, will reduce global spare production capacity and that is the issue. Global spare oil production capacity is at an all-time low and there is no room for error.
Fundamentally, not buying the weakness in the prices today as it seems to be part seasonal and part doldrums. The futures are still out of touch with the physical market and we believe that they will come back together. We think that there is some fear about what OPEC may or may not do and that is probably playing into some of the selling. Low liquidity isn’t helping with the volatility and I think hedgers should stay hedged.
A big drop in gasoline prices caused gasoline demand to snap back in the last couple of weeks. So, if this is about demand destruction and supplies are as tight as they are, can you imagine if the economy picks up a little bit what could we be facing. Shortages. The Strategic Petroleum Reserve releases has kept demand high because of cheap oil being dumped on the market but when you cut that off, we could see a price spike. At the same time the new climate bill is going to impose a lot of taxes on U.S. oil and gas producers that is going to severely reduce U.S. oil output in the future and cause prices to go even higher. These oppressive taxes on U.S. oil and gas companies are also going to make the world a less safe place because we’re going to become more dependent on countries like OPEC and Russia for supply. The Biden administration’s disdain for EU S oil and gas industry is clear.
Bloomberg reported that the climate and tax spending deal announced last week by Senate Majority Leader Chuck Schumer and Senator Joe Manchin could cost the oil industry $25 billion in new taxes. The legislation, which may get a Senate vote as soon as next week, would reinstate and increase a long-lapsed tax on crude and imported petroleum products to 16.4 cents per gallon, according to a summary of the plan released Sunday by the Senate’s tax-writing committee.
Natural gas dipped but still looks very bullish even more bullish if the climate bill passes. I wonder if somebody should tell the Biden administration that the reason why the United States saw the biggest drop in greenhouse gas emissions is because of our production of natural gas.
EBW analytics says that the August contract traded as high as $9.752 on Tuesday before natural gas relented later in the week. After a $4.00/MMBtu run higher in three weeks, the newly September front-month was primed for a pullback and rapidly slumped to test support at $8.01 on Friday. Over the weekend, twin bearish catalysts of a bearish mid-August weather shift and gas production racing higher to all-time daily records added to a bearish technical outlook. Although prices could fall further near-term, stout fundamentals may eventually provide support.
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Exxon Mobil (XOM) Target of Unusually High Options Trading
By: MarketBeat | July 30, 2022
• Exxon Mobil Co. (NYSE:XOM - Get Rating) saw unusually large options trading on Friday. Stock investors bought 214,025 call options on the stock. This represents an increase of 40% compared to the average daily volume of 153,294 call options...
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Exxon Mobil (XOM) Strong move off earnings
By: Options Mike | July 31, 2022
• $XOM Strong move off earnings, not as good as $CVX.. gap ahead can easily fill on watch.
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Chevron (CVX) Gap and go. That gap ahead would be my next target, may need a inside day though
By: Options Mike | July 31, 2022
• $CVX best in breed and delivered. Gap and go. That gap ahead would be my next target, may need a inside day though.
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Cheniere Energy (LNG) nice stealthy move. Try to buy dips off the 8D if it holds
By: Options Mike | July 31, 2022
• $LNG Lost track of this one, back to ATH's.. nice stealthy move. Try to buy dips off the 8D if it holds.
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Peabody Energy (BTU) report was not good, sold downtrend now
By: Options Mike | July 31, 2022
• $BTU report was not good, sold downtrend now , watch to see if it holds the 200D.
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COT - Commitments of Traders in Crude Oil Futures Market Report
By: Software North | July 29, 2022
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Crude Markets Continue to Show Volatility
By: Christopher Lewis | July 29, 2022
• Crude oil markets have rallied a bit during the trading week, as we continue to see a lot of noisy behavior.
WTI Crude Oil Weekly Technical Analysis
The West Texas Intermediate Crude Oil market initially fell during the week but then turned around to show signs of life again. By the time we close down at the end of the week, we are threatening the $100 level. The market has been very noisy, to begin with, and therefore it’s likely that we continue to see a lot of chop and noise more than anything else. The $100 level has a certain amount of psychology attached to it, but you can clearly see that we had broken through a previous trendline.
That being said, if we were to break down below the $90 level, it’s likely that crude oil will drop rather significantly, perhaps reaching down to the $80 level next. This is all about global demand and supply as there are a lot of questions on both.
Brent Crude Oil Weekly Technical Analysis
Brent markets pulled back just a bit to the $95 level before turning around and showing signs of strength during the week. The market has broken above the $105 level late on Friday, now it looks like we are trying to fight back. Whether or not we can continue to go higher is a bit difficult, and therefore we have to pay close attention to the previous uptrend line that we are now threatening.
There are a lot of concerns when it comes to global growth going forward, and that has a major influence on the markets. If there’s less growth, there’s going to be less demand. With the United States entering a recession, that also has a lot of negativity overhanging the market. On the other hand, OPEC does not look likely to increase production. Expect a lot of noisy behavior more than anything else.
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Earnings Preview: Marathon Petroleum Corp. (NYSE: MPC)
By: 24/7 Wall St. | July 29, 2022
• Here’s a look at four companies set to report results before markets open Tuesday morning.
Marathon Petroleum
Oil refiner and marketer Marathon Petroleum Corp. (NYSE: MPC) posted an all-time high share in early June and has posted a stock price gain of around 62% over the past year. That’s a far larger increase than rival Phillips 66’s 16.5% gain. Refining margins have begun falling back to earth as high prices have cut demand and there’s barely a month left in the summer driving season. Competing refiner Valero reported refining margins of $30 a barrel, double the first-quarter total, and Phillips 66 reported a per-barrel margin of $29.30, nearly triple its first-quarter total. Marathon should be in the same ballpark.
Of 17 brokerages covering Marathon, 14 have given the stock a Buy or Strong Buy rating, and the rest rate the stock a Hold. At a current trading price of around $91.20, the stock’s upside potential based on a median price target of $118.00 is about 29.4%. At the high target of $130.00, the upside potential is 42.5%.
Second-quarter revenue is forecast at $44.26 billion, up 15.3% sequentially and up by about 48.4% year over year. Analysts are estimating EPS of $8.47, up 484% sequentially and an increase of 1,154% year over year. For the full 2022 fiscal year, the consensus estimates call for EPS of $18.07, up nearly 640%, on revenue of $160.96 billion, up 33.1%.
Marathon Petroleum’s stock trades at a multiple of five times expected 2022 EPS, 10.4 times estimated 2023 earnings of $8.75, and 10.6 times estimated 2024 earnings of $8.63 per share. The stock’s 52-week range is $53.47 to $114.35. Marathon pays an annual dividend of $2.32 (yield of 2.58%). The total shareholder return for the past 12 months was 68.5%.
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Earnings Preview: BP plc (NYSE: BP)
By: 24/7 Wall St. | July 29, 2022
• Here’s a look at four companies set to report results before markets open Tuesday morning.
BP
Shares of integrated oil giant BP plc (NYSE: BP) have performed well over the past year but trail far behind Chevron and Exxon, which are up 48% and 57%, respectively. BP’s 12-month increase was about 16.7%. The massive $24 billion charge against first-quarter results for shedding the company’s 19.75% stake in Russian oil giant Rosneft won’t be a factor in second-quarter results. First-quarter operating profit totaled nearly $7.2 billion, cash flow from operations reached $8.2 billion, and free cash flow came in at $5.6 billion. That strength should carry over into the second quarter.
Of 15 brokerages covering the company, nine have a Buy or Strong Buy rating on the shares, and five rate the shares a Hold. At a current price of around $28.5.50, the implied upside to a median price target of $36.00 is 26.3%. At the high price target of $51.00, the upside potential is about 59%.
The consensus estimate for first-quarter revenue is $60.85 billion, up 23.5% sequentially and an increase of 66.8% year over year. Adjusted EPS is forecast at $2.13, up 10.9% sequentially and 1,400% year over year. For the 2022 fiscal year, analysts expect BP to report EPS of $7.72, up 102.2%, on sales of $207.84 million, a rise of 31.8%.
BP stock trades at a multiple of 0.6 times expected 2022 EPS, 0.8 times estimated 2023 of $6.04, and 0.9 times estimated 2024 EPS of $5.14. The stock’s 52-week range is $23.39 to $34.30. BP pays an annual dividend of $1.31 (yield of 4.6%). The total shareholder return for the past year was 23.55%.
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Natural Gas Markets Give Up Early Gains Again
By: Christopher Lewis | July 29, 2022
• Natural gas markets have initially shot higher during the trading session on Friday, but they continue to find sellers every time we rally.
Natural Gas Technical Analysis
Natural gas markets initially tried to rally during the trading session on Friday but then turned around to show signs of weakness. The market is likely to continue being very noisy, so it is worth paying close attention to the fact that every time we rally, there seems to be a bit of a selloff. Furthermore, when you look at the candlestick, it is an inverted hammer, so it does suggest that we are going to continue to chop back and forth and show signs of negativity.
We are now testing the $8.00 level, and if we can break down below there, it’s likely that the market will continue to drop significantly, perhaps reaching down to the 50 Day EMA. The 50 Day EMA gets a lot of attention, and I think that will be the case going forward. The markets will continue to look very negative, and therefore I think that it is probably only a matter of time before we go much lower. After all, the heatwave is abating in the United States, so, therefore, it will drive down demand.
There is still a lot of monkey business going on with Russian gas, so I do think that it is going to continue to be a major problem to pay attention to as well. Ultimately, I think what we have here is a situation where the market is simply pulling back from the highs of what could be the potential range that the market wishes to trade in. Because of this, I remain skeptical of rallies, especially as this market has been so highly manipulated as of late.
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The Bi-Session. The Energy Report
By: Phil Flynn | July 29, 2022
The Biden administration does not want us to say that the economy is in a recession. Well, if we can’t call it a recession, so we have to think of another name for this recent second-quarter drop in the gross domestic product. Instead of recession, we will call it a Bi-Session. The Biden administration continues to suggest that a recession by any other name doesn’t smell as nice But in fairness to Biden, it’s not a technical recession until all the data is in. There could be some upward revisions to GDP in the future that could mean that this negative growth could turn positive. Americans care about whether their lives are getting better. When you see gasoline prices go through the roof and the administration does not want to take any responsibility for it but then take credit for it when prices come back down, it’s no wonder Biden’s approval ratings are so low.
Joe Biden needs to own up to the economic slowdown, take responsibility, and assure us that they understand and feel our pain. Instead, we see rising food prices and empty shelves at grocery stores. We see smaller portions for higher prices at restaurants. They blame everybody from the farmers to the ranchers and even ordinary Americans for maybe eating too much. So for many Americans, if this isn’t a recession, they better hope that they never see one.
Biden has turned his back on pro-economic growth policies. They have specifically targeted growth in the US oil and gas sector. Call it a recession or Bi-Session, we know that it thwarted the momentum in oil prices early. The September crude futures were knocking on the door of a major breakout back above the psychologically important $100 a barrel area before pulling back after the GDP data came out.
Oil prices also sold off when OPEC started to signal that they might be open to pumping just a few more barrels at the next OPEC meeting but that by no means is a sure thing. At this point they’re talking about staying the course with their planned production increases but in deference to the global economy, they might promise but not deliver a few extra barrels. Why do I say they won’t deliver? Well let’s face it, they haven’t been able to hit their quota for some time and their supply side is very limited.
Yet that didn’t stop the Biden administration from fawning all over the OPEC cartel. In an attempt to talk down oil prices, they gushed that they were very excited and seem to suggest that OPEC could give us an upwards production surprise at the meeting next week. The U.S. says that they are optimistic about a positive announcement from OPEC plus next week! OPEC in their comments did leave the door open to a production increase it is by no means guaranteed one. They did suggest that they might be able to go above their previously agreed upon 400,000 barrels increase and add a few extra barrels and that may happen, but the reality is it would just be token amount to try to appease Biden. While Biden cheers OPEC, keep in mind that their main coconspirator is Russia which is part of this oil mix.
Reuters reports that Russia and Saudi Arabia remain firmly committed to the goals of the OPEC+ agreement to preserve market stability and balance supply and demand in the global oil markets, the Russian government said in a statement on Friday. Russian Deputy Prime Minister Alexander Novak met Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman to discuss the two countries’ cooperation within the OPEC+ agreement, which sets quotas for oil production in a bid to balance global prices.
OPEC meeting is next week. The joint technical committee is on Tuesday. The joint ministerial monitoring committee is also on Wednesday followed by the OPEC meeting.
Despite yesterday’s disappointing market action, oil is mounting come back. It should make another attempt to take out the $100.00 barrel area. It was close but no cigar for September crude yesterday but getting help from the fact that the inflation rate in Europe overnight hit a record high. Consumer prices in Europe surged up 8.9% last month and that was above analyst estimates of 8.7%. The market is taking this initiative as a signal that the ECB will have to raise more aggressively to curtail inflation in the future. This is going to be a very difficult task for Europe. The energy crisis in Europe due to Russia’s dominance over European supply could cause the EU economy to slip into a recession.
We reported that JPMorgan predicted that the ECB would not be able to raise rates aggressively because of an impending recession. That report caused oil to sell off a few days ago. Yet the economic reality in the short term is that inflation pressures in Europe are out of control and will force the ECB to act. ECB President Christine Lagarde understands that inflation it’s a thief that sucks the blood out of the consumers, businesses, and the economic welfare. I believe her first inclination will be to cool inflation with an aggressive rate hike. If the economy slows, it can always reverse it but it’s a lot harder to reverse inflation if it continues to become more entrenched.
Biden tweeted, “Then we have the so-called Inflation Reduction Act. Let me be clear. “The Inflation Reduction Act of 2022 would be the most significant legislation in history to tackle the climate crisis and to improve our energy security.” That, along with begging OPEC for more oil and thwarting US energy production and bailing out failing green energy projects. No word on how this really is supposed to defeat inflation. Usually, government spending that has gone out of control is how you create inflation. It’s also very unlikely to reduce energy costs because alternative energy sources by their definition are less efficient and will always be more expensive.
If you really want to bring down inflation you should be encouraging US oil and gas production. That would be one of the quickest ways to relieve inflationary pressures not only today but for decades to come. You can still do your green energy transition but instead of taxing the heck out of oil companies and discouraging investment in that sector, they should be doing the opposite. It is very clear that Biden’s energy policies are one of the reasons the United States is in a Bi-Session.
Because of the green energy failures in Europe, Old King Coal is making a huge comeback. The International Energy Agency reported coal consumption in the EU is expected to rise by 7% in 2022 on top of last year’s 14% jump. Global coal consumption is forecast to rise by 0.7% in 2022 to 8 billion tonnes, assuming the Chinese economy recovers as expected in the second half of the year.
Libyan oil production we hardly knew you. Libya post a few days ago that their oil production after political tension had risen back to 1,000,000 barrels a day is now facing more challenges in the country and their energy sector. Mohamed Eljarh tweeted that, “Sources on the ground have confirmed to me that staff of oil services giant #Halliburton in western and eastern #Libya have been told to evacuate immediately, and ordered to leave their equipment/tools on sites. The exact reasons are not known. Similarly, German oil giant Wintershall is also suspending its operations and temporarily evacuating some staff due to a dispute with AGOCO oil company over accumulating debt. AGOCO recently got 600m LYD but failed to pay Wintershall. These are early reports and we will have to wait for confirmation of this. Yet because of the political situation in Libya, it wouldn’t be surprising. We will keep an eye on this.
For oil traders $100 a barrel is still the number to break above and if it does could bring in further aggressive buying. The failure near 100 could signal more consolidation. Products had a wild ride but fundamentally are still very bullish. Record-breaking exports of oil and products last week most likely won’t be repeated. We still think it’s a good time to be looking at options placed in the back end of the oil curve as we expect the back end over time will catch up to the front end.
Natural gas prices acted like they hit a peak after its record-breaking run. The Energy Information Administration injection report was actually bullish but didn’t have enough bullishness to keep the natural gas drive alive. Traders seem to use the report as an opportunity to take profits, hunker down and watched the weather and more than likely look for another opportunity to buy back in. Because at the end of the day US natural gas supplies are at dangerously low levels. Supply is 10.8% lower from a year ago and 12.5% below the year average.
EIA said that, “Working gas in storage was 2,416 Bcf as of Friday, July 22, 2022, according to EIA estimates. This represents a net increase of 15 Bcf from the previous week. Stocks were 293 Bcf less than last year at this time and 345 Bcf below the five-year average of 2,761 Bcf. At 2,416 Bcf, the total working gas is within the five-year historical range.
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Exxon Mobil (XOM) posts record-breaking second-quarter profit
By: Sabrina Valle | July 29, 2022
HOUSTON, July 29 (Reuters) - Exxon Mobil Corp (XOM.N) on Friday posted its biggest quarterly profit ever on the back of soaring energy prices and as it kept a tight rein on spending.
The top U.S. oil producer reported second-quarter net income of $17.9 billion, or $4.21 per share, an almost four-fold increase over the $4.69 billion, or $1.10 per share, it earned in the same period last year.
Oil and natural gas prices have scaled multi-year highs this year as Western sanctions against major exporter Russia squeezed an already under-supplied global market. Margins for making fuels like gasoline and diesel surged worldwide, boosting the profits of oil giants, including European majors Shell (SHEL.L)and TotalEnergies (TTEF.PA), both of which reported results on Thursday. read more
Exxon's results also beat its best quarter of 2008, when Brent crude oil prices peaked at $147 per barrel, and its best-ever quarter reached in 2012, when the company earned $15.9 billion, largely due to asset sales in Japan and tax-related items.
Exxon's first-quarter profits led U.S. President Joe Biden last month to say the company and other oil majors were capitalizing on a global supply shortage to fatten profits. Exxon, he said, was making "more money than God" after posting its biggest quarterly profit in seven years. read more
Exxon has been using extra cash to pay down debt and raise distributions to shareholders. It maintained its 88-cent-per-share dividend for the third quarter.
The company earlier this year more than doubled its projected buyback program to $30 billion through 2022 and 2023. Shell and Total on Thursday extended their share buybacks after their second-quarter results both beat what had been a record-breaking previous quarter. read more
Exxon kept its capital investments at $9.5 billion in the first half of the year, in line with full-year guidance. The profit included a $300 million booked identified item associated with the sale of the Barnett Shale upstream asset.
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Chevron (CVX) posts record profit on surging prices, lifts buyback guidance
By: Sabrina Valle | July 29, 2022
HOUSTON (Reuters) - Chevron Corp (NYSE:CVX) posted its biggest quarterly earnings ever on Friday, built on strong fuel margins and high prices for natural gas and oil, and boosted its share buyback target.
The oil major posted second-quarter net profit of $11.6 billion, or $5.95 per diluted share, more than triple the $3.1 billion, or $1.60 per share, in the same period last year.
Chevron's ramped-up share buyback plan follows those of other oil majors, including European giants TotalEnergies and Shell (LON:RDSa), which this week increased buybacks to satisfy investors looking for bigger returns.
"We think we can do it all," Chevron's Chief Financial Officer Pierre Breber told Reuters. "Grow the dividend to investors, grow traditional and new energy, pay down debt, and buy back shares."
Energy demand rebounded sharply in the last 12 months, but high prices for both fuel and natural gas are hitting consumers worldwide. Global economic figures show several economies are starting to slow, with potential for demand destruction.
Chevron's average U.S. sales price for a barrel of crude oil and natural gas liquids was $89 in the quarter, up from $54 a year earlier.
The international sales price for crude was $102 per barrel, up from $62 a year earlier.
The results from Chevron and U.S. rivals are likely to draw fire from the White House and other politicians who say oil companies are gouging consumers with high fuel prices as they rake in record profits.
Fuel prices have risen sharply due to a combination of pandemic closures, sanctions on Russia and export quotas in China that have reduced refining capacity.
Chevron increased the top end of its annual share repurchase guidance range to $15 billion from $10 billion. Analysts from large financial firms were not expecting an expansion of the buyback program this soon after it raised its guidance in May to the top end of its $5 billion-$10 billion range.
"The increased buyback pace to $15 billion from $10 billion is a positive surprise, while the balance sheet continues to strengthen," said Phillip Jungwirth, an analyst with BMO Capital Markets.
The company has also been using its earnings to cut its debt ratio, which currently stands under 15%, below the company's guidance. The company is not done deleveraging, though. "Over time, if we got to zero net debt, for example, that's okay. Because over time it will rebalance," Breber said.
Shares rose 3.7% in premarket trading to $155.90.
Chevron has been increasing investments and expanding production in the United States, while its global output falls following expiration of concessions in Thailand and in Indonesia.
"We more than doubled investment compared to last year to grow both traditional and new energy business lines," Chief Executive Michael Wirth said in a statement.
GRAPHIC: Energy prices push Chevron's earnings up (https://fingfx.thomsonreuters.com/gfx/ce/mypmnlzbbvr/Pasted%20image%201659090469153.png)
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Shell smashes record again with $11.5 billion profit
By: Reuters | July 28, 2022
Shell posted record results on Thursday, with a $11.5 billion second-quarter profit smashing the mark it set only three months ago, lifted by strong gas trading and a tripling of refining profit.
The company also announced a $6 billion share buyback programme for the current quarter but did not raise its dividend of 25 cents per share. It said shareholder returns would remain "in excess of 30% of cash flow from operating activities".
A rapid recovery in demand after the end of pandemic lockdowns and a surge in energy prices, driven by Russia's invasion of Ukraine, have boosted profits for energy companies after a two-year slump.
Shell bought back $8.5 billion of shares in the first half of 2022 and the new programme is significantly higher than forecast.
"The strong oil price backdrop has helped Shell deliver a blockbuster set of results. The dividend may have remained the same, but the share buyback programme is positive news for shareholders," said Stuart Lamont, investment manager at Brewin Dolphin.
Shell shares were up 1.6% at 1115 GMT, compared with a 1.3% gain for the broader European energy index.
French rival TotalEnergies also reported stellar results on Thursday, with a record profit of $9.8 billion for the quarter, and accelerated its buyback programme.
Norway's Equinor raised its special dividend and boosted share buybacks on Wednesday.
U.S. rivals Exxon Mobil and Chevron report results on Friday.
Oil and gas prices remained elevated in the quarter, with benchmark Brent crude averaging about $114 a barrel. Benchmark European natural gas prices and global liquefied natural gas (LNG) average prices were at record highs in the quarter.
(Graphics: https://graphics.reuters.com/SHELL-RESULTS/lbpgnwlwnvq/chart.png)
REFINING BOOST
Shell's second-quarter adjusted earnings rose to $11.47 billion, above the $11 billion forecast by analysts in a poll provided by the company. That was up from $5.5 billion a year earlier and $9.1 billion in the first quarter of 2022.
Shell's strong results reflected higher energy prices and refining margins, as well as strong gas and power trading, the company said, but were partly offset by lower LNG trading results.
Refining profit margins tripled in the quarter to $28 a barrel. They have weakened substantially in recent weeks on signs of easing gasoline demand in the United States and Asia.
Shell said its refinery utilisation would increase to 90-98% in the third quarter, compared with 84% in the second quarter.
Its oil and gas production in the second quarter was down 2% from the previous quarter at 2.9 million barrels of oil equivalent per day (boepd).
Shell's LNG liquefaction volumes stood at 7.66 million tonnes in the second quarter, down from 8 million in the previous three months. Volumes are expected to fall to between 6.9 million and 7.5 million tonnes in the third quarter because of strikes at its Australian Prelude site and planned maintenance.
Shell also said it had received a $165 million dividend payment in April from the Russian Sakhalin-2 oil and gas joint venture that it intends to exit.
The surge in cash generation was used to further reduce Shell's debt, which stood at $46.4 billion at the end of June, down from $48.5 billion three months earlier. Its debt-to-capitalisation ratio, or gearing, declined to 19.3%.
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Options Players Swarm Solar Bloom Energy Corp (BE) Stock on Climate Bill Update
By: Schaeffer's Investment Research | July 28, 2022
• Democratic Senator Joe Manchin has decided to back the new proposal for climate change spending
• Options volume is running at 26 times the normal amount
News that Democratic Senator Joe Manchin and Senate Majority Leader Chuck Schumer have unveiled a new $369 billion bill to fund climate change efforts has alternative energy stocks surging today. The shares of sector member Bloom Energy Corp (NYSE:BE), in particular, are feeling the tailwinds. The stock was last seen up 17.8% at $20.32.
Today's pop has BE set for its first close above the 140-day moving average since mid-April. And while the equity is still down 6.7% in 2022, it's added an impressive 54.8% in the last six months, and is looking to snap a three-month losing streak, should this positive price action continue.
Options players are targeting Bloom Energy stock at an elevated clip in response to the news. So far, 11,000 calls and 2,830 puts have exchanged hands, which is 26 times the intraday average. The most popular position is the August 26 call, followed by the 21 call in the same series, with positions being opened at both.
This call-bias has been the norm among short-term options traders. This is per Bloom Energy stock's Schaeffer's put/call open interest ratio (SOIR) of 0.39, which stands higher than just 10% of readings from the past year.
Meanwhile, analysts are split on BE. Six in coverage say "strong buy," while six say "hold." A look at short interest shows a slight 1.4% drop in the last reporting period. Despite this, the 16.70 million shares sold short make up a solid 10.5% of the stock's available float, and would take over six days to cover, at BE's average daily pace of trading.
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Crude Oil Continues to Consolidate
By: Christopher Lewis | July 28, 2022
• Crude oil markets initially tried to rally on Thursday but gave up the gain as we continue to consolidate in both grades of crude that I follow.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has rallied a bit during the early hours on Thursday but gave back gains near the $100 level. The $100 level is a large, round, psychologically significant figure that people have seen act quite a bit important multiple times. All things being equal, the market gave back enough gains to form a bit of a shooting star, so at this point, I think it’s probably that we are going to test the $95 level from a 200 day EMA perspective.
If we can break above the $100 level, it’s possible that we could test the 50 Day EMA just above the $103 level and is dropping. Ultimately, this is a market that I think you have to continue to fade signs of rallies as a dropping GDP in the United States should continue to put downward pressure here.
Brent Crude Oil Technical Analysis
Brent markets have given up some of the gains on the $104 level to turn things around and show a bit of a shooting star. At this point, the market is likely to continue to see a lot of volatility and choppiness, but we are clearly in a significant consolidation area. All things being equal, the market is likely to continue to see a lot of choppiness, with the 200 Day EMA underneath showing signs of support, right along with the $95 level.
Looking at this chart, it’s likely that we continue to see more back-and-forth so short-term traders will more likely than not favor range-bound trading systems, at least until we get some type of clothes outside of this $9.00 range we have been stuck in.
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Natural Gas Markets Continue to Look a Bit Exhausted
By: Christopher Lewis | July 28, 2022
• The natural gas markets have gone back and forth during the session on Thursday as we continue to undulate below the $9.00 level.
Natural Gas Technical Analysis
Natural gas markets have gone back and forth during the session on Thursday as we continue to look for some type of momentum. If we can break above the top of the $9.00 level, then it’s possible that we could try to take onto the upside, but all things being equal this is a market that has rallied way too hard, to begin with, and therefore I think at the very least we would need to go sideways from a momentum basis.
If we can take out the massive shooting star from Tuesday, that would be a very bullish sign, perhaps opening up the possibility of a move to the $10.00 level. The $10.00 level is an area that I think a lot of people will have to pay close attention to. Breaking above there would be a massive signal that the market is going to go much higher, but quite frankly I think sooner or later we are going to see demand get destroyed. After all, we have the GDP numbers coming out at miserable levels, so one would think that demand should drop going forward.
The $8.33 level underneath has offered a bit of support, so if we break down below there is likely that we could drive down to the $8.00 level, and then perhaps even lower than that. Looking at this chart, I think we are going to continue to trade in a massive consolidation area, as natural gas has been all over the place. In this scenario, all of that volatility is typically a bad thing going forward for an asset price.
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Record Exports Forward March. The Energy Report
By: Phil Flynn | July 28, 2022
Fed Chairman Jerome Powell seemed to suggest that the Federal Reserve is no longer going to be offering forward guidance about future interest rate decisions but instead is now becoming data dependent. That is welcome news to commodity speculators who like pre-report volatility. Chairman Powell seemed somewhat confident in his press conference yesterday and seem to signal that the Fed believed they were getting closer to theoretical neutral rates and had the semblance about him that the Fed was on a path to defeat this inflationary scourge.
No matter how you interpret what Chairman Powell said, the oil market obviously took it as very bullish. The suggestion that the Fed might not be as aggressive in raising rates reduces the strength of the dollar somewhat and gives the oil markets some upside.
JP Morgan, in their assessment that the ECB would not be able to raise interest rates by 3/4 of a basis point before the Fed announcement, caused oil prices to plummet the day before. We’re reversing course as it seems that central bankers are less panicked about inflation and feel like they can get it under control. More than likely it’s getting under control because the economy is slowing just a bit.
Based on the demand numbers that we saw in the Energy Information Administration (EIA) report yesterday, you would have to say that the talk of demand destruction is still greatly exaggerated or at least somewhat exaggerated. Probably one of the most notable things in the report was the fact that the US set a record in crude oil exports coming in at a whopping 4.55 million barrels a day. That was a 21% increase from the week before. Compare that to the Strategic Petroleum Reserve release from last week which was 5.6 million barrels, and you look at how far US inventories are below the five-year average. If you include exports of refined products, exports hit a record high export total of 10.9 million barrels a day.
The second most notable part of the report is the fact that total US petroleum stocks are at the lowest level since 2008. And even though we’ve seen some signs of moderation, the supply side is so low that there’s not any buffer in the event of upper demand surprise of war or another supply reduction event.
Yes, petroleum inventories fell by 9 million barrels overall. Demand in the United States bounced back in the major categories like gasoline demand and distillate demand. The EIA reported the gasoline demand hit 9.245 million barrels a day which was up 724,000 barrels a day from the week before. The EIA also reported that distillate demand was at 3.750 million barrels a day and that was up 53,000 barrels a day from the week before.
So even if demand hasn’t been as strong as some people think, the question you have to ask yourself is if that’s the case, then why are petroleum inventories are falling so dramatically? According to Reuters, petroleum inventories have fallen in 80 of the last 108 weeks by a total of -438 million bbl since the start of July 2020.
So we have tight inventories in the United States and you’re exporting a record amount of oil to bail out Europe because of the war in Ukraine. Perhaps it’s not the best time to be talking about an oil price cap on Russian oil and gas exports. Yet global leaders have a fantasy that somehow a price cap will work and reduce revenue to Russia. It was reported that the Group of Seven richest economies expect to have a price-capping mechanism on Russian oil exports in place by Dec. 5, when European Union sanctions banning seaborne imports of Russian crude come into force, a senior G7 official said on Wednesday.
What makes this crazier is that they’re talking about a price cap on December 5th right when winter it’s about to get started. Maybe we should all try this price cap idea. Biden says that gasoline stations are making too much money so we should put a price cap on gasoline. When I pull into the station, the pump says $5.00 a gallon. I am going to walk in and tell the person at the desk that I am capping my price at $4 a gallon. So, he’s going to have to give me a rebate. I wonder how that’s going to work out. Maybe someone else should try that first.
Right now, it looks like oil is breaking out of its recent corrective downtrend and is turning back higher. There’s a very high probability that crude oil could once again surpass $100 barrel and perhaps that could happen today. The back end of the curve still looks very attractive for hedging so if you haven’t done so this might be a great opportunity as it has been the last couple of days selling.
European natural gas is again soaring and supplies from Russia are sporadic. US natural gas prices pulled back after a historic run in the hope that hot temperatures will ease a bit even though there are spots of the country that are going to remain very much above normal. Long-term charts of natural gas still look like they have a long way to go on the upside. Short-term we’ve done some back and fill from the historic record-breaking run that we had this month. The trade will be very volatile. We want to buy brakes if possible. Kremlin Spokesman Peskov: We hope that Nord Stream 1 turbine will soon arrive at Portovaya station and will be installed. The European natural gas market isn’t buying that supplies from Russia are going to be reliable, to say the least.
Today’s GDP print will give us perhaps an opportune time for positioning.
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Earnings Preview: Exxon Mobil Corp. (NYSE: XOM)
By: 24/7 Wall St. | July 27, 2022
• Here’s a look at four companies set to report results before markets open Friday morning.
Exxon Mobil
Shares of Exxon Mobil Corp. (NYSE: XOM) have risen by almost 57% over the past 12 months. Like Chevron, the company’s stock decreased by nearly 21% in the period between early June and mid-July. Investors will be looking at Exxon to share some of its windfall profits either through buybacks or a special dividend. One analyst estimates that the company could report year-over-year profit growth of 400%.
Of 27 analysts covering the stock, 14 rate the shares a Hold, seven give the stock a Strong Buy rating, and five more rate the shares a Buy. At a current price of around $90.75, the upside potential based on a median price target of $100.00 is 10.2%. At the high target of $125.00, the upside potential is 37.7%.
Second-quarter revenue is forecast at $111.67 billion, up 23.4% sequentially and 64.9% year over year. Adjusted EPS is pegged at $3.89, up 87.9% sequentially and 254% year over year. For the full 2022 fiscal year, current estimates call for EPS of $12.06, up 124.2%, on sales of $413.68 billion, an increase of almost 45%.
Exxon shares trade at a multiple of 7.5 times expected 2022 EPS, 9.1 times estimated 2023 earnings of $10.00, and 10.7 times estimated 2024 earnings of $8.49 per share. The stock’s 52-week range is $52.10 to $105.57, and Exxon pays an annual dividend of $3.52 (yield of 3.93%). Total shareholder return for the past 12 months was 64.9%.
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Earnings Preview: Chevron Corp. (NYSE: CVX)
By: 24/7 Wall St. | July 27, 2022
• Here’s a look at four companies set to report results before markets open Friday morning.
Chevron
Over the past 12 months, shares of Chevron Corp. (NYSE: CVX) have risen by around 48%, including a drop of about 25% in just five weeks between early June and mid-July. Since peaking at around $124 a barrel in March, the price has fallen to below $100, a dip of 22.2%. The Energy Information Administration reported this morning that U.S. stockpiles are shrinking. Recession talk has cooled crude oil prices while production has remained essentially stagnant. If the Fed pulls in its inflation expectations–and if people believe that–crude demand and prices could jump higher again.
Analysts’ sentiment remains strong for the stock, even if the optimism is a bit more muted. At the beginning of January, 22 analysts had Buy or Strong Buy ratings on the stock. By April, that number had dropped to 15. Currently, of the 28 brokerages covering the company, 15 have a Buy or Strong Buy rating on the stock, and 12 have Hold ratings on the shares. At a current price of around $148.60, the upside potential based on a median price target of $178.00 is 21.8%. At the high price target of $202.00, the upside potential is 35.97%.
Second-quarter revenue is forecast at $57.69 billion, up 6.1% sequentially and 53.4% year over year. Adjusted EPS is forecast at $5.03, an increase of 34.3% sequentially and 194% year over year. For the full 2022 year, analysts currently expect Chevron to post EPS of $17.82, a gain of 119.2%, on revenue of $221.41 billion, up 36.3%.
Chevron stock trades at a multiple of 8.3 times expected 2022 EPS, 9.2 times estimated 2023 earnings of $16.07, and 11 times estimated 2024 earnings of $13.52 per share. The stock’s 52-week range is $92.86 to $182.40. Chevron pays an annual dividend of $5.68 (yield of 3.86%). Total shareholder return for the past 12 months was 54.2%.
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Crude Oil Markets Continue to Sit Sideways Overall
By: Christopher Lewis | July 27, 2022
• The crude oil markets have done very little during the trading session on Wednesday as we are trying to figure out the next move. There’s a lot of concern out there about recession, and that has put a damper on the markets in general.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has gone back and forth during the trading session on Wednesday as we are trying to figure out what to do next. We are sitting on top of the 200 Day EMA, and it looks like the market is just contemplating where it wants to go next. After all, this is an indicator that a lot of longer-term traders will be paying attention to, and with the threat of a recession, it’s going to be difficult to get clarity in the short term.
Today we also have the Federal Reserve in play. They have an announcement late in the session that could give us a bit of a “heads-up” as to where we go next, as the market has to figure out whether we have the lack of supply, or the lack of demand take over.
Brent Crude Oil Technical Analysis
Brent continues to look a bit confused, and at this point in time is likely that the market has to make an impulsive candlestick. As soon as we get some type of large candlestick printed for the daily chart, then I think it’s likely that we could get a bit of clarity. At that point, I will just simply follow the direction. At this point, we are squeezing between the 200 Day EMA underneath, and the 50 Day EMA start to drop rather significantly. I believe at this point in time it’s just a matter of waiting for the volatility to pick up and a significant-close either higher or lower to get involved.
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Natural Gas Markets Continue to Show Resistance
By: Christopher Lewis | July 27, 2022
• Natural gas markets have tried to rally during the trading session on Wednesday as we are approaching the $9.00 level.
Natural Gas Technical Analysis
Natural gas markets have gone back and forth during the trading session on Wednesday as we continue to see the $9.00 level as a potential barrier. This is an area where we have seen a lot of trouble in the past, so it does make quite a bit of sense that we see this area offer a bit of a ceiling. At this point, it looks like we are exhausted, especially considering that there was such a massive shooting star from the previous session.
If we were to break down below the bottom of the range for the session on Wednesday, it’s likely that natural gas will go looking to the $8,00 level. The $10.00 level is an area that will have a little bit of psychology attached to it. On the other hand, if we were to turn around and rally, we could go looking to the $10.00 level, but that is a large, round, psychologically significant figure that I think will be difficult to break through.
Looking at this chart, it does seem to be prone to extreme swings in one direction or another, and therefore I think it’s likely that we swing the pendulum in the other direction. Ultimately, I think it’s only a matter of time before we see a pullback as we had gotten too far ahead of ourselves. Yes, there has been a heat wave, but at the end of the day, it’s starting to dissipate in the US.
All things being equal, you need to be cautious about your position sizing, but it certainly looks as if natural gas is running out of steam and I think it’s only a matter of time before we drop.
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Weekly Gasoline Prices: Regular and Premium Down Again
By: Jill Mislinski | July 27, 2022
As of July 25, the price of Regular and Premium were down 16 and 15 cents each, respectively, from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $5.68 and South Carolina has the cheapest at $3.78. The WTIC end-of-day (7/26) spot price closed at 94.98 and is down 4.5% from last week.
The next chart is a monthly chart overlay of West Texas Light Crude, Brent Crude, and unleaded gasoline end-of-day spot prices (GASO for 6/30).
In this monthly chart, the WTIC end-of-day (7/26) spot price closed at 94.98, down 4.5% from last week.
The volatility in crude oil and gasoline prices has been clearly reflected in recent years in both the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). For additional perspective on how energy prices are factored into the CPI, see What Inflation Means to You: Inside the Consumer Price Index.
The chart below offers a comparison of the broader aggregate category of energy inflation since 2000, based on categories within the Consumer Price Index (commentary here).
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The Message. The Energy Report
By: Phil Flynn | July 27, 2022
The White House continues to tell us that they are doing nothing wrong with the way they are running the economy or the country, it’s only the messaging that gets them into trouble. For example, those old-school people who look at the technical definition of a recession as “two-quarters of negative growth” need to be more open-minded. It is true that the White House does a terrible job with this messaging thing especially when it comes to its latest press release about the Strategic Petroleum Reserve (SPR). Their messaging sent the wrong signal to the market causing a selloff in oil prices but that was their intention.
The White House, in their normally confusing messaging, moved the oil market lower after they announced that they would sell an additional twenty million barrels from the SPR. They confused the market and caused it to sell off even though that was part of the previously announced 180-million-barrel release. In fact, the messaging was so bad that the White House had to clarify what they meant. Panicky people had to be assured that this was not an announcement of a new release but just an auction of the oil already slated for release. We know they plan to sell oil to the highest bidder which in many cases might be a company that will export it to China or elsewhere but that is a topic for another energy report.
The strong start to oil yesterday had a strong reversal of fortune in part because Europe agreed to a natural gas ration plan and plunging consumer confidence. Lousy consumer confidence and slowing home sales are more signs that consumers are struggling in this Biden recession. Wait, it’s not technically a recession or even if it is, we cannot call it that. Not only did we see weak sales from Walmart the other day, but Adidas also missed their estimates of growth as people are buying fewer soccer balls and T-shirts.
Oil is now coming back and that should continue if we see data as we did from the American Petroleum Institute last night. Even with a 5 million barrel plus release from the SPR last week, the API reported that crude oil supplies still fell by a whopping 4.04 million barrels. On top of that, the products also saw a decrease in supply with gasoline falling by 1.06 million barrels and inventories falling by 550,000 barrels. The trifecta of drawdowns in petroleum might suggest that demand is bouncing back after the recent price drop. It could also show some inherent strength in demand going forward.
Saudi Arabia thinks that demand is still going to be fairly good despite declining refining margins. Saudi Arabia is going to raise their selling price for crude oil to a record high. Bloomberg News reports that the world’s top crude exporter is expected to price its Arab light crude to Asia at a $10.80-a-barrel premium to the region’s benchmark for September-loading cargoes, according to the median estimate in a Bloomberg survey of five refiners. At the same time, a slump in margins for Asian processors means that such a hike may dampen any requests for extra barrels, traders said. There were also reports that Saudi upped their exports, so apparently somebody is willing to pay the price despite record SPR releases and Russian oil exports.
The physical market for oil is very tight and the disconnect between the futures market and the cash market should also start to come together. If that happens, that means that we should see oil be very well supported. Chart-wise, oil is at a technical juncture. Some see the charts in a choppy downtrend but if you look at the longer-term charts they still point up. We should get some clarity shortly on oil’s next big move which should be up.
We get a critical decision from the Fed today along with the gross domestic product number tomorrow. Any signs that the Fed is comfortable with their plan to whip inflation now with only a 3/4-point interest rate increase should give the oil a nice pop today. If the Energy Information Administration inventory numbers are in line with what we saw from the API, then that should be another reason to believe that oil prices have put in at least a short-term bottom. Even with yesterday’s weakness, we seem to hold key support above 9500 and the larger support down near 9300.
The heating oil crack spread that was under pressure in recent weeks seems to have bottomed and could be pointing towards the upside. Diesel should get a bounce from the European union’s natural gas rationing plan. We also expect to see gasoline demand bounce back to the upside in a big way. There is a lot of speculation that the EIA has underestimated demand for gasoline in recent weeks. If the EIA plays catchup, we could see a big surge in demand. Besides, even if they don’t adjust previous demand numbers, the reality is that because retail prices have pulled back more people have filled up their cars.
Natural gas went on historic tear and this month has had the most incredible up move we’ve ever seen in the history of the futures contract. The heat wave in the US is driving the market along with the drama over the European gas rationing plan.
Reuters reports that, “Germany’s BASF (BASFn.DE), the world’s largest chemical company, is cutting ammonia production further due to soaring natural gas prices, it said on Wednesday, with potential ramifications from farming to fizzy drinks. Germany’s biggest ammonia maker SKW Piesteritz and number four Ineos also said they could not rule out production cuts as the country grapples with disruption to Russian gas supplies.
On one hand, if Europe rations gas demand one might assume that that’s bearish for LNG but the reality is what they’re going to try to do is ration gas mostly from Russia and try to replace that with good old-fashioned US LNG.
One might wonder that if the Freeport LNG export terminal were open right now, is it possible that natural gas would be closer to 10 or $12. I guess we’ll never know but we do know that this market is very vulnerable to upside spikes. We have warned that time and time again and worst fears are coming true.
Still, recession fears are still hot and heavy. John Kemp at Reuters reported that CATERPILLAR’s share price in the three months from May to July was down by -13% compared with the same period a year ago. The heavy equipment manufacturer’s share price has been closely correlated with the OECD’s leading economic indicator. The slump is consistent with the onset of a business cycle slowdown.
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Occidental Petroleum Leads Exxon Mobil, Chevron Ahead Of Next Week's Earnings
By: Schaeffer's Investment Research | July 27, 2022
• Recent Earnings Growth
Like Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and other oil-and-gas producers, Occidental Petroleum (NYSE: OXY) has been forming a potentially constructive consolidation, rather than falling off a cliff.
Does that mean Occidental may be poised for more gains?
Let’s take a look at the top three stocks with the heaviest concentrations within the S&P large-cap energy sector. Weightings are as follows:
• Exxon Mobil: 23.19%
• Chevron: 21.19%
• Occidental: 4.62%
Clearly, Occidental has less influence over sector-wide performance than its peers. But don’t forget: Stocks frequently move in tandem with their broader industry or sector.
That’s particularly true for stocks such as Occidental that constitute a smaller allocation within their industries or sectors.
Believe it or not, year-to-date, Occidental has returned 123.08%. That compares to Exxon Mobil’s 49.93% return and Chevron’s return of 28.95%.
Of course, that lower return for the two biggest stocks means that Occidental is also outpacing the broader sector, which has returned 34.95% year-to-date.
What’s driving Occidental’s price leadership?
For starters - and this may sound ridiculous - but with a market cap of $58.17 billion, Occidental is significantly smaller than either Exxon Mobil or Chevron, with market caps of $377.06 billion and $289.39 billion, respectively. While a company with a market cap of $58.17 is, indeed, very large, it’s still more nimble than either of those giants.
Occidental has a beta of 0.98, while both its larger rivals have betas of 0.51. While all three of those companies are less volatile than the broader market, Occidental does tend to notch bigger moves. And remember: Volatility doesn’t have to mean big downside moves. Upside volatility is also an important element of investing, and Occidental shareholders are seeing the benefit of that.
RECENT EARNINGS GROWTH
Occidental is slated to report second-quarter results on August 2, after the closing bell. Analysts expect the company to earn $2.91 per share on revenue of $9.84 billion.
If met, those would mark significant increases over the year-ago quarter. According to MarketBeat earnings data, Occidental beat earnings and revenue estimates in each of the past five quarters.
The energy sector was the clear leader this year, until June, when lower gas prices and higher inflation combined to send sector stocks lower. It still remains the year-to-date leader, up 32.90%, while every other sector is down for the year.
Energy also boasts a gain in the past month, but so does every sector except communications services and materials.
That’s some context for how the market may greet Occidental’s report, if the company once again beats views.
It’s no surprise that stocks often advance sharply if the top- or bottom-line results meet views, there’s nothing scary buried in the fine print, and all the conference-call comments from company managers align with expectations of higher earnings ahead.
However, there have been plenty of companies lowering guidance lately. In addition, the trend of commenting on headwinds, such as inflation and supply-chain issues cutting into revenue or profits, are sending stocks downward.
LOOKING AT THE CHART
Occidental broke out of a cup-shaped correction in early January, then continued traveling higher in February. It pulled back to tag its 50-day average before rebounding off that line.
The stock bolted higher in late February, as the company said it would expand shareholder distributions and pay down debt. The company announced a dividend increase, to $0.13 per share, as well as a $3 billion share repurchase program.
Shares got another huge boost in early March, as Berkshire Hathaway revealed a $5 billion stake in the company.
Like everything else in the oil industry, Occidental peaked in early June, and began shaping its current correction. Thus far, it’s corrected 27% from peak to trough and has been slowly shaping the right side of its base since late June.
On Tuesday, the stock closed 1% below its 50-day average, as it fell 3.63%, or $2.34, to $62.07. That downside action was in tandem with the broader market, which also declined Tuesday on concerns about the Federal Reserve’s upcoming interest rate hike and an earnings miss from Alphabet (NASDAQ: GOOGL).
So how should you view Occidental’s potential right now? In the near term, you might consider waiting for the earnings report before making a buy or sell decision. That’s true with any stock. As noted above, these reports have the potential to send a stock lower, wiping out short-term gains.
However, even if a stock gaps up significantly after the report, that’s a signal that institutional investors have conviction in their purchase, and aren’t likely to bail out and take profits quickly. In other words, a gap-up can mean you have time to book some profits after an earnings report.
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Occidental Petroleum (OXY) One man's trash is another's treasure!
By: TrendSpider | July 26, 2022
• $OXY One man's trash is another's treasure!
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Oil Inventories Fall by 4.0M Barrels Last Week: API
By: Yasin Ebrahim | July 26, 2022
Investing.com -- U.S. crude oil inventories fell sharply last week, API data showed Tuesday, at a time when fresh worries about a slowdown in the global economy hurting energy demand remain front and center.
West Texas Intermediate, the U.S. benchmark, traded at $95.51 per barrel following the report after settling down $1.72 at $94.98 per barrel.
U.S. crude inventories decreased by about 4.0 million barrels for the week ended July 22. That compared with a build of 1.9 million barrels reported by the API for the previous week. Economists were expecting a decrease of about 1.1 million barrels.
The fall in crude inventories arrived just as the International Monetary Fund cut its outlook on global growth and warned that high inflation threatens to tip the global economy into recession.
The IMT cut its forecast on global GDP growth to 3.2% in 2022 from a forecast of 3.6% issued in April.
The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies fell by about 1.0 million barrels last week.
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Crude Tumbles as U.S. to Sell More Reserve Amid Worsening Economic Stats
By: Investing.com | July 26, 2022
Crude oil gave up Tuesday’s early gains to trade as much as $1 down a barrel and below key $100 pricing after the Biden administration announced more sales from the national oil reserve to fight inflation at the pump amid weakening economic statistics pointing to the likelihood of recession.
New York-traded West Texas Intermediate, or WTI, crude for September delivery was down $1.12, or 1.2%, to $95.58 per barrel by 1:50 PM ET (17:50 GMT).
London-traded Brent crude for October delivery was down 35 cents, or 0.4%, to $??99.84.
WTI hit a session high of almost $99 and Brent above $102 before giving those back as the Energy Department and White House jointly announced that President Joe Biden had authorized the sale of a further 20 million barrels from the Strategic Petroleum Reserve by October, adding to the already scheduled release of 180 million barrels from the reserve.
The White House said it has released some 125 million barrels from the SPR since Biden began tapping the reserve in November to offset a global oil supply deficit and fuel price spike that heightened after Russia’s invasion of Ukraine in February.
“With these releases, the President has executed a drawdown of unprecedented size and scope to respond to the energy market disruptions posed by Russia’s invasion, and his actions are having an impact,” the White House said.
It said the price of gasoline at U.S. fuel pumps had fallen at 40 cents a gallon as a result. On Tuesday, the average gasoline price at U.S. pumps was at $4.32 a gallon from an all-time high of $5.01 in mid-May, the American Automobile Association said.
On the economic front, sales of new U.S. homes fell just over 8% in June from a month ago and were down double-digits from a year earlier, according to government data on Tuesday that reinforced the notion of a housing market weakening from surging mortgage rates and declining consumer confidence.
U.S. consumer confidence, meanwhile, fell for a third straight month in July as Americans’ fear of a recession grew from Federal Reserve rate hikes aimed at curbing inflation at 40-year highs.
The Fed has raised rates by 1.5% in three increases since March and is likely to hike rates by another 0.75% this week, with the option of three more revisions before the year-end. Despite such increases, inflation measured by the Consumer Price Index grew by 9.1% in the year to June, its highest in four decades. The central bank’s tolerance for inflation is a mere 2% per year.
“Concerns about inflation — rising gas and food prices, in particular — continued to weigh on consumers,” said Lynn Franco, senior director of economic indicators at The Conference Board, which groups public and private corporations that track and publish economic statistics.
“As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July,” Franco said. “Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.”
The Fed left rates unchanged for two years after the outbreak of the coronavirus pandemic to allow for economic recovery. The trillions of dollars in aid dispensed to individual Americans and businesses during that stretch, however, resulted in a price growth explosion.
Now, economists say the central bank risks pushing the economy into a recession if it continues with its present trajectory of rate hikes. U.S. gross domestic product already declined 1.6% in the first quarter. The Commerce Department will issue its first reading for Q2 GDP on Thursday. A negative second quarter is all that is needed to technically send the economy into a recession.
Market participants were also on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.
The API will release at approximately 4:30 PM ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended July 22. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 1.04 million barrels, adding to the 446,000-barrel reduction reported during the week to July 15.
On the gasoline inventory front, the consensus is for a draw of 857,000 barrels over the 3.5 million-barrel build in the previous week.
With distillate stockpiles, the expectation is for a climb of 500,000 barrels versus the prior week’s deficit of 1.3 million.
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Crude Oil Markets Give Up Early Gains
By: Christopher Lewis | July 26, 2022
• Crude oil markets rallied significantly during the early hours on Monday but then fell yet again as we continue to see plenty of volatility.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has been very noisy over the last several days, and Tuesday was no different. Because of this, it looks like the market is going to continue to dance around the 200 Day EMA, thereby offering plenty of opportunities in both directions for short-term traders. Whether or not that changes anytime soon remains to be seen, but the Federal Reserve meeting on Wednesday could be a catalyst.
I believe we go sideways in the short term as we continue to argue between the concept of a lack of supply, and a lack of demand. It’s worth noting that we have been dropping overall recently, which I believe shows the market trying to price in recession. At this point though, there does not look like we have anything close to clarity.
Brent Crude Oil Technical Analysis
Brent markets also look a bit confused, as we are sitting above the 200 Day EMA, and right around the $100 level. At this point, we can break above the $104 level, then we could have a bit more of a recovery. However, if we break below the 200 Day EMA, the market could drop bank to test the $90 level. The $90 level is an area that a lot of people will be paying close attention to, because of the breakdown through there, it would be a fresh, new low, and could open up quite a bit of momentum to the downside. While I don’t necessarily think that’s going to be right away, it is a very real threat at this point as we continue to see weak economic growth.
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Natural Gas Markets Spike
By: Christopher Lewis | July 26, 2022
• Natural gas markets have spiked during the Tuesday session, as we head toward the options expiration. That being said, the market continues to see a lot of noise.
Natural Gas Technical Analysis
Natural gas markets have rallied rather significantly during the trading session on Wednesday to pierce the $9.00 level. However, it’s probably worth noting that the market has quite a bit of volatility ahead of it as we are struggling in this general vicinity, and we also have options expiration happening.
Natural gas markets have also gotten a little bit ahead of themselves, so it does make sense that we would see a bit of a giveback. Whether or not we can break out is a completely different question, but it is worth noting that the heat in the United States is starting to subside, and therefore demand could drop a little bit. Ultimately, I think this is a scenario where you would see a lot of noisy behavior, and therefore I think what we have is a situation where we are overbought, and that’s probably the most important thing that you can take away from this chart.
If we were to break down below the $8.00 level, I think that will accelerate the move back down to the levels. However, if we take out the recent high, then we will be threatening the $10.00 level. That of course is a ridiculous level, so I think what we have is also a massive psychological barrier. If you have been following me for the last several days, I have told you I’ve been looking for an opportunity to short this market. I think we may be starting to see the first remnants of that potential setup, so stay tuned, because I believe that there is a nice swing trade just waiting for us to get involved.
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Energy Sector (XLE) Put sweepers active with size in to the 11/18/22 $65 PUTS ~ 5.4K contracts/$1.84 mil premium
By: Money Flow Mel | July 26, 2022
• $XLE Put sweepers active with size in to the 11/18/22 $65 PUTS ~ 5.4K contracts/$1.84 mil premium.
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Beware! Winter Is Coming! The Energy Report
By: Phil Flynn | July 26, 2022
Europe is in a dangerous situation after Russia again reduced natural gas flows to Europe in a not-so-subtle reminder that winter is coming and Russia controls the supply. The move by Russia is sending natural gas prices soaring on both sides of the pond and giving the oil market a boost as Europe struggles to find alternatives to Russian gas. Europe is responding by planning to reduce consumption, but can that work if some countries in the bloc can’t conserve without devastating their economies.
In the meantime, supply fears are trumping recession fears in the energy markets ahead of tomorrow’s Fed announcement and Thursday’s GDP. Oil traders will also look at tonight’s American Petroleum Institute (API)report to confirm signs that gasoline demand may have bounced back in a significant way after the erratic gasoline demand data that we have seen in recent weeks.
Keep in mind that tonight’s number should include a 5.6-million-barrel release from the SPR. The release that will end this fall as the Biden administration is starting to understand that the SPR was not meant to supply the world. Amos Hochstein, Biden’s Special Presidential Coordinator for International Energy Affairs said, “We can’t be an oil supplier. It’s a reserve and so we have to keep that.” That might be wise considering what Russia is doing to Europe. Let’s pray we don’t get any hurricanes that disrupt US oil production or refining capacity, or we could be in big trouble.
Russia is weaponizing its natural gas supply. Reuters reported that Russian state-owned energy producer Gazprom PJSC said gas exports through the vital Nord Stream pipeline to Germany would drop to about a fifth of the pipe’s capacity, blaming sanctions-related problems with turbines that have already reduced flows. The fresh reduction in the pipeline’s capacity—from 40% currently to 20%—is expected to take effect Wednesday, Gazprom said. Wholesale European gas prices jumped 12% Monday to 179 euros, or about $183, a megawatt-hour. They have more than doubled so far this year and are expected by analysts to keep rising as winter approaches, adding to inflation that is straining economies, governments, and financial markets in the region.
Remember the good old days when OPEC used to cheat on their production quotas? Remember the good old days when the market used to laugh when OPEC said it was going to hold back supply? Well no one is laughing anymore. Argus Media reported that OPEC compliance levels among members of the OPEC+ producer alliance soared to a record 320% in June, up from 256% in May, according to Argus Media, quoting OPEC delegates. Output came in 2.84 million bpd below its collective June production target, with compliance among core OPEC participants narrowing to 196% from 236% in May and among non-Opec members increasing to 464 from 360%. Argus said its survey for June put total OPEC+ compliance at 297%, with OPEC members and non-OPEC counterparts achieving a respective 213% and 442%.
The question for the market is can OPEC increase production if they can’t even hit their current quotas? There has been some market chatter that Saudi Arabia has raised their oil exports in recent weeks. We will have to wait for confirmation but perhaps it’s a sign that the Kingdom is giving into the Biden administration and its upping exports. A sign perhaps they appreciated Biden’s fist bump with Crown Prince bin Salman.
Will any of this matter if we go into a deep recession? What is a recession anyway? The Biden administration doesn’t seem to know or maybe they don’t want to know. The GDP comes out on Thursday and it’s very possible we’re going to see two successive quarters of negative growth which, according to your basic economic textbook, is the definition of a recession. This recalls an article written by my old buddy Dan Molinsky at the Wall Street Journal a few years ago when he was in Venezuela covering President Hugo Chavez. It seems back in 2009 President Chavez had a problem when the economic data started to go in the wrong direction. Molinsky wrote, “President Hugo Chávez wasn’t pleased with data released this week that showed the Venezuelan economy tumbling into a recession. So the populist leader came up with a solution: Forget traditional measures of economic growth and find a new, “Socialist-friendly” gauge. “We simply can’t permit that they continue calculating GDP with the old capitalist method,” President Chávez said in a televised speech before members of his Socialist party on Wednesday night. “It’s harmful.” Biden’s economic advisers like Treasury Secretary Janet Yellen and others seem to agree. If you don’t like what the economic data is telling you, just change the definition and everything is going to be OK.
Libya’s oil production is coming back after some economic turmoil. Reuters reported it hit 1.1 million barrels per day, quoting oil minister Mohammed Oun from the Tripoli-based Unity government.
Well the U.S. Strategic Petroleum Reserve was never meant to supply the world with oil. The reality is that US energy industry continues to be a major positive force in the global economy. The global economy would be in much better shape if we decided to embrace our fossil fuel resources and supply the world with some of the cleanest produced fossil fuels on the face of the earth.
That’s why it is great news that the Energy Information Administration reported that the United States became the world’s largest liquefied natural gas (LNG) exporter during the first half of 2022, according to data from CEDIGAZ. Compared with the second half of 2021, U.S. LNG exports increased by 12% in the first half of 2022, averaging 11.2 billion cubic feet per day (Bcf/d). U.S. LNG exports continued to grow for three reasons—increased LNG export capacity, increased international natural gas and LNG prices, and increased global demand, particularly in Europe.
According to EIA estimates, installed U.S. LNG export capacity has expanded by 1.9 Bcf/d nominal (2.1 Bcf/d peak) since November 2021. The capacity additions included a sixth train at the Sabine Pass LNG, 18 new mid-scale liquefaction trains at the Calcasieu Pass LNG, and increased LNG production capacity at Sabine Pass and Corpus Christi LNG facilities. As of July 2022, we estimate that U.S. LNG liquefaction capacity averaged 11.4 Bcf/d, with a shorter-term peak capacity of 13.9 Bcf/d.
International natural gas and LNG prices hit record highs in the last quarter of 2021 and the first half of 2022. Prices at the Title Transfer Facility (TTF) in the Netherlands have been trading at record highs since October 2021. TTF averaged $30.94 per million British thermal units (MMBtu) during the first half of 2022. LNG spot prices in Asia have also been high, averaging $29.50/MMBtu during the same period.
Since the end of last year, countries in Europe have increasingly imported more LNG to compensate for lower pipeline imports from Russia and to fill historically low natural gas storage inventories. LNG imports in the EU and UK increased by 63% during the first half of 2022 to an average 14.8 Bcf/d.
Most U.S. LNG exports went to the EU and the UK during the first five months of this year, accounting for 71%, or 8.2 Bcf/d, of the total U.S. LNG exports. Similar to 2021, the United States sent the most LNG to the EU and UK during the first half of the year, providing 47% of the 14.8 Bcf/d of Europe’s total LNG imports, followed by Qatar at 15%, Russia at 14%, and four African countries combined at 17%.
In June, the United States exported 11% less LNG than the 11.4 Bcf/d average exports during the first five months of 2022, mainly as a result of an unplanned outage at the Freeport LNG export facility. Freeport LNG is expected to resume partial liquefaction operations in early October 2022.
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4th Longest Streak of Declines in Prices at the Pump
By: Bespoke Investment Group | July 25, 2022
The price of a gallon of gas, while still up YTD and relative to most other periods in the past, has pulled back considerably and consistently over the last six weeks. While a gallon of gas topped $5 in early to mid-June, over the weekend, the average price was back down to $4.36. The decline in prices has also been consistent as prices have now declined for 41 straight days. Going back to 2005, when AAA began tracking the daily national average price, this current streak now ranks as the fourth-longest on record after surpassing the 39-day streak from September 2006 over the weekend. In order for this current streak to move into the top three and oust the 62-day streak from the COVID crash, we'll need to see another three weeks of daily declines, and in order to move into first place overall, we'd need to see the current streak nearly triple in length to 118 days and stretch out to early October!
While the current streak of declines is the fourth-longest on record, the magnitude of gasoline's decline over the last 40 days hasn't been quite as extreme. At -13%, there have been seven other periods where average prices at the pump experienced a larger decline over the same time period. What is notable, however, is that back in March the 40-day rate of change was the second highest on record trailing only the 33% increase that came in the wake of Hurricane Katrina in September 2005.
In order for prices at the pump to keep declining, we're going to need oil prices either to stay around current levels or continue declining. Oil prices have obviously been weak for the last month or so, but over the last two weeks have shown some stabilization above the 200-DMA, including two different days when the price dropped below the 200-DMA intraday but bounced. If the 200-DMA holds in the near-term, gas prices are likely to stop declining, so this will be a key level to watch for what will ultimately determine the health of the consumer.
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Crude Oil Markets Continue to Find Buyers
By: Christopher Lewis | July 25, 2022
• Crude oil markets have fallen a bit during the trading session on Monday only to turn around and show signs of life.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude market has initially pulled back in session on Monday to 200 Day EMA. By doing so, the market looked as if it was going to start falling again, however, buyers have come back to pick this market up a bit. That being said, the markets certainly look as if they are struggling from a longer-term standpoint, and therefore I do not think this is a scenario where you have enough momentum to get excited to the upside, but this certainly looks as if it’s going to be very noisy.
If we were to break through the bottom of the candlestick for the session on Monday, it’s very likely we will eventually drop through the $90 level, perhaps kicking off a major bearish market. On the other hand, if we do break above the $100 level, that could bring momentum back into the market.
Brent Crude Oil Technical Analysis
Brent markets have also pulled back to test the 200 Day EMA, and also have rallied. By doing so, we have seen longer-term traders come back into the market to try to sort things out. The fact that we are trying to form a hammer is a good sign, but we need to break above the $105 level in order to recapture the momentum. With this, I think it’s only a matter of time before the market would reach above the 50 Day EMA as well. That being said, we have the Federal Reserve meeting coming on Wednesday which could have a massive influence on the US dollar, that obviously has a bit of a “knock-on effect” over here.
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Natural Gas Markets Have Rallied Again on Monday
By: Christopher Lewis | July 25, 2022
• Natural gas markets have rallied again during the day on Monday as we continue to see a lot of volatility.
Natural Gas Technical Analysis
Natural Gas gapped to the upside during the trading session on Monday as we continue to see a lot of bullish momentum. Ultimately, it’s worth noting that the market is paying attention to heat waves, as we have them seemingly everywhere. That being said, this is a short-term phenomenon, so that might be why we have seen such a massive shot to the upside.
The market is well above the $8.00 level at this point, and I was starting to reach the overbought yet again. The $9.00 level would be an area of significant resistance as we sold off from there quite drastically. Any signs of exhaustion near there would more likely than not be a nice swing trade, but the question is whether or not we can make it there? If we do, it could be a nice opportunity.
Alternatively, if we turn around and break below the $8.00 level, that would be a very negative turn of events and could send this market to the 50 Day EMA. I do think that the recent breakdown is something that did not happen in a vacuum, but the massive amount of volatility continues to be a major issue when trading natural gas. Quite frankly, retail traders have no business trading in this market right now because it is being kicked around by a handful of major players.
Ultimately, this is a market that is very abundant from a longer-term standpoint, so I do believe that we will see this market do something that makes no sense in a normal environment: start falling into the cooler weather for the northern hemisphere.
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Second Thoughts. The Energy Report
By: Phil Flynn | July 25, 2022
Sometimes we all have second thoughts. It appears that the Biden administration may be having second thoughts about the wisdom of their Strategic Petroleum Reserve release. Joe Biden, who first released oil back in November to lower gasoline prices, is starting to worry about what’s going to happen when the oil reserves are drained and there’s an actual emergency. The Biden administration started to use the strategic petroleum reserve for political purposes and now they realize that could backfire in a big way as inventories have been drawn down to historic lows and the risk of global supply disruption is higher than it’s been maybe ever.
Yahoo Finance reported that a Biden adviser just saying that the oil reserve releases need to end and we have to quit being a supplier to the rest of the world with our strategic reserve. Yahoo said that, “The Strategic Petroleum Release “was a stop-gap measure,” says Amos Hochstein, Biden’s Special Presidential Coordinator for International Energy Affairs. “We can’t be an oil supplier. It’s a reserve and so we have to keep that.” He vowed that ending the releases won’t spur supply shocks, noting that the private sector has assured him that it will be able to ramp up production once there’s no longer access to the reserve.
Amos Hochstein made the point of why we shouldn’t have released oil from the strategic reserve in the first place. He said the private sector confirmed they’d be able to ramp up production once there’s no access to the reserve. That would have happened even faster if it weren’t for the fact that the Biden administration intervened in the market and released oil for political purposes to lower gasoline prices and then double down on that strategy when it came to the war in Ukraine.
The Biden administration decided to export oil to help Europe which everybody knew would happen as soon as they released from the reserve but at the same time, it was a total misuse of what the Strategic Petroleum Reserve was made for. Today JODI reported that U.S. crude oil closing stocks fell in May to 938 MMbbl and are now at their lowest level since 2004. The SPR’s level has fallen to about 492 million barrels of oil, the lowest level since December 1985, according to the Energy Information Administration. That is a dangerous combination and has the Biden administration having second thoughts as to whether it was wise to use the Strategic Petroleum Reserve to bail out Europe and put the U.S. economy at risk. Perhaps the same type of second thoughts many Biden voters are having.
So it might be good news for Europe that the Kremlin says they have no interest in a total cut-off of natural gas supplies to Europe. Bloomberg reports that Gazprom will reinstall the repaired Nord Stream 1 turbine once it arrives in Russia and flows will resume at levels that are technically possible, the Kremlin spokesman. Dmitry Peskov told reporters on Monday, “The turbine will be installed after all the technical
formalities have been completed and the flows will be at the levels that are technologically possible” Russia is “not interested” in cutting off its gas supplies to Europe but this may change, “If Europe continues its course of recklessly imposing sanctions and restrictions that hit itself, the situation may change. But once again, Russia is not interested in this” So Europe has that going for them.
Russian missile strikes in Odesa Sunday targeted military infrastructure in the port there and should not affect planned grain shipments. As far as grain goes Ukraine’s deputy infrastructure minister: We will be ready to work on the export of grain from all ports in the agreement within two weeks.
Oil prices overnight have been very erratic, to say the least. On Sunday night the market started on solid ground with reports that China’s covid lockdowns would be lessened a bit. Oil prices also were under pressure when it appeared that the EU was going to soften oil sanctions for private traders. There will be more time to comply so it would not disrupt the short-term oil market in Europe. The market is trying to balance the potential impact of high price demand destruction versus the current global supply shortages. Oil inventories around the globe are below normal and if the demand destruction is less than people anticipate, then we could see a huge move up in the price of oil. High prices are encouraging more production but that’s going to take some time and the use of strategic reserves will backfire because it gave the market a false perception that supplies would be adequate. When the reserve stops flowing, we’re going to see a shortage. The private sector would have responded faster if the reserve releases didn’t happen.
Natural gas opened on a tear and pulled back a bit. EBW Analytics says that record-breaking electricity demand and a sizably bullish EIA storage surprise led front-month natural gas to extend upward momentum—with Sunday night’s move higher now reaching a startling $3.00 / MMBtu upswing in under three weeks. In the immediate term, the further upside appears likely ahead of August contract options expiration and final settlement midweek. By early August, however, a long-overdue test of support could lead to weakness as the September contract assumes the front-month role.
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