Energy Spotlight: Brent flirts with $120bbl but back to $109, Biden enviro law scrapped

The S&P/ASX 200 Energy Index is down -2.36% in mid afternoon trades on Friday.

Brent prices hit $119bbl midweek on the back of geopolitical events, but has since fallen back below $110bbl.

Re-openings of major Chinese cities appear to have done little to change the tide of sentiment against ongoing inflation and recession concerns, even as OPEC+ says it will not increase planned output boosts.

Weekly performance has declined for the third in a row, sitting at -0.12%. 

Last Friday, weekly performance showed red at -5.91%. 

On Wednesday 29 June saw the XEJ close at 10,279pts — but it’s finishing the week at around 9,789pts. 

The index lost over 16% last month when US inflation rate (and interest hikes) rattled trader sentiment all-over. 

Price headwinds

• Continued doubt about oil consumption across the board continues to stifle enthusiasm

• Low US consumer spending data from this week has added weight to predictions of a recession

• Gas markets have subdued in the US but remain at record highs in the Netherlands (TTF Benchmark) and near all time highs in the UK 

Price drivers

• Chinese lockdowns are being lifted in Shanghai and Beijing

• Oil supplies remain tight with OPEC+ indicating it will not boost its production output targets for August

• Violent protests in Libya and Ecuador respectively have seen the two large oil producing nations suspend operations

Zooming out for a twelve year chart, the severity of the current Dutch TTF gas benchmark price is revealed (TradingEconomics)

It’s been a week of mixed performance for the XEJ as oil prices have a rollercoaster run on a mix of good news and bad news.

Chinese lockdowns were lifted last week in Shanghai and Beijing, but trader sentiment the world-over remains damp. 

Protests in Libya and Ecuador have both led to the suspension of oil production-export activities, which helped push Brent up to $119bbl midweek. 

Turns out that rally was running on fumes—Brent is back down below $110 at the start of July.

OPEC+ won’t produce more oil than it already agreed to and oil markets are still tight, though, Russian production did increase 5% in June. 

But Russian Gazprom investors might be a bit miffed— the supermajor isn’t paying any dividends for 2021. 

Looking at the macro world of regulation and compliance, perhaps the biggest development this week comes from the US Supreme Court. 

A six justice conservative majority have overturned the Federal Biden government’s ability to use the EPA to order states to curb emissions. 

Biden’s environmental agenda has been the subject of intense and relentless industry lobbying since he was first voted into office. 

Energy companies in West Virginia, Texas, and Oklahoma are the most obvious winners of the challenge to the Federal EPA’s authority. 

The legality of an Securities and Exchange Commission rule for companies to report emissions also now hangs in a grey area. 

What to look out for next week 

On Saturday, Baker Hughes will release its US rig count data, which will give traders an idea of production activity at the start of July. 

On Tuesday, the Australian RBA will make its next interest rate decision. 

On Thursday, the American Petroleum Institute releases its US crude oil stock change data for early July — and the EIA releases a raft of domestic US data.

Looking at Australian majors:

Woodside 

Woodside Petroleum (ASX:WDS) is down -3.83% heading into the last hour of trade.

One week performance sits at -1.67% — last week, that figure was -5.74%. 

Year to date (YTD) performance sits at 39.63%.

Santos 

Santos Limited (ASX:STO) is down -2.09%.

One week performance is down -1.16%.

YTD performance is at 15.13%. Last Friday, Santos’ YTD performance reflected 14.10%.

Beach Energy 

And Beach Energy (ASX:BPT) is down -0.87% 

One week performance for Beach is actually up 5.23%, but one month performance down -0.87%. 

YTD, Beach is up 35.71% — last Friday, YTD performance reflected 26.19%. 

Beach Energy's three month charts compared to the XEJ