Good morning; here's what the Oilman has for you today:

• LNG Race Fuels U.S. Capacity Growth

• The Rate Hike Bear Trap

• Upcoming Oil and Gas Events

• Tweet of the Day

LNG Race Fuels U.S. Capacity Growth

The race is on for a long-term supply of LNG, and U.S. producers are set to be the big winners.

With more buyers opting for long-term deals, U.S. LNG developers can expand with no fear of the “stranded assets” monster.

Europe sees the light

Europe has gone from insignificant to huge LNG buyers in a year.

And it is now waking up to the fact that locking in long-term supply might not be such a bad idea.

Thanks to these long-term supply deals, U.S. developers can move forward with new projects.

These were previously in limbo because of a lack of enough long-term demand commitments.

Long-term was the name of the game for Qatari and Australian LNG.

Europe liked the spot market LNG.

Until it started needing a lot of it, and I mean a lot.

It was Europe that last year pushed global LNG trade to a record.

Now it has realized it will need it for years to come.

Welcome to the long-term game.

More crowds on a crowded market

Most of Asia developed a taste for LNG when it was cheap because supply exceeded demand.

It’s also cleaner than coal, so everyone was switching from coal to LNG.

Until last year, when prices spiked courtesy of Europe’s sudden LNG thirst.

LNG became unaffordable for many previously big buyers.

Guess what they’re doing now?

Yep, switching back to coal, just like they did this time last year.

But all this means demand for LNG is guaranteed.

And that’s music to the ears of any LNG developer.

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The Rate Hike Bear Trap

You know how oil prices have been staying low this year wherever demand goes?

This is about to change because supply is going one way: down.

And it’s because of rate hikes.

How the Fed and friends did oil bulls a favor

All the big central banks in the world have been hiking rates.

That’s because inflation is giving them nightmares.

Higher rates make everything more expensive…

Including keeping oil in storage.

So traders are selling their oil inventories to reduce their expenses.

And this means the physical supply of oil is going down.

Just when Saudi and Russian supply is also going down.

And U.S. supply is about to follow.

Brace up for the ride

I’ve been wondering for months why traders don’t care about oil demand at all.

They’ve been watching GDP and inflation numbers like Hawks but giving zero attention to actual oil fundamentals.

Well, those that did this may be in for a nasty surprise.

“Nobody wants to hold inventory, and I think we are, as a world, going toward lower inventory forward cover,” is how Energy Aspects’ Amrita Sen explains it.

“A higher cost of capital incentivizes de-stocking,” per Goldman Sachs. “The destocking ends once inventories reach a new, lower equilibrium.”

And what about demand?

Well, the IEA predicts it at 30 million bpd for OPEC oil alone.

OPEC’s production is about 2 million bpd less than that.

And traders are selling inventory.

The bear trap is about to snap.

Upcoming Oil & Gas Events

• July 19-20: 2023 Independent Petroleum Association of New Mexico Annual Meeting

• July 20: Bakken Classic Fishing Derby

Around the Global Patch

🇬🇧 UK grid shifts: coal stands, wind restrained.
🇨🇳 Chinese player triumphs in Saudi-Kuwait contracts.
🌏McDermott secures a major Asian contract.

Tweet of the Day

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