Benchmark crude futures, Asian spot LNG retreat


Benchmark crude oil futures retreated last week, with decreases of 1.7% & 0.2% for Brent & WTI respectively. Prices were dragged down by the global economic slowdown, the surge in US crude production and inventories, weak US gasoline prices and demand, and a new EU?Iran non?dollar trade mechanism to bypass US sanctions. The International Monetary Fund released fresh estimates of global economic growth for 2019 (3.5%) and 2020 (3.6%) — both were trimmed compared to October’s estimates, showing a slowdown compared to 2018 and 2017.

The European Union is trying to establish a new trade mechanism with Iran called SPV (special purpose vehicle), but it’s likely to take several months to be operational and would be limited only to small trade volumes.Nonetheless, the weekly price loss was limited by the price support from the Opec+ output cut deal, and a new political turmoil in Venezuela.
Despite the last weekly price fall, it is highly possible that prices will end January with positive gains, supported mainly by hopes of a restored balanced oil market helped by the Opec+ cut deal. However, a synchronised global economic slowdown and failure of Opec+ countries to commit to their quotas would undermine this optimism, as the US crude production from shale basins is set to continue to grow in February by 63,000 bpd.

Asian spot LNG prices continued their slide for a fifth straight week, with a new drop last week of about 2.4%. Ample LNG supplies and a weak gas demand due to above average temperatures in the Asia?Pacific region were still weighing on prices. A weak gas demand was emphasised in China where CNOOC undertook the resale of LNG cargoes. Selling tenders were available in Angola, Indonesia, the US, and on the new established Platts LNG Market?On?Close trade platform, while outages in
Gorgon and Bontang LNG plants limited marginally the price fall. Daily LNG chartered rates also continued to fall as they reached $60,000 last week.In the US, Henry Hub natural gas futures fell by almost 9% erasing most of their gains of the earlier week. Prices plunged on forecasts of a warmer weather, then strengthened at the end of last week on new forecasts of much colder weather and constrained production. Meanwhile, UK gas futures fell sharply by more than 9% on the combination of milder weather, robust gas supplies and peak wind generation output.

This article was supplied by the Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development.

Sources and photo-credits: Gulf Times