Crude futures continue to strengthen for third straight week



Oil
Benchmark crude futures continued to strengthen for the third straight week, with Brent finally breaking the $80 mark, the highest level in almost four years. Brent and WTI were up last week by 5.0% and 3.5%, with an increase of 6.8% and 5.0% respectively for the month. Prices were largely boosted by a dominant market sentiment that an expected supply shortfall will be created by the looming new US sanctions on Iran, and that it is unlikely to be compensated for by other producers in the short term. This sentiment was supported by the conclusions of the last Opec+ meeting in Algiers, the falling Iranian and Venezuelan crude supply, and the relatively limited existing global spare capacity. Whereas, rising US crude stocks and the reiterated calls by US president on Opec to raise output, limited the gains.


As the oil market is expected to tighten further in coming weeks, price volatility is seeing an accompanying increase. Therefore, the price fluctuation range is likely shifting now to $60-$100, with the oil price looking to break $90 and the $100 deadlocks. However, analysts warn that it could be only short-lived, if it happens, and that it would harm demand.

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Gas
Asian spot LNG prices continued to decline for a second week, erasing gains seen in early September. According to analysts, the sluggish demand and an apparent ample supply caused the price decline of last week. Seven LNG tankers are heading to North West Europe, indicating low demand in Asia, where buyers are thought to be well-stocked, for at least the next two months, and not expected to be ready to engage in significant buying activity in the coming weeks. Qatar Petroleum announced last Wednesday that after appraisal and testing, it had decided to add a fourth LNG mega-train of 8 mtpa to Qatar’s gas expansion project, making the total capacity addition to be around 32 mtpa by 2023, from currently 77 mtpa.


In the US, Henry Hub natural gas futures continued their rally for a second week with a gain of 1%, amid a choppy fluctuation within the week. Power utilities likely added 98 bcf of gas into storage last week, making stocks still below the five-year average by about 18%, while, UK gas futures slipped by almost 6% last week due to higher temperatures reducing the heating demand, strong supply and robust wind power generation. However, a cooler weather forecast this week could boost demand and eventually prices.

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

Sources and photo-credits: Gulf Times