Crude oil prices back to $50

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Benchmark crude oil futures dropped last week by almost 11%. This marks their biggest weekly loss of the year, cumulating a slump of more than 35% or about $25 since early October. Crude oil prices fell for the seventh consecutive week, reaching their lowest level since October 2017. Prices were negatively affected by sustained oversupply concerns, amid fears of weak demand due to a potential economic slowdown if the US-China trade talks fail, while they were also caught in a broader cross-commodity and cross-asset sell-off. However, Opec is considering to trim output by 1 to 1.4 mbpd at its meeting on December 6 to help stabilise the market situation.

Experts see at least two downside risks for crude prices, growing non-Opec production and a weakening economic outlook. The question for Opec countries during their next ministerial meeting on December 6 is not only if they should cut output, but more importantly, by how much and when it should take place. Opec will have to send a strong signal to the market, otherwise a production cut that is not large enough might send prices down further. Nevertheless, a price territory of $50-$60 might prove to be the only way to bring US shale oil under control.

Asian spot LNG prices for January delivery fell more than 8% last week, affected by a well-supplied market, a slump in crude oil prices and forecasts of a mild winter.  LNG trading across Asia was low as storage tank levels remained high for key customers amongst some LNG on the water still looking for a home. Forecasts of warmer-than-usual weather in major cities across North Asia in the coming weeks also weighed on prices.  However, some analysts believe that the situation is bottoming out with some end-users, like the Chinese, already stopping the re-sale of cargoes, and with the possibility of wide-spread cold weather.

In the US, Henry Hub natural gas futures were up by almost 1% amid volatile trading last week. The volatility was caused in part by changes in the weather forecast, which caused some daily changes to reach about 20%. Meanwhile, UK gas futures tumbled by 7% erasing the gains of earlier in the week. The price fall was caused by robust supplies and lower temperatures.Six LNG tankers are expected in Britain by 30 November.

Sources and photo-credits: Gulf Times