Oil was mixed last week as a Canadian supply outage supported US crude prices, while an increase in production from Opec’s biggest exporter Saudi Arabia pushed Brent lower. Global benchmark Brent slipped 28 cents to settle at $77.11 a barrel. For the week, WTI futures lost about 0.5% after hitting a 3-year high on Tuesday, while Brent lost about 3%.US crude was bullish after official data on Thursday showed inventories at Cushing, the delivery point for US crude futures, fell to their lowest in three-and-a-half years. That came after an outage at a major Canadian oil sands facility cut regional supply. The outage at the Syncrude facility in Canada has contributed to a sharp reduction in the discount for US crude versus Brent crude over the past month.
Brent was also being pressured by expectations of higher Saudi and Russia productions, which impact Europe and Asia, where Brent is the benchmark, more than the markets dominated by the US crude prices. Saudi Arabia told Opec that it increased production by almost 500,000 barrels per day last month. Saudi Arabia also said it would reduce the official selling price of its August barrels. US markets also garnered support from a government employment report showing better-than-expected growth in jobs. That blunted the impact of an escalating US-China trade war. The trade war has yet to have a direct impact on oil markets, but China has indicated it could place tariffs on US crude imports. US producers continued to bring more rigs into oilfields already producing at record levels. The US rig count, an early indicator of future output, was up by five in the week to July 6. That brings the total count to 863, up 100 from last year.
Asian spot LNG prices declined last week, for a third consecutive week, on producers from Australia to Nigeria boosting spot supply, strong European LNG inventories and Pakistan’s cancellation of a six-cargo tender. Prices continued reversing from a 20% rally last month, driven by large concurrent global production outages and tenders seeking more than 40 cargoes for July-September. A spell of hot weather in Japan led Kansai Electric to buy last week but demand for August and September was still limited there, though Chinese consumption was brisk, in part driven by new government policy mandating that domestic importers boost storage capacity. New rules ask gas suppliers to hold at least 5% of imports in storage by 2020, a policy that may be hastening buying demand at Chinese terminals.
Nigeria LNG offered three July cargoes as its fifth production unit resumes this month, AP LNG in Australia, Abu Dhabi and Angola had spare July shipments, plus Pakistan’s decision to scrap its tender was also expected to release Egyptian supply into spot markets. In Europe, LNG terminal inventories saw a minor decline in aggregate but remained robust, and in certain markets such as Britain, the Netherlands and parts of France stocks had risen. It suggests further supply availability, for potential reloads, a further bearish factor.
Sources and photo-credits: Gulf Times