Each week, Al Attiyah Foundation publishes its energy market review, bringing you the latest global news from the oil, gas and petrochemicals sector.
Oil Hits Multi-Year Highs in Third Weekly Gain on Demand Recovery
Oil prices reached fresh multi-year highs on Friday, 11 June, closing out a third straight week of gains, on an improved outlook for worldwide demand as rising COVID-19 vaccination rates help lift pandemic curbs. Brent crude futures settled at USD72.69 a barrel, rising 17 cents after reaching their highest since May 2019, while US West Texas Intermediate (WTI) crude futures settled at USD70.91 a barrel, up 62 cents, settling at their highest since October 2018. For the week, both Brent and WTI were up 1% and 1.9% respectively.
US investment bank Goldman Sachs expects Brent crude prices to reach USD80 per barrel this summer, betting that a recent oil market rally will continue as vaccination rollouts boost global economic activity and demand for the commodity. “Rising vaccination rates are leading to higher mobility in the US and Europe, with global demand estimated up 1.5 mb/d (million barrels per day) in the last month to 96.5 mb/d,” the bank said in a note released late on Thursday. The investment bank also said slow progress in negotiations on an Iran nuclear deal could also weigh on oil supply, supporting prices.
The International Energy Agency (IEA) said in its monthly report that the Organization of the Petroleum Exporting Countries and allies, would need to boost output to meet demand set to recover to pre-pandemic levels by the end of 2022. “OPEC+ needs to open the taps to keep the world oil markets adequately supplied“, the Paris-based energy watchdog said.
As an indication of future supply, US oil rigs rose by six to 365 this week to their highest since April 2020, energy services firm Baker Hughes said in its weekly report. It was the biggest weekly increase of oil rigs in a month.
LNG Market Poised for Buoyant Recovery with Demand Growing Across Asia
Asian spot prices for liquefied natural gas (LNG) have risen for a third consecutive week and touched their highest since January, buoyed by higher oil prices and firm demand from China and Europe. The average LNG price for July delivery into Northeast Asia was estimated at about USD12.10 per million British thermal units (mmBtu), up USD1.15 from the previous week. LNG prices are poised for more gains as gas-hungry China consumes cargoes to feed a rebound in economic growth, while the easing of coronavirus-induced restrictions restores industrial demand in India. Higher oil and coal prices have also helped lift global gas prices, with spot Asian LNG prices doubling in just three months. China imported more than 7 million tonnes of LNG in May, a record for that month, and looks set to import more over the next two months, driven by strong industrial activity. Tokyo Gas, Japan’s biggest city gas provider, may boost storage capacity using LNG tankers, Chief Financial Officer Hirofumi Sato told Reuters in April, potentially lifting imports. Utilities in Japan, the world’s top LNG importer, faced a power crisis last winter which caused LNG prices to spike to record highs. India’s gas consumption has been recovering in June after declining in the previous two months, as states ease restrictions in the wake of a drop in coronavirus infections. Europe’s LNG demand remains robust too, as imports are expected to refill storage levels which hit multi-year lows recently on pipeline supply concerns, stemming from rising Russia-Ukraine tensions and a surging carbon market which may spur power producers to opt for LNG over coal, Fitch Solutions said.
US natural gas futures jumped over 4% to a seven-month high on Friday on forecasts for rising exports, hotter weather and higher air conditioning demand over the next two weeks. Front-month gas futures rose 14.7 cents, or 4.7%, to settle at USD3.30 per mmBtu, their highest close since 30 October 2020. Furthermore, with European and Asian gas prices both trading over USD10 per mmBtu, analysts said they expect buyers around the world to keep purchasing all the LNG the United States can produce.
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