Oil
Benchmark crude oil futures continued to slide for a second week with a weekly decline of more than 4%. Oil prices were pressured primarily due to what is viewed as the first episode of a trade dispute between the US and China. China retaliated to $50bn US import tariffs by an equal amount, while the US president threatened an additional $100bn of tariffs on imports from China. This trade dispute can potentially harm economic growth and slowdown global oil demand. The downward push was also supported by the rising US crude oil production which reached a fresh weekly record of 10.46mn bpd. US oil rig count increased by 11 to reach 808, the highest in three years.
However, oil prices were supported by the unexpected drop in US crude oil stocks by around 4.62mn barrels, in the last week of March, due to a higher refinery utilisation rate. The Russian energy minister also confirmed that his country is seeking a long-term co-operation with Opec starting from next year, where oil output curtailments could continue but under other settings. Opec oil production in March reached an 11-month low of 32.2mn bpd, with a record compliance of 159%, according to a Reuters survey. Moreover, equity and currency market trends were still exercising an impact on oil markets in the latest week.
In an interview to Reuters, Qatar’s energy minister emphasised that Opec+ oil supply curbs are necessary to guarantee increased investments and help avoid a big supply and price shock in the long run. He also supported the idea of creating a long-term co-operation platform with non-Opec members and especially Russia.
Gas
Asian LNG spot prices remained steady last week, supported mainly by emerging demand in Latin America coupled with some niche demand in South Asia. The Argentinian state-owned company, Enarsa, released a request for tender seeking 18 LNG cargoes for delivery in July-August, while Mexico’s CFE awarded two spot tenders seeking deliveries into its Atlantic and Pacific coast terminals. In addition, India’s GSPC is seeking a delivery via tender for next month.
Longer term, Sinopec in China plans to almost triple its LNG receiving capacity to a total of 26mn tonnes per annum (mtpa) by 2023, up from currently only 9 mtpa. In South Korea, domestic natural gas demand is expected to rise to over 40 mtpa in 2031 up from an estimated 36.5 mtpa in 2018, according to the Korean energy ministry. The increased demand forecast comes as South Korea plans to use less coal and nuclear fuel. On the other hand, Tokyo Gas is in the process to increase its ratio of short-term and spot LNG purchases, but it would remain well below 50% otherwise it is deemed too risky by the company.
In the US, Henry Hub natural gas futures declined slightly last week prompted mainly by profit taking after the strong rally of the week earlier. However, supportive weather forecasts, with temperatures remaining below normal in the Northern region, were limiting the downside trend. In the UK, NBP gas futures lost about 3% pressured by lower heating and gas-for-power demand. Moreover, LNG supply to Northwest Europe for the coming weeks is strong with three tankers heading to Britain and four others to Belgium and the Netherlands.
* Sofiane Ghezali is senior energy researcher at Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development.
