Each week, Al Attiyah Foundation publishes its energy market review, bringing you the latest global news from the oil, gas and petrochemicals sector.

Oil prices lower by more than three per cent on recession worries

Oil prices plummeted more than 3% on Friday, 14 October, as global recession fears and weak oil demand, especially in China, outweighed support for a large cut to the OPEC+ supply target. Brent crude futures dropped US$2.94 to settle at US$91.63 a barrel, while US West Texas Intermediate (WTI) crude futures fell US$3.50 to US$85.61.

The Brent and WTI contracts both oscillated between positive and negative territory for much of Friday but fell for the week by 6.4% and 7.6%, respectively.

China, the world’s largest crude oil importer, has been fighting COVID-19 flare-ups after a week-long holiday. The country’s infection tally is small by global standards, but it adheres to a zero-COVID policy that is weighing heavily on economic activity and thus, oil demand.

The market is still digesting a decision last week from the Organization of the Petroleum Exporting Countries (OPEC) and its allies – together known as OPEC+ when they announced a two million barrel per day (bpd) cut to oil production targets.

The decision by OPEC+ could push the global economy into recession, according to the International Energy Agency (IEA), adding that the relentless deterioration of the economy and higher prices sparked by an OPEC+ plan to cut supply is slowing world oil demand.

Asian spot prices declined on healthy inventories

Asian spot liquefied natural gas (LNG) prices continued its downtrend this week on healthy inventories but are expected to rise in the short term, as buyers will need to boost stock ahead of cold winter months and as Europe faces higher price risk.

The average LNG price for November delivery into northeast Asia was US$32.50 per million British thermal units (mmBtu), down US$1.50, or 4.4%, from the previous week, industry sources estimated.

In Europe, while gas prices at the Dutch TTF hub eased recently, backed by a high inventory level and strong flow of LNG, the risk of high prices remains as market players expect Russian pipeline gas flows via Ukraine to come to a halt in the coming weeks.

Morgan Stanley said in a recent report that given the fact that Europe was able to attract high volumes of LNG, prices don’t need to be as high as previously forecast. However, both the global LNG market and the European gas market are expected to remain tight, suggesting prices in 2023 are skewed higher.

In the US, natural gas futures fell about 4% to a near three-month low on Friday, as record output and reduced LNG exports allowed utilities to inject much bigger than normal amounts of gas into storage for the winter over the past month.

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