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

Oil posts second weekly decline following supply fears

Oil dropped by about 2% on Friday, 18 November, logging a second weekly decline, due to concerns about weakened demand in China and further increases to US interest rates.

Brent crude settled at US$87.62 a barrel, falling US$2.16, or 2.4%. US WTI crude closed at US$80.08 a barrel, losing US$1.56. Both benchmarks posted weekly losses, with Brent down about 9% and WTI roughly 10%. Meanwhile, a stronger US dollar is pushing down crude prices.

The market structure of both oil benchmarks shifted in ways that reflect dwindling supply concerns. The current WTI contract is now trading at a discount to the second month, a structure known as contango, for the first time since 2021. Brent was still in the opposite structure, backwardation, though the premium of nearby Brent over barrels loading in six months fell as low as US$3 a barrel, the lowest since April.

China, which sources say is looking to slow crude imports from some sources, has seen a rise in COVID-19 cases while hopes for less aggressive US rate hikes have been dented by remarks from some Federal Reserve officials. The Fed is expected to raise rates by a smaller 50 basis points (bps) at its 13-14 December policy meeting after four consecutive hikes of 75 bps.

Asian spot LNG prices ease on warm weather

Asian spot LNG gas prices continued to decline last week, in part due to a considerably warmer period that is unusual for this time of year and that inventories remain well stocked. The average LNG price for January delivery into northeast Asia was US$25.5 per mmBtu, down US$0.50, or 1.9%, from the previous week, industry sources estimated.

However, market players believe the US Freeport LNG plant’s delayed restart would support prices in the coming weeks. Freeport LNG makes up 3.75% of the global market and the extended outage across mid-November through December represents a loss of about 27 cargoes, according to Rystad Energy.

China also has signalled that they don’t intend to be spot participants for the rest of the year.

In Europe, much of the market is paying keen attention to weather forecasts, which is driving much of the volatility in the European gas hub and delivered LNG prices. The European weather outlook was recently revised towards below-normal temperatures for the coming weeks.

In the US, natural gas futures eased 1% on Friday, paring losses of more than 5% earlier in the session, after Freeport LNG said it expects to restart its LNG export plant in Texas in December.

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