Al Attiyah Foundation Weekly Energy Market Review | 26 August 2023
Each week, Al Attiyah Foundation publishes its energy market review, bringing you the latest global news from the oil, gas and petrochemicals sector.
Oil futures climb up by 1% on soaring US diesel prices
Oil futures climbed about 1% to a one-week high on Friday, 25 August, as US diesel prices soared, the number of oil rigs dropped, and a fire broke out at a refinery in Louisiana.
Brent futures rose US$1.12, or 1.3%, to settle at US$84.48 a barrel, while US West Texas Intermediate (WTI) crude jumped 78 cents, or 1.0%, to settle at US$79.83.
Diesel futures spiked about 5% to a near seven-month high, boosting the diesel crack spread, a measure of refining profit margins, to its highest since January 2023. Weak economic data and a stronger dollar limited gains. For the week, Brent declined less than 1% and WTI lost about 2%.
This month, US energy firms cut the number of active oil rigs for a ninth straight month, energy services firm Baker Hughes said in its closely followed report.
Crude prices rose despite weak economic news from Germany, Europe’s biggest economy, and the US dollar rose to an 11-week high against a basket of other currencies, after US Federal Reserve Chair Jerome Powell said further interest rate hikes may be needed to fight inflation.
Higher interest rates can slow economic growth and reduce oil demand. A stronger dollar can also slow demand by making oil more expensive for holders of other currencies.
Asian spot prices ease from five-month high as Woodside Energy averts strike
Asian spot liquefied natural gas (LNG) prices eased from five-month highs, after workers at Australia’s Woodside Energy ruled out the possibility of striking work, bringing some calm to a market hit by extreme volatility in recent days.
However, unions representing downstream workers at the Chevron-operated Gorgon and Wheatstone projects in Australia voted to authorise a strike, criticising the company for not going through the bargaining process. This means that the workers can go on strike with a seven-day notice period if no agreement with Chevron is reached.
Global LNG markets last week were roiled by news of potential strikes over pay and working conditions at facilities owned by Woodside and Chevron, which cumulatively account for 10% of global LNG supply.
The average LNG price for northeast Asia fell to US$13.00 per mmBtu from US$14.00 the previous week.
Meanwhile, high gas storage in northern Asia and Europe has kept a lid on prices since the beginning of the second quarter, compared to levels seen at the beginning of the year. Despite sparse direct trade between Europe and Australia, Dutch and British gas prices were volatile.
Dutch TTF hub fell last week to US$10.92 per mmBtu.
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