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

Al-Attiyah Foundation - Weekly Energy Market ReviewOil Markets: Brent Ends at Two-Year High as Demand Outlook Counters Supply Fears

Oil prices ended the last week more than 5% higher, with global benchmark Brent edging up on Friday to settle at a two-year high, as strong US economic data and expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted. Brent crude futures settled at USD69.63 a barrel on Friday, its highest close since May 2019, while US West Texas Intermediate was at USD66.32.

Analysts expect global oil demand to rebound closer to 100 mn barrels per day in the third quarter due to summer travel in Europe and the US, following widespread COVID-19 vaccination programmes. However, rising coronavirus infections in Asia continues to put pressure on prices.

Robust economic data from the US, the world’s largest economy and oil consumer, also lent support as the number of Americans filing new claims for unemployment benefits fell to the lowest since mid-March 2020. However, the prospect of more Iranian oil coming on to the markets capped the gains.

More than 34 mn Americans are expected to take to the highways 27 – 31 May, the holiday weekend which marks the start of the summer driving season. But they face gasoline prices at about USD3.04 a gallon on average, the most expensive since 2014.

Also in the US, crude output jumped 14.3% in March to 11.2 mn barrels per day, after being hit by a cold snap in February, the government said in its latest monthly report. The oil rig count, an early indicator of future production, has risen for nine months in a row, according to energy services firm Baker Hughes.

Benchmark Crude Prices
Benchmark Crude Prices

Gas Markets: LNG-Asian spot Prices Rise on Summer Demand for Air-Conditioning Units

Asian spot prices for LNG rose this week, as buyers stocked up the power-generating fuel on anticipation that a warmer-than-usual summer will spur demand for air-conditioning units.

The average LNG price for July delivery into Northeast Asia was estimated at about USD10.30 per mn British thermal units (mmBtu), up 70 cents from the previous week, industry sources said. Supply coming from the US, which hit historical levels last month, decreased last week with export plants entering seasonal maintenance, adding to a strained market.

Trafigura sold a cargo to Vitol for delivery between 17 – 21 July in Tianjin, China, with a premium of USD1.45 per mmBtu over European LNG prices, according to traders. Premiums over USD1 per mmBtu tend to compensate for the longer trip costs to Asia, attracting ships to head East. According to one trader, some buyers were, nevertheless, resistant to pay for cargoes offered well above the USD10 per mmBtu range. Petronas sold two cargoes for delivery between 7 – 8 July, and 23 – 24 July to North Asia for slightly more than USD10 per mmBtu, another trader said.

US natural gas futures rose on Friday to their highest in more than a week, buoyed by forecasts for warmer weather in two weeks and a projected increase in LNG exports. These higher temperatures were expected to boost demand for fuel to power generators and keep air conditioners humming. Still, traders said demand next week was likely to be similar to this week, kept in check by mild weather and the Memorial Day holiday on Monday.

Front-month gas futures rose 2.8 cents, or 0.9%, to settle at USD2.99 per mmBtu, their highest close since 18 May. For the week, the contract was up about 3% after falling about 2% last week. For the month, the contract was up about 2% after gaining about 12% the previous month.

With warmer weather coming after the US Memorial Day holiday week, Refinitiv projected average gas demand, including exports, would rise. But with European gas prices near their highest since September 2018 and Asian prices above USD10 per mmBtu, analysts said they expect buyers around the world to keep purchasing all the LNG the US can provide.

Benchmark Gas Prices
Benchmark Gas Prices

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