Al Attiyah Foundation Weekly Energy Market Review | 2 January 2021
Each week, Al Attiyah Foundation publishes its weekly energy market review, bringing you the latest global news from the oil, gas and petrochemical sector.
Global crude prices edged higher last week but lost more than a fifth of their value in 2020, as lockdowns to combat the novel coronavirus depressed economic activity and sent oil markets reeling. However, Brent and US crude benchmarks have more than doubled from April’s low point, as producers cut output to match weaker demand. News of coronavirus vaccine distributions also bolstered prices in Q4, helping futures recover to the highest in about 10 months.
On the last trading day of 2020, Brent rose 17 cents to settle at USD51.80 a barrel, while US West Texas Intermediate (WTI) rose 12 cents to settle at USD48.52 a barrel. Prices for 2020 bottomed in April as fuel demand collapsed due to the COVID-19 pandemic and after a price war between oil giants Saudi Arabia and Russia. WTI plummeted to a record low –USD40.32 per barrel, while Brent fell to USD15.98 barrel, the lowest since 1999. From there, prices drifted higher and took off once vaccine optimism hit the market.
Though prices have climbed during the last two months, additional lockdowns have weighed again on fuel demand and a new, highly infectious variant of the virus has raised alarms. A recent Reuters poll showed that oil prices are not expected to make much progress in 2021. Demand outlook remains murky, as US gasoline fell 17% for the year, while US heating oil fuel dropped 27%.
Some commodity markets, including spot Asian LNG and silver, ended 2020 on a strong note, with recovering demand and widespread stimulus packages buoying prices. Rollouts of vaccines to combat the virus and trillions of dollars’ worth of financial support were expected to boost investment and spending in 2021. The next major oil price driver will come Monday as OPEC+ plan to debate boosting crude output from February.
Asian spot prices for LNG jumped nearly 17% last week, riding six-year highs, as a cold winter prompted record imports into the region. The average LNG price for February delivery into Northeast Asia was estimated at USD14.60 per mn British thermal units (mmBtu), up USD2.10 from the previous week, sources said. Spot Asian LNG prices have led the energy complex this year, gaining more than 140% on booming demand and outages in key suppliers.
Spot prices had dropped to a record low of below USD2 per mmBtu in May amid coronavirus-induced lockdowns but have quickly rebounded in Q4 this year amid an economic recovery in Asia and a cold spell. Asia is now set to import nearly 27 mn tonnes of LNG in December, surpassing the previous monthly high set in December last year at about 23.6 mn tonnes, mainly led by China and Japan. Temperatures are expected to stay below normal in Tokyo, Seoul, Beijing, and Shanghai over the next two weeks, continuing to boost demand for heating.
North American LNG exporters are sounding more confident about the prospects for new projects in 2021 due to a sharp rally in prices driven by surging Asian demand, even as most industry analysts expect next year to be another difficult one. With natural gas futures in Europe and Asia climbing to their highest levels in more than a year due to a sharp increase in demand late in 2020, US exports are much more profitable. At the start of 2020, a number of developers postponed final investment decisions on new LNG projects in the US, Canada, and Mexico. These projects may get the green light in 2021, as the current prices easily support their financial viability.
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