Al Attiyah Foundation Weekly Energy Market Review | 30 January 2021
Each week, Al Attiyah Foundation publishes its energy market review, bringing you the latest global news from the oil, gas and petrochemical sector.
This week: US Crude Settles Lower on Worries About Vaccine Rollout
Oil Markets: Oil Prices End a Mixed Week
US oil prices settled slightly lower last week, after trading in a tight range on Friday, 29 January, as investors worried about the lingering global pandemic and slow vaccine rollouts. The most active global Brent crude contract also ended Friday’s session marginally lower on vaccine distribution concerns and the efficacy of one vaccine. Oil markets have rallied about 50% since October on the back of vaccine rollouts, but the emergence of COVID-19 variants has fanned worries about economic weakness.
Many analysts feel a US economic stimulus package may not come quickly enough to support the current market. On Friday, US President Joe Biden said that Congress needs to take immediate action on his USD1.9 tn COVID-19 relief proposal, adding that most economists believe additional economic stimulus is required: ‘It could take a year longer to return to full employment if we don’t act and don’t act now,’ Biden said.
Global benchmark Brent crude futures for March settled up 0.6% a barrel on Friday, at USD55.88. The more active April contract settled down six cents a barrel, at USD$55.04. On the week, both contracts were mixed, posting minimal changes. A Reuters poll showed prices are expected to hover around current levels for much of 2021 before a recovery gains traction towards year-end.
Saudi Arabia is set to cut output by 1 mn barrels per day (bpd) in February and March. Compliance with OPEC and allies’ output curbs had improved in January, although OPEC oil output rose after OPEC+ agreed to an easing of supply curbs. However, the rise was less than the agreed amount, with an involuntary drop in Nigerian exports limiting the increase. (OPEC+ is the alliance of 24 oil-producing nations, made up of the 14 members of the Organization of Petroleum Exporting Countries (OPEC), nominally led by Saudi Arabia, and 10 other non-OPEC members, including Russia.)
Gas Markets: Asian Prices Decline as Demand Slows
Asian spot prices of LNG fell for a second straight week to their lowest in nearly two months amid warmer weather forecasts and higher supplies. The average LNG price for March delivery into Northeast Asia was estimated at USD8.40 per mn British thermal units (mmBtu), down 50 cents from the previous week. This is the lowest that spot prices have been since early December, as the region moves out of a historic cold winter. LNG tanker rates also dropped last week, which also weighed on cargo prices.
On Thursday, oil major BP bought a cargo for delivery into Northeast Asia for a March delivery from Diamond Gas, a subsidiary of Mitsubishi Corp, at USD$8.40 per mmBtu, data from S&P Global Platts showed. This follows cargo sales from Woodside Energy and Chevron from LNG tankers for delivery in February, highlighting the availability of supply.
The lower spot prices attracted some pent-up buying demand from South Asian customers who had stayed away when prices surged to a record USD32.50 per mmBtu earlier this month. Indian Oil Corp bought a cargo for delivery 20 February – 5 March from Qatar’s Ras Laffan LNG Company at USD8.70 per mmBtu. India’s Gujarat State Petroleum Corp (GSPC) also bought a cargo for mid-February delivery at about USD8 to USD8.40 per mmBtu from Qatar Petroleum.
In the US, natural gas futures fell almost 4% on Friday to a one-week low on milder weather forecasts next week despite a colder outlook for mid-February. However, for the week, the contract was still up about 5% after falling almost 11% last week. Despite a small decline in LNG exports last week, buyers worldwide continue to purchase near-record amounts of US gas as prices in Europe and Asia remain much higher than in the US.
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