Al Attiyah Foundation Weekly Energy Market Review | 9 September 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 prices rise to nine-month high on worries of ‘tight’ supply
Oil prices gained almost 1% to a nine-month high on Friday, 8 September, on rising US diesel futures and worries about tight oil supplies after Saudi Arabia and Russia extended supply cuts last week.
Brent futures rose 73 cents, or 0.8%, to settle at US$90.65 a barrel, while US West Texas Intermediate (WTI) crude spiked 64 cents, or 0.7%, to close at US$87.51. For the week, both benchmarks were up about 2%.
Last week, OPEC member Saudi Arabia and Russia extended their voluntary supply cuts of a combined 1.3 million barrels per day to the end of the year. Saudi Arabia will probably find it difficult to end its cuts at the end of the year without triggering a price slide, analysts said.
Rising US diesel prices also supported crude prices with heating oil futures up about 3%.
Meanwhile, the oil market is still concerned about the demand outlook in China, which has had a sluggish post-pandemic recovery. Stimulus pledges have fallen short of expectations.
Data on Thursday showed overall Chinese exports and imports fell in August, as sagging overseas demand and weak consumer spending squeezed businesses. Oil traders are also watching whether central banks in the US and Europe will keep fighting inflation with interest rate hikes.
Asian prices for spot LNG slip on tepid demand
Asian spot prices of liquefied natural gas (LNG) inched down last week on tepid demand, even as supply concerns deepened after workers at Chevron’s Australia LNG projects went on strike on Friday.
The average LNG price for October delivery into northeast Asia slipped to US$12.90 per million British thermal units (mmBtu) from US$13 in the previous week, industry sources estimated.
Despite lukewarm demand, the market may still witness a strong contango going into winter months, partially pricing in supply disruptions which should see North Asian players starting to test the waters as temperatures begin to come off and we go into heating season.
A contango market structure means that front-month prices are below that of later-delivery contracts.
Workers at Chevron’s LNG facilities in Australia went on strike last Friday after mediation talks over wages and working conditions ended without a deal, potentially disrupting output from facilities that account for over 5% of global supply.
In Europe, gas prices have declined as inventories are at a record high for the time of year, but storage additions have slowed sharply, reducing the risk storage sites will become full before the winter heating season arrives.
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