(MENAFN- Gulf Times) Oil
Benchmark crude oil futures both declined modestly last week. The price differential between the two benchmarks was still maintained at around $11 for a second week. The oil market was still tugged between the loss of supply from Venezuela and potentially from Iran on one side and the rising US shale output and prospects of Opec and Russia increasing theirs from the other side.
However, lower Chinese crude oil imports, rising US oil stocks, profit taking, and trade tensions added to the downward pressure. Chinese crude oil imports slipped in May to 9.2 mbpd from their 9.6 mbpd record in April. US crude oil stocks rose by 2.1mn barrels (mbs) in the week to June 1, while US gasoline and distillate stocks rose by 6.8 mbs combined. Rising US output reached another record last week to 10.8mn bpd, behind the world's largest producer — Russia. US oil drillers added just one rig to reach 862 active rigs.
Arab oil producers met without finally giving a clear message on what could be the Opec decision on June 22. Since then, the US unofficially asked some Opec countries to produce more to compensate for any supply shortfalls, especially from Iran on which it is re-imposing sanctions. Iraq declared that rising output will not be on the Opec meeting agenda later this month, and that Opec should seek oil market stability which was also emphasised by the Algerian energy minister.
Iran seems to be clearly against any supply increase to replace its own crude.
Meanwhile, KSA raised its prices to Asian refiners for July showing some satisfaction with the current price levels and was not in a hurry to raise production. There are some divergences between the different parties of the Opec+ agreement, which will have to find a compromise in their meeting of June 22, that is likely not to give clear signals to the market but will rather add more fuel to the volatility in prices.
Gas
Asian spot LNG prices continued to increase for the fourth straight week and reaching the highest seasonal (summer) level in the last four years. The prices were still having the support of firm Chinese demand and outages at some LNG exports plants. However, the resumption of production at some LNG plants coming back from maintenance and the start of new projects like Wheatstone this month in Australia could cap prices.
The Asia/Europe price differential reaching roughly $2.5 is expected to spur more supply arbitrage between the two regions. Forecasts for higher-than-normal Asian temperatures are also expected to add to the cooling demand. Cargoes for July delivery are thought to be traded at 10 cents higher, while for August delivery prices are likely to trade at $10.
In the US, Henry Hub natural gas futures were down by more than 2% after four weekly gains of about 9%. The newest storage report was in line with predecessors with a new gas injection of 92 bcf. Production during the last month averaged 79.2 bcfd not far from the all-time high of 80.2 bcfd reached on May 27. In the UK, gas prices conceded roughly 1% on a weekly basis. Prices went down due to low temperatures early in the week, while afterwards rising domestic production weighed on prices, as some terminals started to ramp up after disruptions.
*The author is senior energy researcher at Abdullah bin Hamad Al-Attiyah International Foundation for Energy and SustainableDevelopment.
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