Oil Prices Fall 2% as Chinese Demand Worries Linger| MENAFN.COM

Wednesday, 08 February 2023 10:45 GMT

Oil Prices Fall 2% as Chinese Demand Worries Linger


(MENAFN- The Al-Attiyah Foundation) Oil prices fell 2% on Friday in thin market liquidity, closing a week marked by worries about Chinese demand and haggling over a Western price cap on Russian oil. Brent crude futures settled down $1.71 to trade at $83.63 a barrel, and West Texas Intermediate crude futures were down $1.66 at $76.28 a barrel. Brent ended the week down 4.6%, while WTI fell 4.7%. Both contracts’ market structure implies current demand is softening, with backwardation, defined by front-month prices trading above contracts for later delivery, having weakened markedly in recent sessions. China, the world's top oil importer, on Friday reported a new daily record for COVID-19 infections, as cities across the country continued to enforce mobility measures and other curbs to control outbreaks. This is starting to hit fuel demand, with traffic drifting down and implied oil demand around 1 million barrels per day lower than average. Meanwhile, G7 and European Union diplomats have been discussing a Russian oil price cap between $65 and $70 a barrel, but an agreement has still not been reached. A meeting of European Union government representatives, scheduled for Friday evening to discuss the proposal, was cancelled, EU diplomats said.

Asia Spot LNG Hit 7-Week High, Tracking EU Prices

Asian spot liquefied natural gas (LNG) prices rose last week for the first time since September and hit a 7-week high, tracking European gas prices on cooler weather forecasts and after Gazprom threatened to further reduce gas flows to Europe. The average LNG price was $31 per million British thermal units (mmBtu), up $5.5, or 21.6%, from the previous week, industry sources estimated. Last week Asian rates traded up with a significant jump midweek on the back of the news of the price cap and upward pressure on European pricing, analysts said. EU energy ministers failed to agree on a gas price cap on Thursday, and postponed the adoption of other European Commission proposals, such as a joint gas purchasing and fast-tracking renewable permits, to a meeting slated for Dec. 13. Europe's overall position remains fairly healthy with a substantial backlog of around 28 vessels waiting offshore Europe to deliver. U.S. natural gas futures fell 28 cents to settle at $7.02 on Friday on the upcoming expiration of the front-month contract and forecasts for less cold weather over the next two weeks. However, solid gains earlier in the week still led the market to its third-biggest weekly gain. The contract rose more than 11% last week.

By: The Al-Attiyah Foundation

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