Oil
Benchmark crude oil futures resumed their upward trend last week, gaining more than 1%, after a short pause during the previous week. Market volatility was the main feature, with losses and gains being reversed during subsequent trading days.
Assessments by the International Energy Agency and Goldman Sachs, both highlighted robust global oil demand growth in 2018 in the range of 1.4-1.85mn bpd. New US employment data pointed to the creation of more than 300,000 jobs in February — another strong indicator of demand-side pull. The prospect of talks between President Trump and Kim Jong-un was overshadowed by the threat of an economic trade war in response to US plans to impose import tariffs on steel and aluminium, which provoked the resignation of a key economic adviser to President Trump. Both events weighed on the crude oil market as stocks of US crude oil rose again, dragging prices down in a week when US crude oil production reached a new weekly record of 10.4mn bpd. Despite this, US drillers cut the total rig count by four to bring just below 800.
The prospects of robust global oil demand this year are encouraging, despite some concerns of a slight slowdown in Chinese crude oil imports in February. Some analysts argue that incremental oil production from US shale deposits will meet most of the growth in 2018 as Opec and its allies continue to hold back production.
Gas
North Asian LNG spot prices fell last week, in line with the seasonal trend that signals lower gas demand as the Winter season gives way to Spring. This year, the trend has been exacerbated by weather outlooks in North Asia that forecast temperatures that are double the seasonal norm, with implications for even lower levels of heating demand than might be expected.
The impact of the outage from Papua New Guinea (PNG) LNG plant, due to the earthquake two weeks ago, have been absorbed by the market without any sign of disruption or significant price spike. Minor, short-lived, price signals were offset by the decreasing seasonal gas demand. However, the sudden outage did result in the diversion of some scheduled LNG ships to Singapore as they sought alternative cargoes from the spot market. ExxonMobil said that the PNG LNG plant will remain shut for at least eight weeks until a detailed damage assessment has been completed. In Algeria, the Skikda LNG plant also suffered a possible unplanned outage, which will result in 50 days of maintenance to correct.
In the US, despite the fall in Henry Hub front month futures on Friday, gas prices finished the week up around 1%. In North America, the weather forecast for the next fortnight is for higher temperatures and, therefore, lower heating demand. Analysts believe that there is enough gas in US storage to meet the demand for the remaining Winter period.
In Europe, the sharp increase in gas prices that was caused by the recent cold snap have fallen away as warmer weather heralds the onset of Spring.
* The author is senior energy researcher at Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development.
oil market
