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Oil prices closed out their biggest week of losses in more than nine months with another down day on Friday, as investors sold futures in anticipation of weakened fuel demand worldwide due to a surge in COVID-19 cases. Brent crude fell 8% on the week, settling down $1.27, or 1.9%, to $65.18 a barrel, its lowest since April. U.S. West Texas Intermediate (WTI) crude for September settled down $1.37, or 2.2%, to $62.32 a barrel on Friday, to lose more than 9% for the week.
The crude market has now posted seven consecutive days of losses. Numerous nations worldwide are responding to the rising infection rate due to the coronavirus Delta variant by adding travel restrictions to cut off the spread. Futures contracts suggest that the market expects plenty of supply in coming months. The premium for the front month Brent contract over the third-month contract has nearly halved between late July and now, indicating that near-term supply will not be as tight as the market had expected.
China, the world’s largest crude importer, has imposed new restrictions with its “zero tolerance” coronavirus policy, which is affecting shipping and global supply chains. The United States and China have also imposed flight-capacity restrictions.
The U.S. dollar hit a nine-month high on signs the U.S. Federal Reserve is considering reducing stimulus this year. Oil prices move inversely to the U.S. currency, making oil more expensive for foreign purchasers when the dollar rallies.
While the Delta variant drags on fuel demand, supply is steadily increasing, with drilling firms adding rigs for the third week in a row. U.S. oil rigs rose 8 to 405 this week, their highest since April 2020, services company Baker Hughes said.
Asian gas spot prices fall as cargo rivalry with Europe eases
Asian spot prices for liquefied natural gas (LNG) fell last week as a decline in European gas and oil prices saw competition for short-term fuel supply between the two continents ease. The average LNG price for October delivery into Northeast Asia was estimated at about $15.50 per million British thermal units (mmBtu), down $1.55 from the previous week, industry sources said. Spot prices for cargoes delivered in September are estimated at about $15.20 per mmBtu, they added. Brent oil futures, over which the majority of Asian LNG contracts are priced against, hit lows not seen since May over concerns that new COVID-19 cases could weaken global demand. European gas futures prices fell after Russia’s Gazprom raised supply estimates to the continent, offering at least a brief relief as Europe tries to increase its inventories from decade-low levels. Milder weather in key consuming countries for LNG has also helped to reduce pressure over prices for the fuel, which is used to generate electricity used for cooling. Temperatures in Seoul and Tokyo are expected to be lower than average over the next two weeks, weather data from Refinitiv Eikon showed. PetroChina was seeking cargoes for delivery between Oct. 1-5 in Tangshan, China, at a $0.40 discount over the Japan Korean marker, the reference price assessed by S&P Global Platts. Engie bid at $16.59 for a cargo to be delivered between Oct. 30 and Nov. 3 to Pipechina Tianjin. Shell is offering six cargoes for delivery between Oct 2021 and March 2022 loading from Sabine Pass project, with bids due on Aug. 19.
U.S. natural gas futures gained on Friday as the weather outlook turned slightly warmer, potentially boosting demand for gas used for air conditioning. Front-month gas futures rose 2.1 cents, or 0.5%, to settle at $3.85 per mmBtu. Prices touched a one-month trough on Thursday, pressured by a weekly storage report that showed a larger-than-expected injection. With European and Asian gas prices more than three times higher than the U.S. fuel, analysts expect LNG exports to remain elevated this year.
— By The Al Attiyah Foundation
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22/08/2021
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