Al Attiyah Foundation's Weekly Energy Market Review - July 18, 2020
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Al Attiyah Foundation's Weekly Energy Market Review - July 18, 2020

By Al Attiyah Foundation

Al Attiyah Foundation's Weekly Energy Market Review - July 18, 2020

Oil prices edged lower on Friday on concerns that a surge in coronavirus cases may sap fuel demand, all while major crude-producing nations are ready to increase output. The United States reported at least 75,000 new COVID-19 cases on Thursday, a daily record. Spain and Australia reported their steepest daily jumps in more than two months, and cases continued to soar in India and Brazil. 

Fuel demand has broadly recovered from a 30% drop in April after nations worldwide restricted movements and businesses shuttered. Consumption remains below pre-pandemic levels, however, and fuel purchases are falling again as infection rates rise. Brent crude futures fell 23 cents a barrel to settle at $43.14. U.S. West Texas Intermediate (WTI) crude fell 16 cents to $40.59. Both contracts were little changed from a week earlier.

Lawmakers in the United States and the European Union are set to debate more stimulus over the coming days. The U.S. Congress returns to Washington on Monday with Democratic and Republican leaders agreeing that they need to take action to salve the heavy toll of the coronavirus pandemic. Benchmark crude fell 1% on Thursday after OPEC and its allies, a group is known as OPEC+, agreed to trim record supply cuts of 9.7 million barrels per day (bpd) by 2 million bpd, starting in August. 

U.S. energy firms cut the number of oil and natural gas rigs operating to a record low for an 11th week in a row, according to data from Baker Hughes. Firms have slowed reductions as some consider returning to the well pad with crude prices up from historic lows. Energy firms could start adding rigs later this year if prices remain stable at higher levels.

Benchmark Crude Oil Prices - Al Attiyah Foundation's Weekly Energy Market Review - July 18, 2020

Gas Markets

Asian spot LNG prices edged higher last week ahead of anticipated warmer-than-usual temperatures in some parts, though demand in the region remained sluggish. The average LNG price for September delivery into northeast Asia was estimated to be about $2.40 per million British thermal units (mmBtu). Prices for cargoes delivered in August were estimated to be about $2.30 per mmBtu.

Most areas in Japan, the world's top LNG importer, are expected to experience warmer-than-normal weather between July and September, the Japan Meteorological Agency said in its three-month forecast. Still, gas demand in the region remained sluggish amid fears of a second wave of coronavirus in some countries. 

Nearly 30 laden LNG tankers are idling in mostly Asian and European waters, as traders take advantage of cheap prompt prices and freight rates in a bet that high winter demand will eventually boost the market. Although some spot demand from Taiwan and India boosted prices, Taiwan's CPC Corp bought a cargo for delivery in the second half of September, while India's Reliance bought a cargo for delivery for August.

The UK gas market was undersupplied last week, which may bring some upside risks to the market in NWE. The storage overhang across NWE should continue to mute the upside risk from the disruptions caused by maintenance at major facilities. US gas internal prices fell to $2.40 mmBtu last week, although an EIA Storage Report stating a much lower implied injection should push prices up next week.

Benchmark Gas Prices - Al Attiyah Foundation's Weekly Energy Market Review - July 18, 2020

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DISCLAIMER: The views expressed in this insight piece are those of the author and do not necessarily reflect the official policy or position of the IndraStra Global.