Al Attiyah Foundation's Weekly Energy Market Review - Nov 21, 2020
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Al Attiyah Foundation's Weekly Energy Market Review - Nov 21, 2020

Al Attiyah Foundation's Weekly Energy Market Review - Nov 21, 2020

Oil prices rose about 1% higher on Friday and posted a third consecutive weekly rise, buoyed by successful Covid-19 vaccine trials, while renewed lockdowns in several countries to limit the spread of the coronavirus capped gains. Brent crude futures rose 1.7%, to settle at $44.96 a barrel, while the more active US West Texas Intermediate (WTI) contract for December, which expired on Friday, rose 1%, to settle at $42.15 a barrel. Both benchmarks gained about 5% this week.

Prospects for effective Covid-19 vaccines bolstered oil markets last week. Pfizer Inc said it has applied to US health regulators on Friday for emergency use authorization of its vaccine, the first such application in a major step toward protecting against the new coronavirus. 

Also boosting sentiment was hope that OPEC, Russia, and other producers will keep crude output in check. The group, known as OPEC+, are expected to delay a planned production increase when they meet next week and are looking at options to delay the increase by at least three months. The tapering of their 7.7 million barrel per day (bpd) cuts by around two million bpd is scheduled to commence in January. Still, smaller Russian oil companies are planning to pump more crude this year despite the output deal as they have little leeway in managing the production of start-up fields.

Oil prices were getting some support from signs of movement on a stimulus deal in Washington after US Senate Republican Majority Leader Mitch McConnell agreed to resume discussions on providing more Covid-19 relief as cases surge across the United States. Energy firms in the US last week cut the number of oil rigs operating for the first time in 10 weeks, indicating a reduction of future output.

Benchmark Oil Prices

Gas Markets

Asian spot prices for LNG slipped last week, as Malaysia supplies returned to normal. However, traders were keeping an eye on potential demand during a colder-than-expected winter in North-East Asia. The average LNG price for December delivery into North-East Asia was estimated at $6.70 per million British thermal units (mmBtu), down 10 cents from the previous week.

Temperatures in Beijing and Seoul are expected to be lower than average over the next two weeks, weather data from Refinitiv Eikon showed, suggesting demand may increase for the coming week. Loadings from the Bintulu plant in Malaysia are returning to normal after a recent disruption, which may offset the projected demand increase. This, combined with record-high exports of the super-chilled fuel from the US, are capping prices.

Several sell tenders were issued this week with Nigeria LNG offering 11 cargoes for loading in 2021, while Russia's Novatek offered five cargoes for delivery into Europe next year. Indonesia's PPT Energy also offered 30 cargoes for loading over 2021 to 2023, while Russia's Sakhalin Energy offered 36 cargoes for loading between April 2022 and March 2025. In buy tenders, most of the spot purchases were seen in India, with Gujarat State and Indian Oil Corp both looking for cargoes for delivery in January.

In the US, natural gas futures rose over 2% on Friday, buoyed by the record-high LNG exports and forecasts for cooler weather in early December. In Europe, TTF closed the week at $4.50 per mmBtu, despite the consumption forecast in NWE showing to be bullish. As Asian swaps and Henry Hub prices traded lower, the pressure was conveyed on European prices.

Benchmark Gas Prices

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