Oil Surges After OPEC+ Maintains Cuts & Data Shows Strong US Jobs Growth
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Oil Surges After OPEC+ Maintains Cuts & Data Shows Strong US Jobs Growth

By the Al Attiyah Foundation

Oil Surges After OPEC+ Maintains Cuts & Data Shows Strong US Jobs Growth

Oil prices jumped about 3% on Friday, hitting their highest levels in more than a year, following a stronger-than-expected U.S. jobs report and a decision by OPEC and its allies not to increase supply in April. On Friday, Brent futures rose $2.62, or 3.9%, to settle at $69.36 a barrel, while West Texas Intermediate (WTI) crude rose $2.26, or 3.5%, to settle at $66.09 a barrel. For the week, Brent was up 5.2%, rising for a seventh week in a row for the first time since December, while WTI was up 7.4%.

Both contracts surged more than 4% on Thursday after the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, extended oil output curbs into April, granting small exemptions to Russia and Kazakhstan. Investors were surprised that Saudi Arabia had decided to maintain its voluntary cut of one million bpd through April, even after the oil price rally of the past two months on the back of COVID-19 vaccination programs around the globe. Some forecasters revised their price expectations upward following the OPEC+ decision.

The market also received a boost after a report by the U.S. Department of Labor showed the U.S. economy created more jobs than expected in February. The falling rate of new COVID-19 infections and additional pandemic relief money from the government boosted hiring at restaurants and other services businesses, firmly putting the labor market recovery back on track.

Traders also noted the rising dollar was limiting the gain in crude prices. The price of oil is inversely related to the strength of the U.S. dollar, as a stronger dollar makes oil more expensive for holders of other currencies. 

Benchmark Oil Prices

Asian LNG Prices Edge Higher on Indian and Chinese Demand

Asian spot LNG prices edged higher last week, boosted by spot purchases from Chinese and Indian buyers, though ample supply capped gains. The average LNG price for April delivery into Northeast Asia was estimated at $5.70 per mmBtu, up about 10 cents from the previous week. Prices for cargoes delivered in May were estimated at $5.80 per mmBtu. 

On the demand side, several tenders were issued by both buyers and sellers last week. India's GAIL issued a tender seeking to buy two cargoes for delivery and offered two cargoes for loading from the U.S. India's Gujarat State Petroleum Corp (GSPC). GSPC was also seeking two cargoes for delivery over late March and early April, through two separate tenders, and is also seeking one cargo a month for delivery from May 2021 until April next year, sources said. 

In Europe, concerns over colder weather forecasts supported an increase of both NBP and TTF last week, though gains on NBP were higher compared to TTF. Strong gas for power demand was bolstered by muted wind and weak nuclear power generation, both contributing significantly to the bullish sentiment in the UK. Temperatures should recover this week, however, they will remain below seasonal norms. Wind power generation should also ramp up this week and reduce the UK’s gas for power demand.

In the US, Venture Global LNG expects to install the 7th and 8th of its 18 liquefaction trains at its Calcasieu Pass LNG export plant in Louisiana in the next few weeks, the company's chief executive said on Wednesday. Last week, Venture Global put out a tender seeking LNG buyers that could send vessels to pick up commissioning or test cargoes from Calcasieu as early as next October. The U.S. internal natural gas futures slipped to a five-week low on Friday, on forecasts for milder weather over the next two weeks than previously expected. Traders, however, noted the weather is expected to turn slightly cooler in mid-March, which should boost heating demand.

Benchmark Gas Prices

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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 IndraStra Global.