Oil Dips, Little Changed on Week Despite Weaker Demand Forecasts
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Oil Dips, Little Changed on Week Despite Weaker Demand Forecasts

By the Al-Attiyah Foundation, Qatar


Oil Dips, Little Changed on Week Despite Weaker Demand Forecasts

Oil prices dipped on Friday and ended the week little changed after weathering concerns from banks and the International Energy Agency that the spread of coronavirus variants is slowing oil demand. Global oil benchmark Brent crude settled down 72 cents, or 1%, at $70.59 a barrel. U.S. West Intermediate crude (WTI) settled down 65 cents at $68.44. For the week, Brent fell less than 1%, after dropping 6% two weeks back, its largest week of losses in four months, while WTI slumped nearly 7% in its biggest weekly decline in nine months.


Still, oil has remained supported by improved demand in the world's top consumers, the United States, and other nations where the COVID-19 vaccination rate is higher. 


Major banks Goldman Sachs and JPM Commodities Research are less bullish on oil due to the rising infection rate. Goldman cut its estimate for the global oil deficit to 1 million barrels per day from 2.3 million bpd in the short term, citing an expected decline in demand in August and September. However, Goldman expects the demand recovery to continue alongside rising vaccination rates. 


By contrast, OPEC on Thursday stuck to its forecast for a rebound in global oil demand this year and further growth in 2022, notwithstanding the rising concern over surges in COVID-19.


U.S. energy firms added the most oil rigs in a week since April as the total rig count more than doubled from a record low a year ago, energy services firm Baker Hughes Co said. U.S. oil rigs rose 10 to 397 this week, their highest since April 2020, and up from 172 a year ago, which was their lowest since 2005 before the shale boom boosted activity.


Benchmark Crude Oil Price

Asian Gas Prices Continue Upward Trend on Firm Demand


Asian liquefied natural gas (LNG) prices continued to trend upwards last week as demand remained firm in the region, though a rise in coronavirus cases in China, the world's second-largest importer of LNG, capped price gains. The average LNG price for September delivery into Northeast Asia was estimated at $17.05 per metric million British thermal units (mmBtu), up 15 cents from the previous week, industry sources said. Cargoes to be delivered in October are estimated to be about $17.30 per mmBtu, they added. Shipping disruptions in China due to coronavirus cases, however, could weigh on prices, one source said. Intenders, demand was firm from Asia with several companies seeking or buying cargoes, the sources said. China's Guangdong Energy closed a tender seeking 13 cargoes for delivery from June 2022 to December 2023, traders said. ArcelorMittal Nippon Steel India is seeking 80 cargoes for delivery between 2024 and 2030, while India's Torrent Power is seeking 34 cargoes for delivery for 2022 to 2026, sources said. GAIL (India) Ltd has issued a swap tender offering 12 cargoes for loading in the United States and seeking 12 cargoes for delivery into India over 2021 to 2022, sources added. 


U.S. natural gas futures fell to a three-week low on Friday on forecasts for less hot weather and lower cooling demand than previously expected and despite expectations, U.S. LNG exports will rise as Gulf of Mexico plants boost output after finishing maintenance work. Demand for U.S. LNG has been growing in Europe and Asia, where gas prices were almost quadruple U.S. prices. Front-month gas futures fell 7.2 cents, or 1.8%, to settle at $3.861 per mmBtu, their lowest close since July 19. For the week, the contract was down about 6%, its biggest weekly percentage loss since February. With European and Asian gas both trading over $15 per mmBtu, compared with around $4 for the U.S. fuel, analysts said buyers around the world would keep purchasing all the LNG the United States can produce. Prices at the TTF benchmark, hit a record high last Wednesday.


Benchmark Gas Price


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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.