Oil
Benchmark crude oil futures clinched another week of gains, amid a volatile and choppy trade. Actually, the decline of the earlier days of the week were more than compensated by the gains of the later days. While the correlation between equity markets and oil markets was still noticeable last week, the boost to oil prices was mainly driven by global oil demand growth in 2018 and a spectacular draw in US oil product stocks in the week to March 9. The negative support to prices was mainly due to the rise in non-Opec supply and the build in both stocks of US crude oil in the latest week and total OECD commercial oil in January 2018. 
Crude oil futures moved since last Tuesday from backwardation to contango, which means that futures prices for later months are getting higher than earlier ones. Therefore, this situation might lead to an increase in inventories, implying the start of a potential structural weakness in the prices. 
The Opec and the IEA agreed in their respective monthly reports that non-Opec supply will grow significantly in 2018, although they didn’t agree on the level. Opec is predicting non-Opec crude supply to grow by 1.66 mbpd, while the IEA forecast it to 1.8 mbpd. With global oil demand projected to grow by 1.5 mbpd in 2018 to 99.3 mbpd, the IEA is concluding that there should be an increase in OECD stocks in the first quarter of this year with declines afterwards.
Gas 
North Asian LNG spot prices for May delivery continue to decline but are still higher than last year’s levels, as the spring season corresponding to warmer weather and lower LNG demand is breaking through. The prospect of restart of some nuclear reactors in Japan also weighed on the market, as it usually limits the call on LNG demand for power generation. 
However, LNG demand from other regions could pick up, as South Korea is shutting some coal and nuclear power plants, while some Indian companies are looking for LNG cargoes through tenders.
The LNG industry recorded last week the reception of the world’s second FLNG project in Cameroon with an 1.2 mtpa capacity, while Japan’s Inpex already started trial operations at its Ichtys LNG project in Australia (8.4 mtpa total capacity). With several LNG projects coming onstream, downward pressure on LNG prices should remain perceptible this year. Another eventual pressure on LNG suppliers is to get more flexible contractual terms. As an example, Tokyo Gas clinched last week heads of agreement with Petronas with flexible destination clause.
In the US, Henry Hub natural gas front month futures declined on the week by around 1.6% due mainly to falling demand by the end of March. Although the US inventory levels are getting below the five-year average, analysts believe that there is enough gas in storage to meet the demand for the remainder of the winter. In the UK, NBP gas futures also ended the week with more than 2% losses. The gas supply system is thought to be able to cope with the demand corresponding to a cold snap forecast over the coming days. As Asian LNG prices are weakening, an LNG tanker from US Cove Point made a U-turn in the middle of the Atlantic away from Asia to Britain.

* Sofiane Ghezali is senior energy researcher at Abdullah bin Hamad 
Al-Attiyah International Foundation for Energy and Sustainable Development.


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