Oil futures set for a second straight week of decline
July 15 2018 10:50 PM

By Sofiane Ghezali/www.abhafoundation.org

Oil prices rose about 1% on Friday as strike actions in Norway and Iraq hit supplies, but futures were set for a second straight week of decline after Libyan ports reopened and, on the view that Iran might still export some crude despite US sanctions. Brent crude rose 88 cents to settle at $75.33 a barrel on Friday — a 1.18% gain. However, the global benchmark fell about 2.7% for the week. WTI crude futures rose 68 cents to settle at $71.01 a barrel, but lost about 3.9% for the week.
The market pared gains late in the session on Friday on a Bloomberg report that the Trump administration is actively considering tapping in to the country’s Strategic Petroleum Reserve, which would add supply to the market. The US holds a reserve of about 660mn barrels, enough for about three or four months of supply. 
Persistently declining oil supplies from Venezuela and simmering strike actions in Norway and Iraq are prompting bullish sentiment. Hundreds of workers on Norwegian offshore oil and gas rigs went on strike on Tuesday after rejecting a proposed wage deal, closing Shell’s Knarr field, which produces 23,900 barrels of oil equivalent per day. In Iraq, about 100 protesters demanding jobs and better services closed access to Umm Qasr commodities port near Basra on Friday.
Prices weakened earlier in the week after Opec member Libya reopened major eastern oil ports and US Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers. Fears that a US-China trade dispute could hit global economic growth have also kept buyers on the back foot. The US oil rig count remained steady at 863 this week. The rate of US rig growth has slowed over the past month or so with a decline in crude prices.
Asian spot LNG prices continued correcting lower with potentially steeper dips expected ahead amid lower demand from China and India and healthy supply. Recent tender deals seemingly confirmed the bearish tone. Spot prices for August delivery in Asia were assessed at $10 permn Btu, down 10 cents from the previous week. LNG prices may be a shade lower heading into September. 
Despite above-average temperatures in Japan, utilities show limited demand for LNG, while in China buyers may be waiting for prices to fall further before wading into the spot market. Total LNG imports into China remain brisk however. Cooling prices may also tempt Indian buyers back into the market but for now demand was sparse with only Gail this week wrapping up a tender purchase for a single late July cargo.
A run of production outages helped to tighten markets last month but much of that pressure has since been relieved. However, the market was not fully out of the woods as Malaysia’s giant Bintulu complex may have shut in some production for planned maintenance. The 30mn tonne per annum, nine-train facility spent last month troubleshooting unexpected electrical faults that impeded output. Australia’s Ichthys project, meanwhile, fell further behind schedule, delaying first LNG as developer Inpex patched what it called “minor issues”. The end of September is now the new target for the project to ship its first LNG cargo.

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

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