Oil
Benchmark crude oil futures rebounded last week, with Brent and WTI increasing by around 5% and 3% respectively. Prices rose mainly on the back of the US-China trade war ceasefire until next March, a drop in US crude stocks, a forced production cut in Alberta (Canada), and most importantly the Opec+ (Opec and its allies) agreement to cut output by 1.2mn bpd from October’s levels starting from January. The new Opec+ agreement was anticipated by analysts to rein in market supply excess, as non-Opec production is projected to soar next year by 2.4 mbpd while demand should grow by only 1.1 mbpd. However, prices were still pressured by depressed financial markets and concerns about the success of the US-China trade negotiations, as well as doubts about the effectiveness of the size of the last Opec+ output cut.
The new Opec+ output cut deal is likely to be an attempt to bring back balance to the oil market and put a floor under prices, while at the same time trying to do not push prices back to the $80 levels reached early October. The aimed floor level is seen by analysts at around $60, but the extent to which this floor price will hold is uncertain and will depend on multiple factors related mainly to the supply side. Meanwhile, the US became for the first time on record a net exporter of crude oil and refined products, by exporting a net of 0.21 mbpd in the last week of November.


Gas
Asian spot LNG prices fell sharply last week to below $9 per mmbtu, reaching a six-month low. The drop for a third week in a row was symptomatic of an unusual weak seasonal demand amid a warmer than average winter, whereas major customers already filled largely their winter stocks during the month of September. While prices were in backwardation last week, many of the cargoes floating in Asian waters were sold to release the tankers and benefit also from the current high shipping rates. Prices turned to contango from backwardation as February prices were assessed at $9 and above. 
In the US, Henry Hub natural gas futures declined by almost 3% for the first week in six. Prices fell last week on record output and changing weather forecasts, but a greater-than-usual weekly storage draw pared the losses. Meanwhile, UK gas futures fell for a third straight week amid a volatile trading. The drop was caused by relatively mild weather, healthy supply from Norway and through LNG, and high storage levels which are 94% full as of 6 December. 


This article was supplied by the Abdullah bin Hamad 
Al-Attiyah International Foundation for Energy and Sustainable Development.
Related Story