Oil prices lost about 1 percent on Friday as the economic recovery worldwide runs into stumbling blocks due to renewed Covid-19 lockdowns and on worries about rising crude supply. The eurozone’s economic recovery from its deepest downturn on record stalled this month as pent-up demand, unleashed by the easing of lockdowns in July, dwindled a survey showed. By contrast, US housing and manufacturing survey data came in better than expected.
Brent crude futures settled at $44.35 a barrel, down 55 cents or 1.2 percent, while US West Texas Intermediate (WTI) crude futures settled at $42.34 a barrel, falling 1.1 percent. Brent fell about 1 percent for the week, although WTI saw a weekly rise of nearly 1 percent. In demand, India’s crude oil imports fell in July to their lowest level since 2010, while US motorists drove 13 percent fewer miles in June than a year earlier, according the US Department of Transport.
Putting further pressure on oil prices, Libya’s national oil company said it could restart oil exports after the North African country’s internationally recognised government in Tripoli announced a ceasefire. Those additional barrels would add to the output from OPEC+. The group has been focused on ensuring members that had overproduced against their commitments would cut output.
An internal report showed the group wanted oversupply between May and July compensated for with cuts this month and next, Reuters reported. The report also showed OPEC+ expects oil demand in 2020 to fall by 9.1 million barrels per day (mbpd), and by as much as 11.2 mbpd if there is a resurgence of Covid-19 infections.
Asian spot LNG prices jumped to a multi-month high earlier last week, although they eased slightly towards the end of the week on expectations of more supply from the US. The average LNG price for October delivery into Northeast Asia was estimated at about $4.10 per million British thermal units (mmBtu), up 40 cents from the previous week, but down about 10 to 20 cents from earlier this week.
Expectations of more cargoes from the US as well as news that the maintenance at Gorgon will not be as extensive as initially thought are expected to weigh on prices next week.
Chevron Corp plans to shut Train 1 at its Gorgon LNG plant in Australia in early October and Train 3 in January 2021 for inspections on key equipment in the processing units. Its train 2 is expected to restart production in early September after maintenance was extended for two months.
Buyers are expected to cancel up to 10 LNG cargoes for October loading from the US, the lowest number in months as prices i
n Asia and Europe recover. The exact number of cancellations was not immediately clear, but several trade sources estimated a range of three to ten, much lower than the 40 to 45 likely cancelled in July and August. As a result, Henry Hub prices moved high last week, closing at $2.45 per mmBtu on Friday.
European gas prices have also increased this month due to lower Russian gas flows. Analysts now expect winter LNG prices to rise to $5-6 per mmbtu as the market tightens. Both the TTF and NBP prices saw weekly gains last week, with both benchmarks closing above $2.75 per mmBtu.
