Doha: Oil prices hit highest in a year on growth hopes & OPEC+ output cuts.
Oil prices rose about 1 percent last Friday, after hitting their highest in a year and closing in on $60 a barrel, supported by economic revival hopes and supply curbs by producer group OPEC and its allies. Oil prices were also supported as US stock markets hit record highs on signs of progress toward more economic stimulus. At the same time, a US jobs report confirmed that the labour market was stabilising.
Brent crude ended Friday’s session up 0.9 percent, at $59.34, after hitting its highest since February 20 at $59.79. US crude settled up 1.1 percent, at $56.85, after reaching $57.29, its highest since January 22 last year. US crude futures gained nearly 9 percent last week, the biggest percentage gain since October, in part due to US inventories dropping to levels last seen in March. Brent also rose by about 6 percent for the week. The last time Brent traded at $60 a barrel, the pandemic had yet to take hold, economies were open, and fuel demand was much higher.
The rollout of COVID-19 vaccines has fed hopes of demand growth. Still, even optimists, such as OPEC, which expects a market deficit throughout 2021, do not expect oil consumption to return to pre-pandemic levels until 2022. Last week, Aramco raised its Arab Light official selling price (OSP) to North-West Europe for March by $1.40 a barrel from the previous month. Some traders feel this could signal Saudi Arabia is more confident in the demand outlook and is feeding the bullish sentiment. OPEC and allies, collectively known as OPEC+, also stuck to their supply tightening policy at a Wednesday meeting. Record OPEC+ cuts have been one of the biggest contributors in helping lift prices from historic lows last year.
Asian spot LNG prices fell for a third week in a row, as Spring approaches in the northern hemisphere, reducing the heating demand that sent prices to a historic high last month. The average LNG price for March delivery into North-East Asia was estimated at $7.20 per million British thermal units (mmBtu) last week, 80 cents lower than the previous week. For April delivery, cargoes were estimated at $6.60 per mmBtu. Supply disruptions during winter sent prices to a record high of $32.50/mmBtu on January 13.
In two of the world’s top LNG consuming countries, temperatures in Tokyo and Shanghai are expected to rise slightly above the historical average over the next two weeks, weather data from Refinitiv Eikon showed. Falling prices in Asia are also normalising the flow of US ships to Europe. Four US vessels have changed their trajectory in the middle of the Atlantic in the last two weeks, diverting from their intended delivery in Asia towards Europe instead. As prices fall in all regions, analysts expect there to be a flurry of purchases for delivery in March, as consumers seek to replenish stock exhausted last month.
Congestion delaying LNG shipments via the Panama Canal, which has been driving up freight costs in the past months, has also eased over the last couple of weeks.
LNG tanker transits of the Panama Canal hit a record in January, with 58 US vessels finding a shorter route to Asia, the canal operator said in a February 3 note.
Modifications in the Canal’s reservation system on January 4 allowed last-minute slots to be offered through auctions. From the 25 auctions last month, nine have been awarded to LNG vessels, the Canal’s operator said.
In the US, natural gas futures dropped more than 2 percent on Friday on midday forecasts for less cold weather and less heating demand for the coming week than previously expected. That price decline came even though all forecasts continue to call for extreme cold in two weeks, which helped boost futures to their highest levels in 12 weeks earlier on Friday. The contract was up about 11 percent for the week, its highest weekly percentage gain since October.
