Doha: Oil settled near $70 a barrel on Friday, supported by production cuts from major oil producers and optimism about demand recovery in the second half of the year. Benchmark Brent finished slightly down on Friday, at $69.22 a barrel, while US West Texas Intermediate crude also ended down at $65.61 a barrel. Brent and US crude ended the week roughly flat after prices touched a 13-month high on Monday, following seven straight weeks of gains.
Last week’s oil prices continued to be buoyed by the White House relief package and an almost daily flow of optimistic vaccine headlines. As a result, The Organization of the Petroleum Exporting Countries now forecasts stronger oil demand recovery this year, weighted to the second half. OPEC, Russia and its allies also decided last week to maintain its output cuts.
US drillers are also holding back, cutting the number of oil and gas rigs operating for the first time since November, according to data from Baker Hughes. The US oil rig count fell by one last week to 309 rigs, or 49 percent below this time last year. However, sustained higher oil prices are expected to encourage US producers to increase output in the coming months, which could eventually weigh on prices, JPMorgan analysts wrote. The financial services holding company expects US oil output to average 11.36 million bpd this year, compared to the 11.32 million bpd output in 2020.
As the world’s largest oil consumer, the US saw a big draw on gasoline stocks last week as the winter storm in Texas disrupted refining output. As a result, analysts said the fundamentals for summer gasoline was the most bullish in nearly a decade.
Asian spot LNG prices rose to a one-month high last week on supply disruption from Russia and buying interest in China and India. The average LNG price for April delivery into Northeast Asia was estimated at about $6.50 per million British thermal units (mmBtu), up about 80 cents from the previous week. Prices for cargoes delivered in May were estimated at about $6.55 per mmBtu. Most analysts attributed the strength in April prices to short covering from Russian Sakhalin plant outages, in addition to an uptick in buying interest from the Chinese.
Russia’s Sakhalin Energy, the international operator of a pioneering LNG plant in eastern Russia, said it had to make changes to its LNG output on March 1 after the failure at one of the gas pumping stations. Traders said one of the two trains at Sakhalin-2 plant has been offline following the accident. Sakhalin Energy produced and shipped record volumes of LNG in 2020 topping 11.6 million tonnes. The company supplies LNG to the Asia-Pacific with major customers in Japan, South Korea, Taiwan, and China, and as result, the outages boosted prices in the region.
In Australia, Chevron Corp plans to shut Train 3 at the Gorgon plant off Western Australia in the second quarter for maintenance and weld inspections, the company said. Analysts expect this further distribution in supply, coupled with increased Chinese demand, will support prices for the coming weeks. Last week, China’s Unipec was seeking nine cargoes for delivery over April to May, while China National Offshore Oil Corp (CNOOC) was also seeking two cargoes for delivery in April.
US natural gas futures fell over 2 percent to a six-week low on Friday after forecasts called for milder than previously expected weather and lower demand through to late March.
