Prospects for global oil demand and major trends in the gas and LNG markets are in sight of S & P Global Platts news editors this week amid stuttering from the coronavirus pandemic.
1. Restoring oil demand in the spotlight as the IEA offers a tougher market in 2021
What is happening? The world oil market should tighten next year, as demand for the coronavirus pandemic is recovering more rapidly than supply. International Energy Agencygiving OPEC and its manufacturing allies the opportunity to reduce agreed production reductions faster than expected. World oil demand will grow by 4 million barrels per day more than next year’s supply, which would mean offsetting a portion of the vast preponderance of oil reserves accumulated during the pandemic, the IEA said in its latest monthly oil market report on June 16.
What’s next? On the demand side, markets are closely monitoring the pace of recovery in oil demand and the possibility of a recurring wave of COVD-19 infections to smooth out the demand recovery curve by pushing its tail in 2021 and possibly in the subsequent period. In terms of supplies, OPEC +’s efforts to curb quota reductions by some of its members, such as Iraq and Kazakhstan, are key to fully realizing a massive reduction in production by 9.7 million barrels per day by the end of July. Any slowdown in recovery in oil demand could lead OPEC + to consider halting cuts after July.
2. US natural gas production begins to rise despite falling prices
What is happening? US natural gas base prices drop to 20 year minimum On June 16, its price amounted to only 1.38 USD / million BTUs, since a drop in the level of LNG supply in liquefied gas and a slower than expected recovery of gas demand from the coronavirus affect the US market balance. Bearish sentiment is also lowering the futures and forward markets, with both NYMEX and Henry Hub summer balance contracts now trading at low to mid $ 1.60s / MMBtu.
What’s next? According to S & P Global Platts Analytics, for the week ending June 18, US gas production averaged over 86.9 billion cubic meters. Feet per day, which is 400 million cubic meters. There are more feet per day than at the end of May. As reductions in main supply pools are weakening, additional production may be bearish for US gas prices this summer. In Perm, production has recently grown to more than 11 billion cubic meters. Feet per day, compared with a 16-month low of 9.8 billion cubic meters. BCF / d in closed release by July may push production at the basin level to annual maximums observed in early May.
3. The Chinese market is flooded with LNG, despite the uncertain prospects for demand
What is happening? The volume of LNG imports in China has been growing steadily since February 2020, when imports declined due to the impact of coronavirus on the economy and the erosion of demand in the domestic natural gas markets. When the Chinese economy began to gain momentum, it inspired hope for a complete recovery. Record-low oil and LNG prices meant that gas importers were interested in acquiring more LNG cargo. However, while domestic demand has grown, many export-dependent industries have not yet recovered. Along with high reserves, the domestic gas market is crowded and leading Chinese LNG importers are participating in price competition,
What’s next? Many domestic sources remain bearish in their outlook for the coming months, as LNG imports continue to grow, contributing to an oversupply of supplies to China. The JKM LNG spot price averaged $ 3.50 / million BTUs, $ 3.10 / million BTUs, $ 2.80 / MBTE and $ 2.10 / MBT based on DES for shipments in March, April, May and June, respectively, as shown by S & P Global Platts. Chinese gas importers do not have an optimistic outlook on demand forecasts for the remainder of the year, as many uncertainties can undermine the growth potential of this demand center.
4. Gas injection in the EU is slow but high stock levels remain a problem
What is happening? Over the past few weeks, gas injection into Europe has declined, giving some respite to the market, which was under significant price pressure. According to S & P Global Platts Analytics, injection rates in Europe, especially in Germany, France and Italy, have slowed as gas prices rise in Europe.
What is happening? There are concerns that European gas storages will be filled long before the end of the injection season, possibly already in August, which will be bearish for a market that has already seen record low prices in 2020. However, evidence suggests that at present, the rate of injection, storage will fall to the same level that was observed last year by mid-August.