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Commodities

LNG shortages will lead to very high volatility on gas markets in 2023

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natural gas futures prices

Extremely high volatility in global liquefied natural gas (LNG) markets in 2023 will encourage U.S. LNG terminals to continue operating at full capacity, according to S&P Global Commodity Insights’ annual energy study. Still, analysts are predicting natural gas futures prices will rise. 

At the same time, prices at the main U.S. gas hub – Henry Hub – are likely to fall because liquefaction capacity will remain at the same level. Despite very high natural gas futures prices, the shortage of new liquefaction capacity will prevent production from rising as much as buyers in Europe and Asia would certainly like. 

As a result, gas markets (especially in Europe) will try to balance lower demand with existing reserves instead of increasing LNG production. For Europe, we do not rule out a growing deficit in the gas and electricity markets in FY23. The main reason for such dangerous dynamics is, the authors of the study of S & P Global emphasize, that next year will be the first year for Europe without significant amounts of Russian piped gas.

S&P Global expects a sharp growth in the European LNG infrastructure next year, which will significantly improve the situation with the reception of delivered gas. So we should be prepared for a decrease in natural gas futures prices on the back of this news. By the end of the year 10 LNG terminals will be operational or under construction.

In global gas markets, the most important fundamental determinant of global demand in 2023 will be, according to Dan Klein of S&P Global, Beijing’s coronavirus policy. Numerous lockdowns this year have reduced energy demand in the PRC, which has stabilized the gas, oil and coal markets in Europe, which after Feb. 24 has struggled all year to abandon and find substitutes for Russian energy.

Analysts and economists at S&P Global believe that after virtually no growth in energy demand in China this year in 2023, it will grow to 3.3 million barrels per day regarding oil. Growth in energy demand in the Celestial Empire is expected to account for almost half (47%) of all global growth next year.

Most gas producers agree with analysts’ and economists’ forecasts of extremely high volatility in gas markets in 2023.

Earlier, we reported that record production declines in key U.S. gas basins exacerbated the energy crisis.

Commodities

Oil prices wrap up Q1 with strong gains as Russia cuts ease oversupply worries

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Investing.com– Oil prices settled higher Thursday to wrap the first quarter with strong gains as bets on lower Russia output eased worries about a global supply surplus.    

At 14:30 ET (18:30 GMT), rose 1.6% to settle at $87.48 a barrel, while rose 2.2% to $83.17 a barrel taking its gains for Q1 to about 16%.

Tight supply see oil prices notch strong Q1 gains 

Prices were boosted chiefly by a tighter outlook for markets, as Russia, Saudi Arabia and other members of the Organization of Petroleum Exporting Countries kept ongoing production curbs in place. Russia had earlier in March said it will deepen its ongoing production cuts, while fuel supplies in the country also shrank following a series of debilitating attacks by Ukraine on Russian fuel refineries.

Few signs of a deescalation in the Israel-Hamas war, which has raised geopolitical tensions in the oil-rich Middle East region, also underpinned oil prices, as did persistent supply disruptions stemming from Houthi attacks on ships in the Red Sea. 

OPEC meets next week

Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organisation of Petroleum Exporting Countries amid supply concerns over ongoing geopolitical risks.

That said, the group  is unlikely to make any oil output policy changes until a full ministerial gathering in June.

Russia and Saudi Arabia, who lead the group known as OPEC+, extended their output cuts of 2.2 million barrels per day until the end of June. 

“While expectations of the group recommending any change to its supply policy are not high, any signs of members not adhering to current production quotas will be seen as a bearish sign,” ANZ Research said in a note.

(Peter Nurse, Ambar Warrick contributed to the article.)

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Commodities

Oil prices advance on tighter supply outlook

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By Ahmad Ghaddar

LONDON (Reuters) – Oil prices firmed on Thursday, following two consecutive sessions of decline, as investors saw a tighter supply outlook ahead, while the OPEC+ producer alliance was widely expected to stay the course on its current production cuts.

Brent crude futures for May were up 91 cents, or 1.1%, at $87 a barrel while the more actively traded June contract rose 75 cents, or 0.9%, to $86.16 at 1101 GMT. The May contract expires on Thursday.

U.S. West Texas Intermediate (WTI) crude futures for May delivery were up 89 cents, or 1.1%, to $82.24 a barrel.

Both benchmarks were on track to finish higher for a third consecutive month.

In the prior session, oil prices were pressured following last week’s unexpected rise in oil and gasoline inventories, driven by a rise in crude imports and sluggish gasoline demand, according to Energy Information Administration data.

However, the crude stock increase was smaller than the build projected by the American Petroleum Institute, and analysts pointed out that the increase was lower than what would be expected for this time of year.

“We … expect U.S. inventories to rise less than normal in reflection of a global oil market in a slight deficit,” SEB analyst Bjarne Schieldrop said. “This will likely hand support to the price going forward.”

Also providing support to prices were U.S. refinery utilisation rates, which rose 0.9 percentage points last week.

Recent disappointing inflation data affirms the case for the U.S. Federal Reserve to hold off on cutting its short-term interest rate target, a Fed governor said on Wednesday, but he did not rule out trimming rates later in the year.

“The market is converging on a June start to cuts for both the Fed and the European Central Bank,” JPMorgan analysts said in a note. Lower interest rates support oil demand.

Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organisation of Petroleum Exporting Countries (OPEC) amid supply concerns over geopolitical risks.

OPEC+ is unlikely to make any oil output policy changes until a full ministerial gathering in June.

© Reuters. An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. Picture taken with a drone. REUTERS/Tatiana Meel

“[We] do not see any indications that the recent run-up in prices due to the heightened Russian infrastructure risk will prompt any policy reversal at next week’s JMMC meeting.” RBC analyst Helima Croft said.

“Any serious shift will likely have to wait until the June 1 ministerial meeting, and even then, we believe the group will be very judicious when it comes to unwinding any cuts.”

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Commodities

Firmer oil prices expected as demand builds and supply curbs persist: Reuters poll

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By Sherin Elizabeth Varghese

(Reuters) – Oil prices will gain some momentum this year as demand picks up and output curbs by the OPEC+ producer group continue to squeeze supply that is already being pressured by military conflicts, a Reuters poll showed on Thursday.

A survey of 46 economists and analysts forecast that would average $82.33 a barrel in 2024, up from the $81.13 consensus projection in February. expectations were raised to $78.09, up from the $76.54 forecast last month.

This was the first upward revision in 2024 consensus forecasts since the October poll.

“We see the oil price rally going further until the summer months,” said Florian Grunberger, senior analyst at data and analytics firm Kpler. “This is due to the geopolitical risk premium and the interests of OPEC+ members, coupled with increasing demand in China.”

Oil prices have added more than 12% in the quarter so far, fuelled by geopolitical tensions in the Middle East, Houthi attacks on Red Sea shipping and recent Ukrainian drone attacks on Russian refineries. [O/R]

On the demand side, the overall consensus was roughly in line with the 1.3 million barrel per day (bpd) rise for 2024 projected by the International Energy Agency.

The IEA’s forecast was far less bullish than that of OPEC, which expects demand growth at 2.25 million bpd this year and said the 2024 and 2025 growth trajectories of India, China and the United States could exceed current expectations.

“Traders have now fully absorbed the implications of the OPEC+ supply cut extensions at a time when demand is proving more robust than expected,” said Matthew Sherwood, lead commodities analyst at the Economist Intelligence Unit.

© Reuters. FILE PHOTO: A person uses a fuel nozzle to fuel up a car at a petrol station in Vienna, Austria March 18, 2022. REUTERS/Leonhard Foeger/File Photo

OPEC+ members led by Saudi Arabia and Russia are unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters.

“Convincing OPEC+ members to under-produce as a group to maintain oil prices above a certain level is not going to be easy,” said Suvro Sarkar, energy sector team lead at DBS Bank, pointing to rising surplus capacity and the loss of OPEC+ market share to non-OPEC+ producers such as the United States.

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