Benchmark energy products have seen trading high volumes outside of U.S. market hours, demonstrating deep liquidity and flexibility around the clock, Chicago-based CME noted. Brent crude oil prices plunged from $64 per barrel on average in 2019, with the ICE Brent frontmonth May last seen trading as lwo as $29.75/b
Government analysts in Washington, meanwhile, expect prices will average $37/b during the second quarter and recover slightly to $43/b during the second half of the year. Declining global inventories will thereafter gradually put upward pressure on price, lifting Brent prices to an average of $55/b in 2021.
Covid-19 contingency plans curb demand
As economies throughout the global grind to a near-halt as government impose increasingly drastic measures to contain the Covid-19 outbreak, consumption of crude oil and natural gas plunges with the surplus stored in inventories.
Global liquid fuels inventories are seen grow by an average of 1.0 million barrels per day (b/d) in 2020 after falling by about 0.1 million b/d in 2019. According to the U.S. Government’s March Short-Term Energy Outlook (STEO) inventory builds will be largest in the first half of 2020, rising at a rate of 1.7 million b/d.
After the March 6 meeting, the leading OPEC member Saudi Arabia announced to flood the market with cheap oil and natural gas after Russia refused to support measures to limit production. A global crash in prices of crude oil and natural gas was the consequence.
Stockpiling surplus fuels
Analysts now expect OPEC production will far exceed demand, largely due to the significant decline in global liquids demand which contributes to inventory builds. “Given that OPEC surplus capacity is more than 2.0 million b/d, member countries could produce far more than EIA’s currently forecasts, which would lead to larger inventory builds and put downward pressure on prices,” analysts cautioned.
On the other hand, higher-than-expected crude oil production outages could reduce supply and put upward pressure on prices. Such outages are likely to occur in Libya, Iran, Kuwait and Nigeria.
Gas prices plunge
Lower crude oil prices impact oil-indexed natural gas prices with a time-lag, which will also lead to lower long-term LNG supply contracts to the benefit of Asian utility buyers.
The Platts Japan-Korea Marker price for Asian spot LNG was last seen at $3.115 per MMBtu for April cargoes.
In Europe, meanwhile, the UK National Balancing Point (NBP) gas price that guides LNG prices for the Atlantic Basin was last at $3.10 per MMBtu, up from $2.85 per MMBtu and the main natural gas price on Continental Europe, the Dutch Title Transfer Facility (TTF), was also at $3.10 per MMBtu.
The US Gulf Coast LNG prices at the Intercontinental Exchange remain subdued due to the supply glut and sluggish demand. The front-month April 2020 price notched up to $2.401 per MMBtu from $2.390 per MMBtu. The May LNG future was last seen at $2.451 per MMBtu, up from a previous $2.449 per MMBtu.