Oil & Gas
Prices and volumes react to global tensions
April 2018
Increasing natural gas consumption by LNG exports is expected in the next two years. Most of the price rises in recent months reflects drawdowns in global oil inventory, and falling outputs from Libya, Nigeria and Venezuela. After 2019, futures indicate a bearish trend for oil prices.

Brent oil prices moved sideways for most of March, before hitting a late rally to over US$71/bbl and finishing at US$69.5/bbl.  The rally was in response to global geo-political tensions and was aided by OPEC cuts and low Venezuelan production.  WTI crude averaged US$62.25/bbl; it rose at the end of the month to US$65/bbl; US inventories fell 4.6Mbbl in the last week, representing an 11.2% year on year (y-o-y) fall.  Henry Hub gas spot prices remained in the US$2.6-2.7/Mbtu range over the month.

US refinery demand for heavy crudes saw March quarter imports of Canadian heavy crude surpass supplies from Venezuela. In the US, the average price for imported crude over March was US$56.8/bbl. In Asia, refinery crude demand is being skewed by a shift towards lighter crudes, particularly from Russia who is increasing pipeline supplies into China. The lighter crudes are set to replace heavier oils from Venezuela, even as Asian oil demand remains strong.

Crude oil supply in the U.S. remains high at around 10.3Mbpd, undermining OPEC's output curbs; this will likely move markets into a supply surplus in 1H 2018. The Energy Information Agency (EIA) forecasts OPEC output will average 32.7Mbpd in 2018. In news, India's Reliance is looking to rapidly expand its KG basin operated gas project. Poland's PGNiG also found more gas reserves at Przemyƛl, relevant because of the political debate over Russia's Ukraine-circumventing Nordstream-2 pipeline.