Oil Falls To Settle at 3-Week Low on US, China Economic Concerns

Oil prices eased on Friday and settled at a three-week low as traders worried about negative economic news from the US and China and signs of growing supply. Losses were limited by optimism US trade deals could boost global economic growth and oil demand in the future.

Brent crude futures fell 74 cents, or 1.1%, to settle at $68.44, while US West Texas Intermediate (WTI) crude fell 87 cents, or 1.3%, to settle at $65.16. For the week, Brent was down about 1% with WTI down about 3%. New orders for US-manufactured capital goods unexpectedly fell in June while shipments of those products increased moderately, suggesting business spending on equipment slowed considerably in the second quarter.

Meanwhile, the US is preparing to allow partners of Venezuela's state-run PDVSA starting with US oil major Chevron, to operate with limitations in the sanctioned nation, sources said on Thursday. That could boost Venezuelan oil exports by a little more than 200,000 barrels per day (bpd), news US refiners would welcome, as it would ease tightness in the heavier crude market. 

US energy firms last week cut the number of oil and natural gas rigs operating for the 12th time in 13 weeks, energy services firm Baker Hughes said. In China, the world's second-biggest economy, fiscal revenue dipped 0.3% in the first six months from a year earlier, the finance ministry said, maintaining the rate of decline seen between January and May.

Gas

Asian spot liquefied natural gas (LNG) prices slipped for a second consecutive week to a ten-week low, weighed down by tepid demand and increasing supply from new projects. The average LNG price for September delivery into north-east Asia was at $11.90 per million British thermal units (mmBtu), industry sources estimated. 

This is down from $12.30 per mmBtu last week and its lowest since May 16. Despite the heatwave, spot demand in Northeast Asia has remained limited, as much of the additional cooling demand is being met by cheaper coal-fired power generation.

 Also, increased renewables generation has pushed some coal-fired generation out of the baseload mix, allowing more available dispatchable capacity to meet peak demand. The prospect of supply growth in the coming months also weighed on prices, particularly with expectations that Canadian supply will increase following the commencement of production at the LNG Canada project.

Meanwhile, Venture Global’s Plaquemines export facility, which has begun production from its second phase, has reached record output, while the Greater Tortue Ahmeyim project offshore Mauritania and Senegal has been operating smoothly since loading its first cargo. 

In Europe, the futures price at the Dutch TTF hub dropped to $11.19 per mmBtu. A fall in spot Asian LNG demand over the past weeks has allowed European buyers to bid at wider discounts to the TTF to secure cargoes.

This article was supplied by the Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development.