Brent oil ended up last night at $50.12 after a wild ride that saw it plunge then launch as stock markets took off. The offending data was a huge US stock build:
But falling production:
In news, the bull/bear debate rolls on, from the WSJ:
Pierre Andurand, one of Europe’s top energy traders, said the price of a barrel of West Texas Intermediate crude could fall as low as $25 in the next 10 months as the global demand outlook is revised down.
Mr. Andurand, founder of London-based hedge fund Andurand Capital Management LLP, which gained around 38% last year, said he expects WTI—trading around $46.18 on Thursday—to stay in a range of between $35 and $50 a barrel for another year before starting to rise.
But he added: “I think there is a 30% probability to even go down to $25 in the next 10 months, as storage capacity gets filled and demand will keep on being revised down.”
And, from Reuters:
Goldman Sachs head of commodities research and commodities bear Jeff Currie said on Thursday that he does not see the price of oil breaking above $50 a barrel in the next year, but the chances of it dropping to $20 are below 50 percent.
Persistent oversupply, along with slowing demand from China and other emerging-markets as well as a stronger dollar, will create enough of a headwind to keep the price of oil below $50 a barrel through the coming 12 months.
…”A substantially oversupplied market makes it that much more difficult in terms of trying to complete the adjustment process going forward, but also reinforces our view that of a chance that we trade down to $20, that’s where we reach storage capacity constraints,” Currie said at a news briefing.
Clear as oil. My own view remains we need to go lower to clear the market and that that is being prevented only by monetary considerations.
Turning to LNG, the indicative oil-linked contact price rose to $7.02mmBtu:
In news, India is still banging the drum for flexible contracts, via Platts:
Indian Oil Corporation will seek “pricing flexibility” clauses for long-term LNG deals it will sign with global suppliers, a company official said Wednesday, noting the move is driven primarily by current low commodity prices.
…The current low oil price is sparking off a debate among Asian buyers of LNG from North America on the benefits of delinking from the crude-based pricing in favor of natural gas.
…Japan Cleared Customs or JCC has traditionally been the delivered price of LNG in Asia, and it is indexed to a basket of crudes. But since early 2014, Japanese importers of LNG from North America have been in favor of a “cocktail” price which is indexed more to natural gas than crude oil.
Some Asian buyers may find it more competitive for Canadian LNG prices to be indexed to crude oil, but Japan will likely favor a mix that will include both JCC and the US’ Henry Hub or Western Canada’s AECO, Eiji Yanagawa, general manager of the natural gas division with Mitsui, said at the event.
Crikey, just gives us a spot and futures market!
Santos is celebrating, from LNG worldnews:
The first cargo of liquefied natural gas from the Santos-operated US$18.5 billion GLNG project in Australia has been delivered to South Korea’s Kogas, according to a report by Reuters.
The news agency cited Total’s CEO Patrick Pouyanne as saying this on Thursday without revealing any further information.
Shame it killed the company. Meanwhile, Woodside is dissembling:
Woodside Petroleum chief executive officer Peter Coleman is maintaining that his company’s $11.65 billion bid for Oil Search is “very competitive” in the face of speculation his company will make a higher offer.
I’ll say. Way over-priced more like it. Won’t get it over the line, though. PNG won’t sell at a loss. Walk away.
