Oil
- The highlight of the oil calendar in April was the Doha talks scheduled for the 17th, where 18 oil-producing nations including Saudi Arabia and Russia met to discuss an output freeze (again!). Crude rose steadily in anticipation of the talks, even though they once again promised no more than a freeze and Iran had already said they wanted no part in it. A strong market across the commodities complex – iron ore year-to-date has rallied over 50% - also helped. As it was, the meeting broke up with no agreement, with the Russian oil minister going so far as to say the Saudis were ‘unreasonable’ for demanding the presence of Iran.
- Curiously, oil prices didn’t drop much at the news. Perhaps the market had expected the already-battered can to be kicked further down the road – this time to the 2nd June OPEC meeting. And then Kuwait’s oil workers staged a strike, cutting the country’s production by almost half, and oil was off and running.
- Brent closed April at $48.13/bbl, registering a 21% gain in the month and WTI closed at $45.92/bbl, a 20% gain. A weaker dollar, falling US oil production, improving economic data from China combined with large speculative positions fuelled the rally. Analysts however have cautioned that inventories remain high and oversupply persists.
LNG
- The benchmark FOB Singapore SLInG index broke below the key $4-level for two weeks, hitting a record low of $3.899/mmBtu before rebounding to finish the month at $4.136/mmBtu. This was the first significant rally since the Sakhalin outage early this year, on the back of stronger crude and European gas, though purchase tenders from India and Argentina failed to emerge and the market is looking vulnerable once again.
- The LNG18 conference in Perth saw the gathering of the glitterati of the LNG world amidst unprecedented oversupply swamping the market, which could persist into the 2020s. For the chief executives of some of the largest global O&G companies, it was a case of weathering the storm, strengthening relationships with existing customers, and preparing to develop new markets where possible. The lower price environment is encouraging new buyers to enter the market – South Africa, Pakistan, Poland were mentioned – and for the sellers, the focus is on flexibility and cost management. Above all, a consistent theme throughout the conference was the need for clear, transparent and fair pricing of LNG, and importantly how to transition to this.
FULL REPORT AVAILABLE HERE
