Oil prices settled higher on Friday as U.S. Secretary of State Antony Blinken began a week-long sweep through the Middle East in an attempt to contain regional tensions stoked by the Israel-Hamas conflict. Brent crude futures settled up $1.17, or 1.51%, at $78.76 a barrel. U.S. West Texas Intermediate crude futures finished up $1.62, or 2.24%, at $73.81.
Crude rebounded from losses on Thursday triggered by hefty increases in U.S. gasoline and distillate stocks, and both benchmarks ended the first week of the year higher. With the tensions in the Middle East, the geopolitical trading premium has to get pushed higher, analysts said.
Shipping giant Maersk said it will divert all vessels away from the Red Sea for the foreseeable future, warning customers of disruptions.
Meanwhile, a U.S. government report showing employment grew in December would support demand in the coming year. U.S. employers hired more workers than expected in December while raising wages at a solid clip, prompting financial markets to dial back expectations that the Federal Reserve would start cutting interest rates in March. Moreover, the U.S. crude oil drilling rigs were up by one at 501, energy services firm Baker Hughes said on Friday.
Asia Spot LNG price dip to 5-month low as stocks weigh
Asian spot liquefied natural gas (LNG) prices slipped to a five-month low last week, extending losses that began in mid-November as mild winter weather and high inventories curbed demand. The average LNG price for February delivery into north-east Asia dipped by 4% to $11.20 per million British thermal units (mmBtu) from $11.70 last week, industry sources estimated.
Despite the risk of attacks on commercial vessels in the Red Sea and force majeure notifications Novatek sent over future Arctic LNG 2 supplies following U.S. sanctions, Asian prices have seen little upside.
In Europe, gas consumption for heating could rise as temperatures in Northwest Europe are expected to fall by up to 6 degrees Celsius below normal levels this week.
Meanwhile, gas inventories remain high, with storage facilities at 87% of capacity as of Jan. 1 versus 83% the previous year.
The benchmark front-month contract at the Dutch TTF hub rose by 7.6% to $10.99 per mmBtu. In the U.S., natural gas prices climbed about 3% on Friday forecasts that extreme cold weather in January will boost demand for the fuel for heating to its highest since hitting a record during a winter storm in December 2022.
— By The Al-Attiyah Foundation