Oil prices rose on Friday, closing the week higher on the back of cold weather in Europe and the U.S. as well as additional economic stimulus flagged by China. Brent crude futures settled 58 cents, or 0.8%, higher at $76.51 a barrel, the highest level since Oct 14.
U.S. West Texas Intermediate crude closed 83 cents, or 1.13%, to $73.96, the highest level since Oct 11. Brent notched a 2.4% weekly gain, while WTI climbed nearly 5%.
Signs of Chinese economic fragility heightened expectations of policy measures to boost growth in the world’s top oil importer. Worries about Chinese demand were a factor in bearish demand assumptions last year, analysts said.
China announced a couple of new measures to boost growth last week with a surprise move to raise wages for government workers and the announcement of a sharp increase in funding from ultra-long treasury bonds. The additional funding is to be used to spur business investment and consumer-boosting initiatives.
Oil is likely to have gained some price support from expected increased demand for heating oil after forecasts for colder weather in some regions. Also supporting prices, U.S. oil rig count, an indicator of future output, fell one to 482 last week according to Baker Hughes.
U.S. crude stockpiles dropped by 1.2 million barrels to 415.6 million barrels last week, EIA data showed. Holding back prices however, the dollar was on track for its best week in about two months.
Asian spot prices gain on Europe gas outlook uncertainty
Asian spot liquefied natural gas (LNG) prices rose last week to a one-month peak, as the expiry of a transit deal for Russian gas through Ukraine caused uncertainty in Europe’s gas outlook. The average LNG price for February delivery into Northeast Asia LNG-AS was $14.60 per million British thermal units (mmBtu), industry sources estimated.
Ukraine had allowed Russia to keep pumping gas across its territory despite nearly three years of war, but Kyiv refused to renew a five-year deal that expired on New Year’s Day. While this risk was predictable, the European gas balance remains uncertain in the first quarter. A key concern is the relatively high withdrawals from European gas inventories, which are currently 16% lower year-over-year due to stronger gas demand, analysts said.
The suspension of the Russian gas flow via Ukraine could result in a net loss for the European market, necessitating higher LNG imports to balance the market in 2025. Gains in Northwest European delivered prices have outpaced Asia’s price gains, supported by the end of the Russia-Ukraine gas transit deal, downward revisions to minimum temperature forecasts and an unplanned outage at Norway’s Hammerfest export terminal.
European prices closing above Asian prices has also prompted most west African cargoes to head to Europe instead of Asia. In the U.S., gas price fell 8% to a two-week low Friday due to smaller storage draw and milder weather forecasts.
— By The Al-Attiyah Foundation
