Oil prices plunged about 5% to an eight-month low on Friday as the U.S. dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession, cutting demand for oil.
Brent futures fell $4.31 to settle at $86.15 a barrel, down about 6% for the week. U.S. WTI crude fell $4.75 to settle at $78.74, down about 7% for the week. The U.S. Federal Reserve raised interest rates by a hefty 75 basis points on Wednesday.
Central banks around the world followed suit with their own hikes. Analysts expects that central banks are poised to remain aggressive with rate hikes that will weaken both economic activity and the short-term crude demand outlook.
Meanwhile, the U.S. dollar was on track for its highest close against a basket of other currencies since May 2002. In the euro zone, business activity downturn deepened in September, a survey showed, suggesting a recession looms as consumers rein in spending and as governments urge energy conservation following Russia’s moves to cut off European supply.
Manufacturers were particularly hard hit by high energy costs as gas prices rocketed, while services industry suffered as consumers stayed at home to save money.
Asia spot LNG prices soften on sufficient stock
Asian spot LNG prices continued to fall last week as Japan and South Korea remain well supplied at least until October, while the market awaits signals of a Chinese demand rebound.
The average LNG price was 42 per million mmBtu, down $4 from the previous week, industry sources estimated. In Europe, a combination of high inventory levels and governments’ efforts to curb demand are keeping the Dutch gas benchmark at much lower levels compared to a month ago.
However, many uncertainties remain, not only regarding the remaining Russian gas flows towards Europe, but also whether the current LNG inflow can be maintained and when colder temperatures will start in Asia. In the U.S., natural gas futures fell 26 cents to settle at $6.83 per mmBtu on Friday, their lowest close since July 14.
For the week, the gas contract fell about 12%. Mild weather expectations until early October kept both heating and cooling demand low and allowed utilities to inject lots of gas into storage over the next few weeks.
With Cove Point LNG terminal potentially undergoing routine maintenance in October, LNG feedgas demand is expected to fall and contribute to bearish Henry Hub prices until the facility returns online.
— By The Al-Attiyah Foundation
