1. Summary
Oil Market
- Oil benchmark prices continued their decline last week due to crude stock builds throughout the OECD, despite nearly 100% OPEC compliance in production cuts in February. Continued increases in U.S. crude production, rig counts, and storage levels suggest that production cuts from OPEC and non-OPEC producers are not having the desired effect in reducing global oversupply. Likewise, crude petroleum storage in Turkey is increasing to an 85% capacity factor.
- The impact of record crude stockpiles in the United States on oil prices were somewhat muted by higher demand for gasoline. Many refiners in the United States and globally have responded to the OPEC production cuts by scheduling refinery maintenance. Meanwhile, global demand for products remains strong.
Natural Gas & LNG
- Speaking recently at CERA Week (Houston, USA), IEA Executive Director Fatih Birol said: “The countries in Turkey's surrounding region have profound natural gas resources and Turkey should benefit from these resources as much as possible…Turkey has to diversify its own natural gas and it needs to play an important role in the distribution of gas coming from Iraq and the Eastern Mediterranean.”
- European gas spot prices declined last week due to lower demand expectations after forecast temperatures continued to increase. Meanwhile U.S. gas prices were mixed as parts of the country experienced unseasonably cold temperatures due to a late-winter storm.
- In Asia, weak oil prices continue to weigh on gas and LNG prices. In Australia, gas prices in many domestic markets have been increasing due to growing perceptions that a gas supply shortage is on the horizon. Recent estimates put Japan LNG spot prices near $9.00/mBtu and average domestic prices in Western Australia are between $13- $17.00/mBtu.
- Three of the world’s top LNG buyers, Korea’s KOGAS, Japan’s JERA and China’s CNOOC, signed an agreement in March to “cooperate in the joint procurement of LNG.”
Economics
- U.S., European and Asian economies remain positive, while Japan and China continue to battle slowing growth. The Turkish government forecasts strong GDP growth in 2017 and 2018.
Geopolitics & Supply
- As OPEC considers extending supply cuts, Saudi Arabia is likely to insist that Iran contributes more to reductions at OPEC meeting in May. Meanwhile, Russia has not committed to the idea of continuing to cut production. In Venezuela, gasoline shortages are the latest sign of a deteriorating oil sector.
Renewables
- The Kalyon-Hanwha Group consortium won Turkey’s tender bid for a 1-GW solar park in Karapınar, offering a power take-off price of USD 0.0699 (EUR 0.065) per kWh.
- In the United States, wind surpassed hydro as the largest source of renewable electricity generation capacity in 2016.