1. Summary
Oil Market
- Oil benchmark prices increased over the last two weeks, as OPEC and non-OPEC producers consider extending the agreement to cut production. Prices, which have increased by more than $5/b since March 27, are also supported by tensions in Syria, the oil supply market outlook in the United States, supply outages in Libya and the North Sea and increased compliance from Russia on oil production cuts.
- The story continues that 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.
- Prices for transportation fuels are increasing in most regional markets ahead of the summer driving season. European gasoline exports are expected to increase significantly to the United States. U.S. gasoline stocks have shed 16 mb since early February.
Natural Gas & LNG
- Europe is likely to receive its first shipments of U.S. LNG this summer due to the competitiveness of U.S. gas prices and Europe’s need to replenish gas storage, with stocks at their lowest level since 2013.
- New supply from Australia and Angola helped push down LNG spot prices in Asia, ending an upward trend that began last December when an outage in Australia led to a tighter market.
- LNG producers are exploring ways to unlock new markets with smaller, more flexible contracts. France’s Total and Japan’s JERA, the world’s largest LNG importer, are set to strike a deal with flexible volumes based on Asian LNG spot prices.
Economics
- Economic indicators are positive for the United States, the Eurozone, Japan and China. The U.S. economy remains healthy despite disappointing job growth data for March. The Eurozone is thriving even though Britain triggered its exit from the EU. Japan’s economy is strengthening while China’s industrial profits soared. Turkey’s economic growth estimates were strong for fourth quarter 2016 notwithstanding mixed economic data.
Geopolitics & Supply
- U.S. airstrikes against Syrian military targets have increased tensions between many oil producers and consumers. OPEC and non-OPEC producers will discuss extending their supply cuts at their May meeting. OPEC compliance remains high despite the fact that output increased from Iran and Iraq in February. Saudi Aramco discounted its oil prices to northwest Europe, which may renew tensions with Russia over market-share there.
Renewables
- Global renewable energy capacity increased by 8% in 2016, despite 23% drop in investment, according to the United Nations.