OREANDA-NEWS. SGX Oil & Gas Monthly Report - August 2016.

Oil

  • The bearish mood in July spilled over into August and the month started by reaching lows not seen since April – WTI dropped below $40/barrel and Brent closed at $41.50/barrel on 2nd August. US rig counts were up, temporary outages from Canada to Kuwait were resolved and oversupply was the name of the game once more.
  • In the subsequent two weeks the market rallied and oil gained about $10/barrel – Brent broke back above $50/barrel and WTI got close to $49/barrel, driven by hints from OPEC that they were about to resume negotiations with Russia about an output freeze at a meeting in September. Yes, we’ve heard that one before.
  • Impressive as it was, the rally didn’t last long. And with a feeling of d?j? vu, by the end of August it was clear that OPEC was pumping as hard as ever and oversupply was back in the picture. On top of that, Fed Chair Janet Yellen signalled an impending rate hike and the US Dollar rallied. Brent was back at $48.20/barrel at the time of writing and WTI about $2/barrel below that.


LNG

  • After the fireworks of July when LNG prices rallied close to 20%, August was resolutely range-bound. The benchmark Singapore Sling price index started the month at $5.639/mmBtu and finished at $5.255/mmBtu which were also the highs and lows of the month respectively.
  • A balance of factors has kept LNG going sideways in August. Supplies from a diverse range of sources emerged, ranging from Australia to Trinidad and even Algeria. On the other hand, Nigeria LNG declared a force majeure due to a leak in the pipeline which is the main source of gas for NLNG.
  • At risk of sounding like a broken record, LNG and oil fundamentals and price have continued on their separate ways. While oil had one of its strongest rallies in recent memory, LNG has been flat to a little weak. LNG is starting to find its own feet as spot trading comes into greater focus. JERA has stated that they want to cut their long-term contracts by 42 percent from current levels by 2030. There continues to be talk that spot and short-term deals may account for half of global LNG trade, the latest comment coming from a deputy director with Itochu Corp. And IOC recently announced its intention to significantly increase its LNG purchases from the spot market.