Oil: Close to close: Down at $ 65.52/bbl for Brent ICE MAY15 (This morning at $ 65.17/bbl)
o Crude oil prices were broadly unchanged this morning from their previous settlements on Monday and Friday as no major news came on screen and main markets were closed yesterday, leading to very low exchanged volume. Strong demand, especially in US with Memorial day weekend, has been offset by strengthening dollar and ample supply outlook. Brent holds around $65.5/b close to its 20-days average and within a very tight Bollinger range ($64.3/b – 67.9/b). Brent and WTI crudes rallied +15 % and +30% between March and mid-May but has moved largely sideways since.
o Main events: According to Goldman Sachs and reported by REUTERS, US shale producers will ramp up activity with WTI prices remaining near $60/b. The consultant firm Timera Energy also said that WTI prices are approaching long-run marginal cost (LRMC) benchmarks for new investment. The weekly BH rig count showed Friday just a 1 rig drop for last week, signalling that higher crude prices may be starting to steady the sector after 24 straight weeks of drill rig declines. These are signs showing that $60/b for WTI is an economic threshold for shale oil industry and it is exactly where we are now; we could see drilling ramp up in the short term if prices stabilize around this level. This could be a key factor for H2-2015 as a tightening of the fundamentals, based in particular on shale output drop, is one of the supportive factor expected to push prices up on the end of the year.Ahead of the next OPEC meeting in 10 days, positions did not move an inch within the cartel and it seems Gulf oil producers, led by Saudi Arabia, will resist attempts to any cut output. Preserving market share still remains a top priority for Gulf monarchies and they are encouraged by the successful effect of the current strategy initiated last November. Either the other members (Algeria, Ecuador, Iraq…) nor Russia managed to find a deal with them to launch a collaborative action so far.
o Outlook: A batch of US data is expected today but with no major market mover for Brent. Today, we see markets slightly bearish with a support at $64.3/b.
Gas: Close to close: Down at 21.56 EUR /MWh for TTF CAL 16 (This morning at EUR 21.65/MWh)
o Weaker gas demand amid strong supply dragged European spot prices lower on Friday ahead of a three-day weekend in most European countries. Residential demand dropped by 10.4% in the UK and by 19% in the Netherlands on the back of milder weather, although temperatures were expected to remain in line or below seasonal norms over the coming days. Russian flows were stable at 330 mm cm/day while Norwegian flows picked up above 240 mm cm/day. UK LNG send outs remained strong, with a flurry of LNG tankers being en route to the UK. Near-curve contracts followed the bearish trend at the front, although overall movements remained limited.
o NBP ICE June 2015 prices lost 0.2 p/th at the close (-0.48%), to 41.44 p/th. TTF ICE June 2015 prices were almost stable at the close: -3 euro cents (-0.16%), to €20.38/MWh. TTF ICE Cal 2016 prices lost 6 euro cents at the close (-0.29%), to €21.56/MWh.
o Temperatures remain below seasonal norms across Europe today and consumption is expected to peak tomorrow before decreasing gradually throughout the week. On the supply side, Norwegian flows are lower this morning due to the ongoing shutdown of the Zeepipe terminal and an unplanned outage at the Kvitebjorn field. Consequently, British gas exports to Belgium through the Interconnector pipeline increased over the weekend and are nominated at 40 mm cm/day today compared to 21 mm cm/day on average in the first three weeks of May, which is likely to support NBP spot prices this week. All in all, we favour a stable to slightly bullish outlook for spot prices today. Curve prices could also firm a bit as a weaker euro against the pound could continue to support contracts traded in euro while uncertainty over the provisional ruling on Emskanaal production could support the TTF curve, although overall movements should remain limited.