Oil: close at $47.99bbl for Brent ICE (This morning at $ 48.29/bbl)
Crude oil prices keep on dragging around their weekly and monthly averages with Brent around $48/b and WTI slightly above $44.5/b amid low volatility. Brent prices have remained almost flat for the last 4 sessions and the sentiment is rather bearish at the moment.
– The Bakker Hughes weekly rig count showed deceleration in its fall with one only one rig off from drilling for oil last week.
– But that was the only (slightly) supportive news of the weekend as large speculators were cutting bets on higher prices on NYMEX last week according to the CFTC report : indeed, they cut their net-long positions by -5% down below 300 Mb last week.
– News flow of the weekend was a bit alarming for bulls with only pessimistic figures and statements, fuelling concerns for this week, next month and Q4-15. First, consultant firm Energy Aspects said that it “forecasts a sharp slowdown in global oil demand across Q4-15 at -0.8 Mbd”. Then, the agency said that rising inventories as well as a mild winter expected for Europe and North America as a result of an El Nino weather event would likely lead to reduced refinery production and lower use of crude oil by refiners… Then, the executive director of the IEA said investment in the sector in 2016 will likely decline further after sliding this year by more than a fifth due to low prices.
The week begins on a bearish tone and prices are already low: it looks more and more like markets are going to be stuck again in a thin trading range with no volatility for days as it has been the case during the whole month of September. Next important milestones for crude markets will be the releases of the three monthly forecasting reports in two weeks (11,12,13 November). Global economy will hit the headline this week with Fed rate decision on Wednesday and US quarterly GDP on Thursday. For today we have stable views for crude prices.
Gas: close at 18.24EUR /MWh for TTF CAL 16 (This morning at 18.05EUR /MWh)
Comfortable supply pushed NBP spot prices lower on Friday, while a further drop of the euro against the pound lifted continental prices. The outage at the Nyhamna processing plant finally ended on Friday after it restricted Norwegian export capacity by 52.5 mm cm/day on Thursday. Consequently, Norwegian imports to the UK through the Langeled pipeline jumped by 30 mm cm/day on Friday, leaving the UK system well-supplied on the back of a busy LNG schedule and mild weather forecasts for the coming days. A stronger pound against the euro continued to weigh on the British curve. NBP ICE November 2015 prices lost 0.15 p/th at the close (-0.38%), to 39.7 p/th.
On the continent, a cheaper euro against the pound and intraday strength in oil prices provided support to the TTF curve. TTF ICE November 2015 prices gained 13 euro cents at the close (+0.73%), to €18.276/MWh. TTF ICE Cal 2016 prices were assessed 10 euro cents higher at the close (+0.56%), to €18.239/MWh.
The UK system is oversupplied this morning as LNG send outs jumped above 50 mm cm/day this morning compared to 40 mm cm/day on Friday. Supply fundamentals are rather strong this morning as Norwegian production is close to 340 mm cm/day with no constraint in sight. Nevertheless, Russian gas exports adjusted downwards over the weekend which could be a bullish factor in the short-term. But temperature forecasts were revised upwards over the weekend and temperatures could be 4-5°C above seasonal norms by the end of the week in the UK and 2-3°C above seasonal norms on the continent. All in all, this is likely to weigh on European gas prices today. Curve contracts could follow the bearish trend at the front as oil prices should not be supportive.