Markets Remain Tight Nearly 3 Months into Ukraine War
Enverus Intelligence Research, a subsidiary of Enverus, has released its latest FundamentalEdge report focusing on its five-year supply, demand and price outlook.
The report confirmed that, nearly three months into the Ukraine war, oil and gas markets remain tight with Brent oil trading well above $100 per barrel and Henry Hub gas above $8 per MMBtu. Enverus Intelligence Research’s latest publication highlighted that the sharp rally in Henry Hub gas prices has exceeded all early year price forecasts and reflects strong LNG demand as Europe faces up to Russian supply risks as well as limitations for gas-to-coal switching in the U.S. power generation sector.
In the report, Enverus Intelligence Research nearly halved its early 2022 demand growth expectation for oil to 1.65 million barrels per day and revealed that it sees further headwinds from rising interest rates and a marked slowdown in the Chinese economy as the country battles a new Covid outbreak in major industrial and population centers.
“Neither LNG tightness nor a limited capacity to switch power generation from gas to coal seem likely to change quickly in the near term,” Al Salazar, the co-author of the report and senior vice president of Enverus Intelligence Research, said.
“This in turn implies that prices are likely to remain elevated until U.S. supply infrastructure becomes able to accommodate supply growth sometime next year or demand buckles under the weight of soaring prices,” Salazar added.
Bill Farren-Price, the lead report author and director of Enverus Intelligence Research, said, “we see a tangible risk that oil markets will become volatile again later this year and into 2023 when the stock releases end”.
“The release of oil from the Strategic Petroleum Reserve buys time for producers in the U.S. to push harder and for Iran nuclear diplomacy to bear fruit,” he added.
On May 24, the U.S. Department of Energy’s Office of Fossil Energy and Carbon Management announced an additional notice of sale of up to 40.1 million barrels of crude oil from the SPR. This notice of sale is part of President Biden’s announcement on March 31 to release one million barrels of crude oil a day for six months, the DOE highlighted.
China reached a new weekly Covid-19 case peak in the week commencing May 16 (543,290), according to the latest information from the World Health Organization (WHO). Weekly Covid-19 deaths in China peaked in the week commencing March 7 (1,955), WHO data shows.
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