Power Up: Oil prices are sliding
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Sept 9 -By Liz Hampton
U.S. Energy Markets Editor
Hello Power Up readers! Oil prices have been slipping, despite ongoing geopolitical supply risk and other factors that should point to tighter markets near-term. This morning both contracts are in the red, with U.S. crudefutures trading around $67.35 a barrel and Brent at $70.68 a barrel. Natural gas is off too, even as a hurricane brewing in the Gulf of Mexico is set to hit oil and gas infrastructure later this week. Let's jump in.
Crude futures post major declines as demand jitters weigh
And a hurricane threatens U.S. oil and gas facilities
Oil prices posted a big loss over the last week, despite ongoing disruptions to supply in Libya, a major drawdown in U.S. crude inventories, and OPEC+'s decision to delay a planned output increase by two months.
Brent ended down 10%for the week, settling at $71.06 a barrel on Friday - its lowest level since Dec. 2021. West Texas Intermediate (WTI) shed 8% for the week and ended at $67.67 a barrel.
Late last week, Libya declared a force majeure on several crude cargoes as production has been curtailed amid a political standoff over the central bank and oil revenue.
Meanwhile, U.S. crude inventories fell by nearly 7 million barrels in a weekand hit a one-year low.
While all of these factors should be supportive for prices, they haven't been. Oil futures are down again today, even as the U.S. Gulf Coast is bracing for a potentialhurricane that couldimpact some oil and gas infrastructure this week.
The weather system is anticipated to make landfall along the Louisiana coast as a Category 1 storm, with several liquefied natural gas plants in its path. Shell has alreadypaused some operations offshore as the storm approaches.
Even so, natural gas prices are down today at roughly $2.19 per million British thermal unit, down more than 4%.
Demand concerns appear to be keeping a cap on prices, with the market closely watching weakness in the Chinese economy and a shift to lower carbon fuels.
In theU.S. oil consumption slowed in June to its lowest seasonal level since the coronavirus pandemic of 2020, the U.S. Energy Information Administration said in its monthly supply and demand report in August.
Demand concerns have also hit the fuels market hard, with U.S. gasoline futures slumping to near a three-year lowlast week. In Asia, refining margins are at their lowest seasonal level since 2020 as supplies have jumped.
The market is bracing for lower prices. Bank of America Global Research on Friday loweredits 2025 Brent forecast by $5 to $75, pointing to weaker demand, particularly from China, as well as growing inventories.
Trading houses Gunvor and Trafigura, meanwhile, expect oil prices to range between $60 and $70 due to sluggish Chinese demand and oversupply, executives said at the APPEC conference in Singapore.
ESSENTIAL READING
Russia revised upwards its 2024 forecastsfor export sales of oil and gas by $17.4 billion amid a more positive price outlook. It had previously estimated $239.7 billion. The upward revision underscores the struggle the West has faced in inflicting damage on the Russian economy through sanctions.
Fuel oil cargoes bound for the U.S. Gulf Coast hit over a five-year low last month in a sign of weakened refinery demand as margins have softened, Georgina McCartney reports. Lower Mexican imports largely drove the decline.
New England states Massachusetts and Rhode Island are moving ahead with three offshore wind projects totaling 2.9 gigawatts (GW), government officials said on Friday. The projects are set to begin delivering power around the end of the decade.
Automaker BMW is aiming to bring its first hydrogen-powered vehicle into the market in 2028 using a technology developed with Toyota Motor. The vehicle will be an existing model with a hydrogen fuel cell drive option.
French nuclear fuel company Oranocould begin enriching uranium at a new plant in the U.S. by the early 2030s, executives said on Friday, a move that would boost its share in the global market as the U.S. weans itself off Russian supplies.
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Editing by Marguerita Choy
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