Month in brief

• Date: 01 July 2019
• Published date: 01 July 2019
• DOI: http://doi.org/10.1111/oet.12717

THE MONTH IN BRIEF

Month in brief

The month was dominated by growing tensions in the Mid-

dle East Gulf, which, along with continued tight quota

adherence, has been supportive for prices. However, these

bullish influences were offset through most of the month by

on-going US output growth and rising concerns over global

demand, linked to international trade disputes and stalling

global economic growth. This left Brent prices in the low

$60s/bbl until late in the month, when they firmed, with

September closing at $66.49/bbl on June 26.

Throughout the month, rising tensions in the Mideast Gulf

have threatened to disrupt trade flow through the Straits of Hor-

muz, adding a risk premium to prices. Attacks on tankers in

MaywerefollowedbyanothertwoinJune,alongwiththe

shooting down of a US drone. This has raised insurance pre-

miums, but so far has not affected freight rates or trade flows—

although some Japanese buyers are looking to switch Saudi

liftings to the Red Sea as a precaution. US President Trump has

called on other nations to boost security patrols in the area, not-

ing that the US dependency on Mideast oil is low and falling,

while east Asia is importing at record levels. The US insists Iran

needs to initiate fresh talks to end the dispute, but hardliners in

Iran are continuing to threaten neighboring countries' oil exports.

There was a mixed output picture within OPEC during the

month, but overall tight adherence to quotas continued, with

output at 30.09 mn bd—down 170 000 bd from April (most of

this additional fall was from Iran, with compliance for those

with targets falling slightly to 178%). Saudi Arabia pumped

9.70 mn bd, the lowest since January 2015 and a 120 000 bd

drop from April, according to S&P Platts. Iran saw exports fall

to 800 000 bd, down from 1.7 mn bd in March, as it struggled

to find buyers for its cargoes in the wake of the US sanctions

decision. Iraq, on the other hand, saw exports soar to record

levels, and they are believed to be higher still in June; while

Venezuela managed a slight rise in May despite sanctions.

The demand outlook continues to soften, with the EIA

cutting its oil demand growth forecast in June by 160 000 bd

for 2019 and by 110 000 bd for 2020. Refinery margins

remain weak and demand in many parts of Asia so far this

year is already well down on last year—annualized growth

in India, for example, was at 3.2% year-to-date (end-May),

down from 8.1% last year.

Looking ahead, Saudi Arabia has said it is keen to main-

tain supply constraint through 2H 2019, and it is widely

expected that OPEC and its 10 non-OPEC partners will roll-

over the current 1.2 mn bd supply deal (signed in December)

at the end of June. However, Russia has indicated that it

wants more flexibility from July onwards, amid concern that

US production is expanding unchecked into new markets.

The international gas market continues to be over-

supplied, with some contracts at 10-year lows on the TTF

and NBP in Europe, and LNG prices in Asia and elsewhere

also remaining near multi-year lows. Citigroup cut its gas

price forecasts for this year by 18% in places, putting US

Henry Hub at just $2.50/mn Btu, Holland's TTF at $5/mn

Btu and the Japan/Korea benchmark at $5.80/mn Btu.

How to cite this article: Month in brief. Oil and

Energy Trends. 2019;44:6. https://doi.org/10.1111/

oet.12717

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