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Rising COVID-19 cases spur oil demand worries

Tuesday, 07 December 2021 | 01:00

Crude prices ended little changed on Friday after erasing earlier big gains on growing worries that rising coronavirus cases and a new variant could reduce global oil demand.

Earlier on Friday, oil prices climbed more than $2 a barrel after producer group Opec+ said it could review its policy to hike output at short notice if a rising number of pandemic lockdowns chokes off demand.

Both benchmarks declined for a sixth week in a row for the first time since November 2018, and both remained in technically oversold territory for a sixth straight day for the first time since September 2020.

The Organization of the Petroleum Exporting Countries, Russia and allies, a grouping known as Opec+, surprised the market on Thursday when it stuck to its plans to add 400,000 barrels per day (bpd) supply in January.

However, Opec+ left the door open to changing policy swiftly if demand suffered from measures to contain the spread of the Omicron coronavirus variant.

They said they could meet again before their next scheduled meeting on January 4. Markets across assets were roiled all last week by the emergence of Omicron and speculation that it could spark new lockdowns and dent fuel demand.

Asia liquefied natural gas (LNG) prices fell last week, as spot demand from China remained muted despite the start of winter and as natural gas supplies from Russia continued to flow steadily to Germany. However, the drop in prices was kept in check by outages in Australia which curbed cargo loadings.

The average LNG price for January delivery into Northeast Asia fell to $34.60 per metric million British thermal units (mmBtu) last week, down $1.50. Chinese LNG buyers are pulling back on spot purchases of the super-chilled fuel as prices remain high and inventories are ample.

The Chinese government’s tolerance of additional coal burning has also dampened appetite for more expensive LNG. Beijing Gas entered the market to purchase LNG cargoes, but they are for delivery in the middle of next year.

Giving some support to prices, Royal Dutch Shell shut production at its Prelude floating LNG site and Chevron shut one of three processing units at its Gorgon LNG plant, both off northwestern Australia.

In Europe, Russian natural gas supplies to Germany through the Yamal-Europe pipeline have stabilised, data from German network operator Gascade showed, settling European gas prices.
Source: The Peninsula

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