In this week’s highlights, the European gas market is poised for further volatility with the region short of LNG arrivals; annual auctions in the European power market for cross-border transmissions have begun; and in oil, Norway’s Statoil becomes the single largest holder of December-loading cargoes in the North Sea.
Additionally, Russia and the Gulf states are expected to follow up this week on last week’s decision to extend the OPEC/non-OPEC production cut agreement to the end of 2018.
How much do you expect oil prices to be affected by OPEC’s continuing cuts? You can reach out to us by tweeting with the hashtag #PlattsMM.
Video Transcript
In this week’s highlights, the European gas market is poised for further volatility with the region short of LNG arrivals; annual auctions in the European power market have begun; and in oil, Norway’s Statoil becomes the single largest holder of December-loading cargoes in the North Sea.
But first, Russia and the OPEC Gulf states are expected to follow up this week on last week’s decision to extend the OPEC/non-OPEC production cut agreement to the end of 2018. Russia’s energy minister, Alexander Novak, visits Baghdad on Tuesday to discuss cooperation with OPEC’s second-largest producer. Then, with Russia’s Yamal LNG project in the Arctic dispatching its first cargo on Friday, Novak has said he expects Saudi oil minister Khalid Al-Falih to also attend that highly symbolic event.
Kuwait will also host a meeting of the Gulf Cooperation Council the "GCC" this week, bringing together some of the Gulf’s most important, and sometimes fractious, oil producers.
Which brings us to this week’s social media question: How much do you expect oil prices to be affected by OPEC’s continuing cuts? Tweet us your thoughts using the hashtag #PlattsMM.
Now, as we roll into December, the winter season is bringing with it rising demand for heating fuels, which has certainly been the case for the European gas market. With the region’s first winter cold snap, we saw the UK NBP day-ahead price hitting its highest level for this time of year since 2014 at more than €22 per megawatt-hour.
There could be increased market tightness and price volatility in the week ahead if the combination of cold weather and the shortage of LNG deliveries – particularly to Northwest Europe - persists deeper into December.
LNG cargoes have instead been diverted to Asia where demand has been solid, particularly in China. A lack of LNG arrivals means Northwest European storage stocks are also being drawn down relatively quickly, with levels dropping below those at this time of year for any time over the past two winters.
Now turning to the European power markets, annual auctions of cross-border transmissions are now getting underway. Power traders will be keeping a close eye on the results of the Italian, French and Spanish borders as they help to determine spreads for the year-ahead contracts.
Also in this round of auctions, Italy’s network operator Terna is preparing a virtual auction. This mechanism effectively offers Italian industrial users a cheaper source of electricity from the German and other power markets instead of buying from the relatively expensive local Italian power market.
And finally, Norwegian oil major Statoil bought some half a billion dollars of Brent, Forties, Oseberg and Ekofisk crude oil in the Platts Market on Close assessment process last week, becoming the single largest holder of December-loading cargoes in the North Sea nearly overnight.
Much of the volume is expected to go to the Far East, although Brent is continuing to price at a significant premium to Dubai and an open arbitrage from Europe to Asia remains far from certain.
Also in oil, look out for the Platts survey of OPEC production due this week, which will provide fresh insight into the current state of the market.
Thanks for kicking off your Monday with us, and have a great week ahead.