Winter storm shutdowns, rising oil prices driving higher gas prices
The CEO of Austrian energy company OMV said he needs extreme cold to boost profits at a time of historically low natural gas prices.
«Honestly, if I had one free wish, then please send me an icy blizzard due to gas prices», – said on Thursday to CNBC «Squawk Box Europe» OMV CEO Rainer Seele.
His comments came shortly after the oil and gas group acknowledged that lower commodity prices have reduced profits in the last three months of 2019, reflecting an industry-wide trend..
Natural gas prices traded at around $ 1.86 per million British thermal units (MMBtu) on Friday, up 0.1% from the previous month. Gas price is almost 30% lower than last year and has decreased by almost 15% since the beginning of 2020.
In Asia, the Japan-Korea-Marker (JKM) benchmark liquefied natural gas (LNG) price closed at an all-time low of $ 3.00 per MMBtu for the second straight session on Thursday, according to data provided by S&P Global Platts.
Agency said JKM’s spot price has plummeted since the beginning of the year, following significant pressure from high global inventories, a warmer winter in North Asia and continued rapid supply growth – especially due to new projects on the Gulf Coast.
S&P Global Platts said fears of disruptions and production cuts in China due to the rapidly spreading coronavirus also exacerbated pressure on LNG prices as China’s largest LNG importer announced force majeure on some contracts on Thursday..
China National Offshore Oil Corporation (CNOOC) announced Thursday that it has suspended contracts with at least three suppliers, Reuters reported, citing two unnamed sources..
Analysts say the move is likely to further deteriorate the outlook for demand in China and has expressed concerns about its impact on global trade flows and prices. China is the world’s second largest importer of LNG.
«The coronavirus outbreak does not fundamentally change the direction of the LNG market. He was already weak and was moving in that direction.», – Ira Joseph, head of energy and gas analytics at S, said in her research note.&P Global Platts.
Ms Joseph added that S&P Global Platts predicted $ 3 JKM prices would hit this year and the coronavirus outbreak would catalyze this historic price crash and «will create conditions for it to last longer».
China’s National Health Commission on Friday confirmed 31,161 cases of virus-like pneumonia in the country with 636 deaths.
Earlier this week, the World Health Organization (WHO) reported nearly 200 coronavirus cases in at least 23 countries outside of China. WHO declares outbreak a health emergency.
«Of course, the market is suffering from severe coronavirus infection, and all traders need more than just aspirin to get the best prediction.», – said OMV’s Seele.
«I think we need more than aspirin, we need an OPEC response», – he added.
Seele said one of the reasons an OPEC response is needed is because during the first quarter, the coronavirus could have removed from China about 1 million barrels per day.