Oil prices have declined as the global economy has shown a slowdown in growth in recent weeks, and a number of disappointing data from the US and China has hit commodity prices. Weaker crude demand has added to the pressure.
However, an environment of huge liquidity expansion and improving economic growth should support oil prices after the weak second quarter. The US Fed is continuing its quantitative easing program, and the European Central Bank is expected to cuts its interest rate this week. The Bank of Japan has introduced a monetary easing program which will double Japan’s monetary base in the next two years.
Despite weak oil demand growth, OECD stocks have not built during the first quarter. This can be explained by colder-than-normal weather and Saudi Arabia’s management of oil markets.
UK natural gas storage levels increased sharply last week, as warmer weather gave shippers an opportunity to inject. Injections into the long-range Rough are expected to support gas demand over the summer as it will take 164 days at the maximum injection rate to refill the storage.
A degree of supply concern remains, but the expected increase in LNG deliveries to the UK should prevent price spikes.
UK storage, million cubic meters (Source: ICIS Heren)