Commodity Roundup: Oil prices ease; LNG supply risks remain high, ANZ says

Subdued demand following a warmer-than-normal winter and weak economic growth has eased concerns about supply shortages in global gas markets. Nevertheless, risks to supply still have the potential to keep prices elevated, ANZ analysts said in a note on Wednesday.

Significant risks remain due to the ongoing conflict in Ukraine and the Middle East. Additionally, new U.S. sanctions on Russian LNG projects at a time when the European Union looks to ban imports of the commodity from Moscow, is expected to result in a drop in exports this year.

U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt reportedly said, sanctions on Russian oil and natural gas are working, and the Biden administration is “going to keep tightening sanctions to stymie Russia’s efforts to develop new ways to export fossil fuels.”

As per ANZ Research, growth in global LNG supply is expected to be essentially flat in 2024, after rising around 1.5% last year. “This should finely balance the LNG market. But, with supply risks skewed to the downside, this could change quickly,” it said.

“It’s been nearly two years since Russia invaded Ukraine, creating tumult in the industry. The market is still in transition, but the risk of severe gas shortages has subsided, leading to a steady decline in the risk premium the market had placed on natural gas,” the brokerage added. On the day, natural gas (NG1:COM) was trading -0.38% lower at $1.81.

European natural gas futures eased after rising above €29/MWh from a two-week low, due to disruptions in supply from Norway and Britain.

Elsewhere, oil prices ticked lower despite a surprise drop in crude stockpiles, as traders kept an eye on the Middle East.

Perceived de-escalation between Iran and Israel could remove another $5-10 a barrel of “the still elevated geopolitical risk premium” in coming months, Goldman Sachs analysts said in a note, putting a $90 a barrel ceiling on Brent.

On the data front, traders will be watching the official release on oil and product stockpiles at 1430 GMT.

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