Quarterly report – Oil and natural gas prices

  • Brent: between $60 and $80/b in 2019 (2018: $71/b)

The oil price oscillated between $50 and $86/b in 2018, averaging $71/b (+31% compared to 2017). The volatility observed in 2018 was due in large part to uncertainty about supply and economic growth, but also to the U.S. sanctions against Iran. Initially announced as being extremely severe, the embargo was softened at the last minute by the American president when he realized the likely consequences of a rise in the price of oil products.

For 2019, the average Brent price is expected to be in the $60 to 80/b range. These expectations account for different scenarios for factors such as economic growth, the Iran embargo, OPEC’s management of supply and U.S. production.

  • NBP: €19-23/MWh in 2019 (€23.3/MWh; $8.1/MBtu in 2018)

Based on forward prices and expected oil prices, the average UK NBP price for 2019 could fall between €19 and 23/MWh ($6.5-7.8/MBtu) compared to €23,3/MWh ($8.1/MBtu) in 2018, representing a potential decrease of between 1 and 18%.

The Impact of New Marine Emissions Regulations on the LNG Market

Changes to the IMO emissions standards will see the global sulphur limit in marine fuel reduced from 3.5% to 0.5% from 2020.

Marine fuel is a huge energy market which is currently dominated by oil products. However, tighter environmental regulations, particularly MARPOL Annex VI, are driving changes in fuel requirements, especially with regards to sulphur emissions, both in the Emission Control Areas (ECAs) around the coasts of North-West Europe and North America, but also globally, particularly as the 0.5% sulphur limit applies globally from January 2020 . LNG has opportunities in this sector as a low-sulphur fuel, although it also faces strong competition from low-sulphur oil products, sulphur scrubbing technology, and potentially from electric vessels. Currently there are known to be around 139 merchant vessels using LNG as a fuel, with a similar number on order. Whilst LNG-fuelled shipping has been slow to take off, it is now growing rapidly, particularly as supply infrastructure coverage has improved significantly in recent years. LNG is likely to become a fuel of choice for newbuilds in many sectors, whilst there may also be some LNG conversions.

Blue Skies and Natural Gas in China

2017 was a key and challenging year for the Chinese gas sector. All indicators point to an acceleration of natural gas penetration in the energy mix and an intensification of gas market reforms to facilitate this expansion.

Boosted by the recovery of Chinese economic growth, the acceleration of coal-to-gas switching policies, and the rebound in the competitiveness of natural gas relative to competing fuels, China’s natural gas consumption reached a record high level. According to the National Development and Reform Commission (NDRC), natural gas consumption rose by 15.3% to 237.3 bcm in 2017. China was the world’s fastest growing gas market: the country alone accounted for a quarter of global growth in gas consumption.