Oil and gas prices eased on Friday and closed the week lower, as the oil and gas industry awaited news of the impact of US’ 25% tariffs on Canadian and Mexican imports, and China’s 10% levy, which was confirmed on Saturday.
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The European Union could be hit at a later date, but the UK could escape tariffs.
President Trump said that wider tariffs on oil and natural gas will come later this month on the two countries, although possibly at a lower rate.
Indeed, the Canadian energy tariff was put at 10%, although Mexico was believed held at 25%.
Both Canada and Mexico have immediately retaliated by putting tariffs on US goods.
Trump also included a process whereby Canada and Mexico could seek specific exemptions for certain imports. It is expected that the new tariffs will become effective on 1st March.
Canada and Mexico are the US’ two largest crude oil providers and also pump pipeline gas to their neighbour.
Meanwhile, Asian spot LNG prices fell last week amid low demand during the Lunar New Year holiday, encouraging cargo diversions towards Europe where gas prices are at a 15-month high, due to concerns over storage refilling.
The average LNG price for March delivery into north-east Asia was at $13.80 per MMBtu, down from $14 per MMBtu the week before, industry sources estimated.
"Demand in Asia, particularly in China, has been weaker than the seasonal norm, which has been pulling rates down. We're seeing some strength going in to March deliveries," said Toby Copson, Chairman at Davenport Energy Partners.
"However, overall sentiment remains muted so cargoes are being re-routed to Europe to capture premiums," he added.
High prices are also discouraging price sensitive buyers in southeast Asian markets.
"Asian LNG buyers are firmly out of the market for spot US LNG cargoes, not only for next-month deliveries but also for future months," said Natasha Fielding, Argus’ head of European gas, LNG and biomass pricing.
In Europe, colder weather and higher storage withdrawals continued to concern the market at the end of last week.
"Higher prices in Europe encouraged a burst of LNGCs to divert away from Asia to Europe in early January, with at least six making mid-Atlantic course changes. We saw a seventh last week, with the ‘LNG Juno’ changing course from Japan to Greece," said Alex Froley, senior LNG analyst at ICIS.
"All eyes are currently fixated on the last straw that could quicken the pace of European storage withdrawals and leave sites so depleted after the winter that the only way forward will be fierce competition for LNG," said Florence Schmit, European energy strategist at Rabobank.
"Sentiment is very bullish at the moment and governments across Europe talking about subsidising storage injections during the summer only amplifies this trend," she added.
The US arbitrage to northeast Asia via the Cape of Good Hope for February slightly narrowed, but still sent strong signals that US cargoes were incentivised to deliver to Europe rather than Asia, Spark Commodities analyst, Qasim Afghan, said.
In addition, global LNG freight rates fell to new record lows, as Atlantic rates dropped to $3,500 per day on Friday, the lowest on record, as increased vessel availability continued to apply downward pressure. Pacific rates also dropped to $11,500 per day, Afghan said.
