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Platts: 5 Commodity Charts To Watch This Week

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Platts: 5 Commodity Charts To Watch This Week

Tyler Durden

Mon, 09/14/2020 – 12:34

Via S&P Global Platts Insight blog,

As the 36th Asia-Pacific Petroleum Conference (APPEC) opens, this week’s Tracker kicks off with a look at Saudi crude oil pricing into Asia. In Europe, meanwhile, steel prices are recovering, and carbon emission allowances face a volatile period amid legislative change.

1. Largest Saudi crude OSP cuts are to Asia; headwinds to higher exports remain

What’s happening? Saudi Aramco cut Official Selling Prices (OSPs) to nearly all regions on low refining margins and weak market structures, but more than S&P Global Platts Analytics expected prior to the release. OSPs to Asia were cut by $0.9-$1.5/b on the month, more than the cuts to OSPs for US and Europe. The price into Asia was more than the market metrics of 51 cents/b suggested by the change of the Dubai M1-M3 spread, month-on-month, in the last five trading days in August.

What’s next? The more generous terms still face headwinds in raising export volumes to Asia in October when Asian refiners are set to cut runs on maintenance. Meanwhile, Russian grades have more arbitrage incentives and crude stocks in China are high. Saudi Arabia is relying on continued demand recovery to bring product stock excesses into better balance, and Asian turnarounds to support a slight improvement in margins, resulting in higher crude demand and liftings. The Kingdom is determined to increase exports in keeping with the most recent OPEC+ agreement, but if the produced volumes are too much relative to the demand recovery profile, OPEC+ will be forced to reassess the situation in November.

2. EU carbon prices volatile ahead of EC’s 2030 climate target revamp

 

What’s happening? Recent price volatility looks set to continue this week in the EU carbon market, as the European Commission is expected to unveil its revamped 2030 emissions reduction target September 15. The EC is set to raise the target from the current 40% below 1990 levels to at least 50%. This means the annual carbon caps under the EU Emissions Trading System will shrink at a faster rate in the period to 2030, tightening supply.

What’s next? The EC’s expected increase in climate ambition is well known in advance and likely to be baked into the price ahead of the fact. Moreover, this legislation is only at the initial proposal stage. The deeper 2030 target needs formal approval by the EU Parliament and Council before becoming law. Nevertheless, expect to see further price volatility around this announcement as the market anticipates what the new target means for supply, and how it fits into a wider suite of reforms that could propel carbon prices to new highs this coming decade.

3. European steel coils prices set for further hikes on limited availability

What’s happening? European hot-rolled coil prices have seen increases of more than 20% since June as material availability tightened due to production cuts and mills hiking offer prices substantially, to Eur530/mt ex-works Ruhr. Spot market trading is particularly active in Italy with buyers scrambling to secure volumes in Northern Europe amid the absence of import material from outside the EU. The regional spread between Northern and Southern Europe has narrowed as material tightness is particularly apparent in the South.

What’s next? Although European mills are slowly ramping up, the increase in output is unlikely to make a difference to material availability in short-term. The monthly S&P Global Platts German steel sentiment survey for September showed most market participants expect sharp rises, moderate output increases and lower inventory levels. The absence of the usually high share of import material to meet steel consumption in Italy could lead to ex-works South Europe prices temporarily overtaking ex-works Ruhr prices, according to market participants.

4. Haynesville pipeline ramps up amid output growth outlook

What’s happening? Gas deliveries on the DTE Louisiana Energy Access Project surged recently to a new high of 761 MMcf/d, bolstering support for Haynesville shale supplies that feed US Gulf Coast demand, including from liquefaction facilities. The surge has helped tighten Carthage basis from $0.08/MMBtu in August to $0.03/MMBtu behind Henry Hub during the second week of September.

What’s next? Haynesville production is expected to see substantial growth over the next few years, with current production averaging 11.9 Bcf/d, 70 MMcf/d above the August average, S&P Global Platts Analytics data show.

5. Plentiful supply, mild weather stifle TTF bullish streak

What’s happening? August’s rally in European gas prices seems to have come to a halt for now in September given relatively healthy supplies and warmer temperatures. The TTF day-ahead price more than doubled in August to above Eur10/MWh on maintenance work in Norway, low Russian deliveries and robust demand.

What’s next? With European gas storages almost completely full and temperatures set to remain high across the continent, the market remains relatively soft. There is still some capacity in Ukrainian gas storage sites, but deliveries are restricted by ongoing maintenance on a pipeline that flows gas from Slovakia into Ukraine.


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Tyler Durden

Zero Hedge's mission is to widen the scope of financial, economic and political information available to the professional investing public, to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become, to liberate oppressed knowledge, to provide analysis uninhibited by political constraint and to facilitate information's unending quest for freedom. Visit https://www.zerohedge.com

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