Commodity Tracker: 5 charts to watch this week

Equatorial Guinea's oil drilling campaign has been canceled after two weeks due to rig failure, the oil ministry confirmed. Amid ongoing low prices and weak demand, lithium producers are reducing their production. S&P Global Commodity Insights editors are focusing on the US natural gas production which reached an all-time high.

1. Rig failure cancels Equatorial Guinea's oil drilling campaign

What's happening? Equatorial Guinea's oil drilling campaign was canceled(opens in a new tab) because of rig failure, and ExxonMobil confirmed it would leave the country in Q2. Two weeks earlier, the rig had launched a three-well drilling campaign on offshore Block G, currently producing 25,000 b/d. Compounding the challenge, US supermajor ExxonMobil said it would complete its long-anticipated divestment next quarter, ending 30 years in the country. OPEC-member Equatorial Guinea has seen production fall to 50,000 b/d from 289,000 b/d in 2015.

What's next? After Block G, the new rig will shift, as planned, to Block S to drill the Kosmos-operated Akeng Deep ILX wildcat. Meanwhile, ExxonMobil's withdrawal to focus on less carbon-intensive projects and frontier basins will leave state-owned GEPetrol to manage Equatorial Guinea's largest field, Zafiro.

2. Lithium industry looking for price floor after 7-month decline

What's happening? Lithium prices are holding at their lowest levels since mid-2021 after a seven-month decline, with the Platts Lithium Carbonate CIF North Asia assessment remaining steady at $13,500/mt through the first week of February. Many lithium producers in China and Australia have already scaled back output amid ongoing price softness and weak demand. Operations at North America's only lithium spodumene mine are now under review, but its owners said they will attempt(opens in a new tab) to maintain output during the market downturn.

What's next? Lithium industry stakeholders will monitor whether prices have hit a floor or have more room to fall. Meanwhile, US-based industry bellwether Albemarle will provide further detail on its market outlook during its Feb. 15 earnings call. The company already announced that it will decrease its spending this year and likely push back development(opens in a new tab) on its South Carolina lithium project.

3. US natural gas production back near record high, weighing down futures prices

What's happening? US dry natural gas production has bounced back from steep declines(opens in a new tab) endured over the Martin Luther King Jr. holiday in mid-January, now approaching the all-time high of nearly 105.7 Bcf/d recorded in December 2023. Modeled Lower 48 dry gas production is averaging roughly 104.5 Bcf/d month to date after sinking to just 88.3 Bcf Jan. 16 during the height of the January freeze, according to data from S&P Global Commodity Insights.

What's next? The strong volumes, in tandem with weak seasonal demand, are making gas futures traders increasingly bullish about what next few months hold. March, April and May 2024 futures are trading below $2/MMBtu. Forecasters predict -- and many market participants are hoping for -- gas producers to moderate drilling activity in this year due to the weak pricing, as at least two Appalachian producers in CNX (opens in a new tab)and Seneca Resources(opens in a new tab) have already elected to do.

4. Pea prices correct downwards from December's peaks

What's happening? Canadian pea prices reached year-high points in December 2023 before correcting downwards in January. The Indian government removed import tariffs on yellow peas until March 31 in December 2023, leading to increased export prices in anticipation of a larger demand from India. However, prices of Canadian yellow, maple, and green peas FOB fell 9%, 8%, and 4% month on month in January to C$11.65, C$23.6 and C$17.93 per bushel, respectively, as demand waned, despite Agriculture and Agri-Food Canada (AAFC) recently estimating the country's dry pea production at 2.61 million mt in 2023-24, down 24% year on year.

What's next? AAFC projects Canada's pea production to increase by 19% year on year to 3.1 million mt in 2024-25, but this remains below 2022-23 output. If there are no extreme weather events impacting yield, the projected increase in production will put pressure on Canadian pea prices in the longer term.

5. Asian LNG re-export trend continues to surpass Europe in 2024

What's happening? Asian LNG re-exports have continued to outmatch(opens in a new tab) Europe so far in 2024, maintaining Asia's stronger re-export trend that emerged in 2023, according to data and analysts from S&P Global. Historically, between 2008 and 2022, re-exports from Europe outmatched those from Asia. European LNG re-export volumes have declined since the disruption to shipping in the Red Sea, with ships avoiding the Suez Canal route linking Europe and Asia.

What's next? The lengthier route via the Cape of Good Hope reduced the incentive for European volumes to head eastward. This is expected to continue in the near term with the ongoing tensions in the Red Sea. While "the growing trend of reexports from China, which had only reexported four cargoes total prior to 2022, will likely continue to add flexibility and liquidity to trade in the Pacific Basin going forward," Ayush Agarwal, LNG analyst at S&P Global, said in a 2024 LNG trade report.

Further reading: Platts LNG Daily (opens in a new tab)

Research and analysis by Charlie Mitchell, Nick Lazzaro, Jeremy Beaman, Eugene Ong, Aly Blakeway