Commodity Tracker: 6 charts to watch this week

Oil markets are in focus following the death of Iranian President Ebrahim Raisi. Meanwhile, Niger has recently become an oil exporter. In Turkey, the polyethylene market is feeling the impact of rising inflation and interest rates.

1. Oil markets closely watching Iran after president's death

What's happening? Iranian President Ebrahim Raisi died in a helicopter crash May 19 as he was heading to inaugurate a project at the Tabriz oil refinery, according to state television. Oil markets initially shrugged off the impact of Raisi's death, with crude futures edging slightly higher. However, the incident underscored the geopolitical risks underlying crude exports from the Middle East, following mounting tensions in the region as a result of the Israel-Hamas war. Iran, OPEC's third largest producer, exported around 1.5 million b/d in the first quarter, most of it heading to China. The country produced 3.15 million b/d of crude in April, according to the Platts OPEC+ survey by S&P Global Commodity Insights, the highest since late 2018, despite western sanctions intended to stifle purchases of Iranian oil.

What's next? As of 14:23 GMT on May 20, the July ICE Brent crude oil futures contract was up 23 cents/b from the previous close to $84.25/b, but the market continued to closely watch developments in Iran and the Middle East. Raisi's death comes as oil ministers from OPEC and its allies were preparing to gather in Vienna on June 1 to decide on production quotas for the coming months, with analysts expecting a rollover of the deep voluntary output cuts implemented by Saudi Arabia, Russia and several other members. Iran, however, is exempt from an OPEC+ quota. Raisi's death is unlikely to change oil policy in Iran, according to analysts from Commodity Insights, or US sanctions on the country.

2. Niger joins ranks of oil exporters with first crude cargo

What's happening? The first cargo of heavy sweet crude from Niger has been lifted at Benin's Seme port, making the junta-led African country an oil exporter for the first time. The cargo, which appeared en route to Europe as of May 20, according to the sources, marks the start-up of the new 110,000 b/d Niger-Benin pipeline. Landlocked Niger currently produces some 20,000 b/d of crude from its Agadem Rift Basin oilfields, most of it used locally due to the lack of an export route. The 2,000-km pipeline, built by the China National Petroleum Corporation, which is also developing oilfields in the country, is set to immediately quintuple Niger's production with a 90,000 b/d capacity to start with. Niger and Benin have rowed publicly in recent days over a border closure following a coup in Niger in July 2023. Mediation by China allowed for the first cargo to lift on May 18.

What's next? The pipeline ramp-up to full capacity will make Niger a significant oil exporter, exceeding the current output of some OPEC+ members, including Equatorial Guinea, South Sudan and Sudan. The country's Meleck crude export grade has an API of 24.4 and sulfur content of 0.354%, according to CNPC, making it medium/heavy and sweet. Comparable crudes include Angola's heavy sweet Pazflor and Dalia grades, which are sold primarily into China. While the first cargo appears to be heading to Europe, it remains to be seen which grades it could displace in different markets. Niger's oil also represents new non-OPEC+ supply entering the market.

3. New Zealand carbon price hits near 10-month low

What's happening? The New Zealand carbon market saw a second day of selloff on May 20, with the NZU price hitting near 10-month low of NZ$46/mtCO2e ($28.06/mtCO2e). The fall came after a government consultation to update carbon auction settings suggested a lower floor price. The consultation released May 15 was part of an annual review of the price and volume settings for NZU quarterly auctions, under which the government must consider the advice of its national climate body, the Climate Change Commission. While the CCC had recommended keeping the price settings unchanged, the government provided an option to lower the setting for the auction floor and the cost containment reserve trigger price.

What's next? Market participants said the selloff was led by a mix of forestry owners selling their units for cashflow and the speculators expecting to benefit from lower prices. The NZU price also tumbled in 2023 due to policy certainty to a year-low of NZ$35/mtCO2e. The market was awaiting government figures for the total unit holdings to estimate the total reduction in NZUs still available for the spot market. Data will be released after the May 31 deadline for emitters to surrender NZUs.

4. Turkish polyethylene market faces challenges amid rising inflation, interest rates

What's happening? Market conditions in Turkey worsened as Q2 approached(opens in a new tab), marked by rising inflation and interest rates. As of April, annual inflation soared to 69.8% from 64.9% at the start of the year, according to the Turkish Statistical Institute, while the central bank raised its key rate from 42.5% to 50%. The move strained credit-dependent traders, causing business disruptions. Turkish PE prices peaked towards the end of February, Platts, part of Commodity Insights, assessed LDPE at $1,170/b Feb. 7, LLDPE at $1,070/mt Feb. 21, HDPE injection at $1,110/mt Feb. 21, HDPE Blowmolding $1,130/mt Feb. 21, HDPE Film $1,130/mt. In March, markets began to lose momentum as the Muslim month of Ramadan approached, later extending to the Eid Al-Fitr holidays, which further subdued market activity. Additionally, the lira's fall against the dollar raised import costs, eroding consumer purchasing power and suppressing demand, leading to a hesitant market environment.

What's next? The bearish outlook in the Turkish PE market is anticipated to persist through May, with expectations of stabilizations later in the year, according to market sources.

5. West Europe's sulfuric acid spot price achieves new peak

What's happening? The average of Platts FOB West Europe sulfuric acid spot price range assessment has reached $75/mt, its highest level since late August 2022, when the average reached $112.5/mt. Since late January, as supply constraints limited spot activity out of the continent. Europe's sulfuric acid supply tightness has been attributed by market participants to three key drivers: low liquid sulfur supply, planned maintenance and the persistent purchasing activity by a major North African consumer.

What's next? Sulfuric acid supply from sulfur burners, which accounts for 63% of the total acid produced in Western Europe, is expected to remain flat in Europe, as tight sour crude supply will limit the growth potential for both elemental sulfur and burned acid in the region, according to Commodity Insights analysts.

6. Analysts see room for manganese price rally to run as China's stocks decline

What's happening? Manganese ore prices are poised to increase further as the market digests the yearlong closure of the world's second-largest manganese mine and as China's stocks of high-grade Australian ore start to decline. The global manganese market lost 12% of supply(opens in a new tab) when a tropical cyclone halted production at Australia's Groote Eylandt Mining Co. in mid-March. The mine's final shipment to China arrived in late April.

What's next? Major miners in Gabon and South Africa will try to increase output to replace the lost Australian supply(opens in a new tab), but they face rail constraints, longer shipping times and higher shipping rates.

Reporting and analysis by Charlie Mitchell, Kshitiz Goliya, Jiryes Haddadin, Juliet Stevenson Brown, Meghan Gordon