Commodity Tracker: 5 charts to watch this week

OPEC remains optimistic on the global crude demand. In Japan, the aviation industry is seeing a shortage of jet fuel due to high demand during the summer holidays. Meanwhile, the UK's emissions allowances, Germany's plant-based meat demand and Mexico's solar capacity are also in focus.

1. OPEC demand optimism continues despite policy of major cuts

What's happening? Despite its ongoing commitment to OPEC+ crude production cuts, market uncertainty and sticky prices, OPEC is maintaining its optimistic demand forecast through to the end of 2025. OPEC forecasts near-term global oil demand growth at 2.25 million b/d for 2024 and 1.85 million b/d for 2025. The International Energy Agency estimates that global oil demand will grow by just 960,000 b/d in 2024 and 1 million b/d in 2025. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $83.36/b on June 17 down from highs of above $93/b in early April. Prices have fallen despite OPEC+ production dropping by 40,000 b/d month on month in May to 41 million b/d, according to the latest Platts OPEC+ survey. Furthermore, key OPEC+ members implementing voluntary cuts extended them through September and group-wide cuts until the end of 2025 at a meeting June 2.

What's next? OPEC Secretary General Haitham al-Ghais challenges forecasts of peak oil demand by the end of the decade. The IEA earlier released a forecast stating that global oil demand, including biofuels, will peak at around 106 million b/d by 2030, up from just over 102 million b/d in 2023. OPEC projects global demand of 116 million b/d by 2045, with potential for further growth beyond that. Commodity Insights sees demand peaking at 109 million b/d in 2034. OPEC+ could change policy, either at meetings of the joint ministerial monitoring committee overseeing the deal scheduled for August, or a full ministerial meeting slated for December. The group could also call an extraordinary meeting if it thinks market conditions necessitate policy changes.

2. Japan's summer holiday demand squeezes jet fuel supply

What's happening? Japan is experiencing jet fuel shortages amid a sharp increase in summer holiday demand. Jet fuel stocks in the country reportedly appear adequate but are tighter than historical norms as of the first week of June. This has raised concerns among airlines that refineries in the region might not be able to provide adequate supply of jet fuel during the holiday season.

What's next? Japan will likely cut jet fuel exports and reduce jet fuel inventory to meet domestic demand, which could surge above 90,000 b/d in June and July, higher than the first quarter average of 70,000 b/d. Analysts at Commodity Insights said this is likely bullish for Singapore jet fuel cash differentials, the benchmark for Asian regional jet pricing. However, the upside could be constrained by arbitrage windows from South Korea to the US West Coast and from West Coast India to Northwest Europe. Commodity Insights analysts said higher exports by China in June could also add to the downside risk to cash differentials in Singapore.

3. UK ETS anticipates further emissions reductions in 2024 as high energy costs, weak demand persist

What's happening? Verified installation-level emissions in the UK's carbon emissions trading scheme dropped from 110.6 million mtCO2e in 2022 to 96.8 million mtCO2e in 2023, according to data from the UK ETS Authority, indicating reduced demand for UK Allowances. Aviation emissions increased by nearly 4,000% since the 2020 pandemic lockdowns, reaching 8.9 million mtCO2e in 2023. The most significant drops in emissions were in the chemicals sector (22.1%) and combustion sector (18.7%). The emissions decline in stationary installations was mainly attributed to lower output stemming from higher production costs caused by high energy costs and decreased demand due to economic pressures.

What's next? The latest UK ETS figures offer a bearish sentiment to UKA prices, slowing down price recovery for the summer leading into the autumn. Operators that dropped more than 1 million mtCO2e were all power stations. With the upcoming closure in September of the last coal-fired power station, Ratcliffe on Soar, analysts at Commodity Insights expect power stationary installations to continue to lead the overall decarbonization. Steel sector emissions should also continue to decline as scheduled electric arc furnaces begin operations, replacing blast furnaces. Aviation is expected have an even larger share of overall emissions as aviation demand continues to increase.

4. Germany's plant-based meat production rises 17% on year in 2023: Destatis

What's happening? Germany saw its plant-based meat production surge by 16.6% year on year to 121,600 mt in 2023, while its corresponding value rose 8.5% year on year to Euro 583.2 million. Germany's meat analog production has more than doubled (up 113%) since 2019, indicating an increasing adoption of plant-based meat. Meanwhile, preliminary data from Germany's Federal Institute for Agriculture and Food revealed that average per capita meat consumption in the country fell 0.8% year on year to 51.6 kg in 2023, down 15.3% from 2018, suggesting a shift to plant-based diets.

What's next? With the production of plant-based meat growing fast, economies of scale are expected to help lower the prices of plant-based proteins. German plant-based meat is expected to reach price parity with animal meat in the middle term, which will in turn help to drive its demand.

5. Mexico's forecast PV-solar capacity additions shrink while wind grows significantly

What's happening? Mexico has revised renewable energy capacity addition targets, with lowered PV-solar capacity and increased wind capacities. The National Electric System Development Program, or PRODESEN, released by Mexico's Energy Secretariat May 31, anticipates the integration of an additional 93,924 MW of installed capacity in both short and long term. For the long-term 2028-2038 period, the report forecasts adding around 50,000 MW of renewable capacity, with 22,662 MW corresponding to wind, 8,790 MW to PV-solar and 8,867 MW to batter energy storage systems.

What's next? If PRODESEN numbers become effective, the simultaneous occurrence of a shrink in capacity additions for PV-solar and a significant growth in wind projects from previous forecasts could be a breaking point for the parity of wind/solar's International Renewable Energy Certificates price levels in Mexico over the next 15 years.

Reporting and analysis by Rosemary Griffin, Zhuwei Wang, Michael Testa, Eugene Ong, Francisco Sequera