Commodity Tracker: 4 charts to watch this week

The impact of Rhine water levels on oil product shipments, policy risk and volatility in nickel prices, and the state of European and US natural gas markets are all in the sights of S&P Global Platts' editors this week. Here’s our weekly pick of unfolding energy and commodities market trends.

1. Rhine water levels start to affect oil product barge loadings

What’s happening? Water levels are beginning to affect loadings of clean oil product barges to carry product to the Upper Rhine. In some instances, barge loadings were heard at below 50% of capacity, at 1,200 metric tons for a 2,500 mt barge going to Basel. This “short loading” of barges, combined with increased demand amid worries about a worsening situation on the Rhine, has driven barge freight rates to a four-month high.

What’s next? Water levels are going down, and market participants buying and selling diesel, jet fuel and other commodities will be keeping a close eye on weather forecasts. At the end of 2018, barges were unable to navigate the shallow Upper Rhine for prolonged periods due to a severe drought, causing shortages of oil products in southwest Germany and Switzerland. Some say authorities and distributors are now better prepared – a conviction likely to be tested in the coming months.

2. Nickel stays volatile after price surge on Indonesia ban

What’s happening? The London Metal Exchange three-month nickel price continues to be volatile. Nickel saw a 10% rise two weeks ago after Indonesia, which has traditionally accounted for around 15% of global supply, reinforced plans for a nickel ore export ban from 2022. A similar ban from 2014-17 forced miners to refine and process nickel and bauxite into nickel pig iron, nickel matte, ferronickel and alumina before exporting such products, causing LME prices to spike to $16,000/mt in March 2014.

What’s next? Analysts at BMO Capital Markets expect the market to tighten further from 2022 when the ban is enforced, but say the impact of the announcement has been short-lived. Still, prices are set to stay volatile amid other supply-side factors, including the recent Sulawesi earthquake, issues at Koniambo in New Caledonia and Vale’s Onça Puma complex in Brazil, and figures from the World Bureau of Metals Statistics that show the market continued in deficit in the January-May period.

3. US Permian Basin gas prices hit four-month high…

What’s happening? Permian Basin gas prices hit a four-month high last week, recovering from several extended forays into negative territory during the recent shoulder season. Positive gas prices at the West Texas Waha hub, which have continued through late July, come despite strong in-basin production. During the second half of this month, output from the Permian has averaged 8.9 Bcf/d, the highest level since March.

What’s next? In the forward market, traders now appear more confident that Permian gas prices will remain in positive territory until Kinder Morgan’s 2 Bcf/d Gulf Coast Express Pipeline enters service in late September. Last Tuesday, the balance-of-month forward contract at Waha settled at 51 cents/MMBtu, up from a low of just 2.5 cents/MMBtu earlier this month. Forward prices for August and September have also moved higher.

4. …as low European gas prices keep coal’s prospects at bay

What? The spread between the S&P Global Platts Coal Switching Price Indicator and gas prices at the Dutch TTF hub widened to about €2/MWh in the last few weeks. The CSPI calculates the threshold at which gas prices are more competitive than coal prices as input fuel in power generation. The competitiveness of gas in Europe comes amid a 13-year high in carbon prices and bearish gas fundamentals.

What’s next? Part of the surge in the carbon price could be short lived, due to the current heatwave that has hit Europe. However, the emissions market appears supported by supply-side concerns, with the German government planning to reduce auction volumes as it closes coal plants. At the same time, a healthy outlook for LNG supply is weighing on the European gas balance, pressuring natural gas stocks and the forward curve.