Commodity Tracker: 4 charts to watch this week

Russian oil exports may have been limited in August, and while Moscow has promised to further cut its crude exports this month, small independent refineries in China are expected to remain on their buyers' list for the rest of the year. Results of an upcoming green hydrogen pilot auction in Europe are also in focus, while the steel sector is watching the spreads in seaborne coking coal markets.

1. Russian oil exports hit 11-month low as refinery downtime, output cuts bite

What's happening? Russian seaborne oil exports fell to an 11-month low in August, according to tanker tracking data, as heavy refining maintenance hit oil product exports, and output cut pledges and Black Sea tensions continued to limit crude flows. Total Russian shipped crude and oil product exports averaged 5.27 million b/d, the lowest since September 2022, and 650,000 b/d below pre-war levels, according to S&P Global Commodities at Sea data. Russia-origin seaborne crude shipments were little changed on the month averaging 3 million b/d in August while its oil product exports fell to a 10-month low of 2.27 million b/d, down from a post-war high of 3 million b/d in March.

What's next? The export slump since May also comes as the market looks to gauge Moscow's compliance with its pledge to cut exports by 500,000 b/d in August to help support global oil prices. Additionally, Moscow has promised to cut its crude exports by a further 300,000 b/d in September, a move expected to tighten the sour crude oil market further. Spot prices for Russia's key Urals export crude grade have also been trading above the G7's $60/b price cap since July 11 while Russian diesel was seen selling above G7 price caps of more than $100/b in August. It remains to be seen if Russian oil product prices exceeding the G7's price caps have hampered Russia's ability to source enough non-Western tankers to maintain export flows. In the case of crude, most market watchers believe Russian access to a growing fleet of non-G7 insured shadow tankers has been sufficient to move the exports to alternative markets in Asia, the Middle East and Turkey.

Related story: APPEC: G7 oil price cap helps cut Russian oil production: US Treasury official

2. ... while China's independent refiners are seen to continue buying Russian crude

What's happening? When China's independent refiners were first allowed to import crude oil in 2015, Beijing's policy focus was to keep the product market well-supplied and inject vitality into the market with competition for state-owned refiners. But that policy gradually changed focus toward supply-side reform and industry upgrades, tightening the noose around tax evasion and violation of environmental rules and regulations. To survive and make profits amid shifting policies, these small independent refineries are forced to rely on discounted crudes to compete against their state-owned and private integrated peers. From importing 123 crude grades from 38 countries in 2020, China's independent refiners currently rely almost entirely on Russia, Iran, and Venezuela -- suppliers facing a host of sanctions.

What's next? Between January and July, 99% of crude imported by China's independent refineries -- around 2.5 million b/d -- came from Russia, Venezuela and Iran. Crude oil traders based in Singapore, refinery sources in Shandong and market analysts broadly expect China's private refining sector to continue relying heavily on Russian and Iranian crude throughout the rest of 2023.

Related story: CHINA INDEPENDENT OIL REFINERIES: Refiners succumb to vagaries in Chinese policymaking

3. European hydrogen developers warn of auction design flaw

What's happening? Industry association Hydrogen Europe has warned the European Commission's forthcoming green hydrogen pilot auction could be derailed by inflation if indexation is not introduced. On Aug. 30, the EC unveiled terms and conditions for the Eur800 million fund that will bridge the gap between renewable hydrogen production costs and market prices on a fixed premium basis up to a value of Eur4.50/kg ($4.90/kg).

What's next? With no indexation of the fixed premium, the fear is electrolysis developers faced with volatile project costs will refrain from bidding in the auction, set to open Nov. 23. The risk extends to other auctions where there is a material time gap between bidding and delivering a completed asset. All eyes are on the UK's latest Contracts for Difference auction, with 8 GW of low carbon generation on offer. Results are due Sept. 8. Platts, part of S&P Global Commodity Insights, assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur5.60/kg Sept. 4.

Interactive: Platts Hydrogen Price Wall

4. Gap between China CFR and Australian FOB coking coal prices widens, hampering trade

What's happening? Coking coal prices in the seaborne markets have diverged with lower China CFR import prices as spreads widened through August. A recovery in demand in India and contract requirements elsewhere ahead of the fourth quarter limited availability from Australia and the US. Weaker Chinese import demand on stronger Mongolian availability -- and a cooling in domestic coal and metallurgical coke, steel markets -- pushed down CFR pricing for premium low-volatile coking coal.

What's next? The decline in China import prices continues to expose participants such as miners and traders to regionally differentiated markets, complicating spot trade. The spread between FOB Australia benchmark prices with equivalent prices available in China widened to $31.80/mt on Aug. 31, equivalent to 12% of the PLV FOB price. China continues to be more reliant on Mongolian and Russian coking coals, with post-COVID restrictions aiding inland transportation and production. Stronger contract sales of Australian coals into Asia and Atlantic markets limited availability for China, while sanctions on Russian coals in Europe and Japan may see price dislocations persist.

Reporting from Robert Perkins, Phil Vahn, Henry Edwardes-Evans, Hector Forster