Commodity Tracker: 4 charts to watch this week

All eyes are on the upcoming OPEC+ meeting Dec. 1-2 following the announcement of the US SPR release as well as the risks brought about by the omicron variant of COVID-19. Germany's coal phase-out law review and the world's largest rice exporters are also in focus.

1. With a coordinated SPR release on the horizon and a resurgence of pandemic fears, what would OPEC do?

What's happening? The White House announced Nov. 23 that the US will release 50 million barrels from its Strategic Petroleum Reserve by early 2022. The release includes an exchange of 32 million barrels that will be delivered in mid-December through April and returned in 2022-2024, on top of 18 million barrels sold in the coming months that were already required by Congress to be sold by the end of 2022. China, India, Japan, South Korea and the UK will join the US in the SPR release. There's no schedule yet for Asian countries' SPR releases.

What's next? S&P Global Platts Analytics said any immediate price impact in the US would likely be felt in Gulf Coast differentials, steeper on LLS or Mars benchmarks, depending on the quality of the crude released. However, any further impact will not be sustained, as the SPR release would not change balances dramatically and OPEC+ would be less inclined to increase its production. OPEC will meet on Dec. 1, and with its allies on Dec. 2. Some OPEC+ delegates have told S&P Global Platts the alliance could pause its next scheduled increase if the SPR barrels exacerbate what is expected to be a market oversupply in the coming months. OPEC+'s decision has also been complicated by major a sell-off after resurgent COVID-pandemic fears, with the emergence of the omicron variant.

2. New COVID-19 variant rears its ugly head just as India's jet fuel demand gets ready for take-off

What's happening? India's COVID-19 situation has mostly stabilized, with the total number of doses administered in the world's second most populous country crossing 1 billion. Although India's DGCA in its latest circular on Oct. 29 noted that international travel may be allowed on select routes by the authorities on a case-to-case basis. On Nov. 21, the Civil Aviation Authority of Singapore said it had reached an agreement with the Ministry of Civil Aviation of India on the resumption of scheduled commercial passenger flights between Singapore and India.

What's next? India's jet fuel demand is ready for take-off as the country plans to open its doors to international tourists and forms more air travel bubbles, while domestic travel has surged. India's jet fuel consumption rose to a 19-month high in October, latest data released by the Petroleum Planning and Analysis Cell, or PPAC, showed Nov. 11. "There is a lot of travel optimism due to loosened restrictions, pent-up leisure demand combined with festive and marriage season in India," said Shreyans Baid, South Asia oil market analyst with Platts Analytics.

3. German coalition plans for 480-540 TWh renewables by 2030 to exit coal

What's happening? Germany's incoming coalition plans to massively boost renewables to an 80% share in the power mix by 2030 to exit coal eight years earlier than the current 2038 target. If SPD, Greens and FDP approve the treaty the new government can start in early December. A review of the coal phase-out law will be brought forward to end-2022 from 2026 to check which closure dates can be moved earlier. In addition, the coalition plans a floor price for CO2 around Eur60/mt. The announcement lifted EUA carbon allowances to a record Eur75/mt on Nov. 25 with the German government also calling for a European carbon floor price.

What's next? This winter's gas price spikes as well as German reactor closures are to boost demand for coal with German lignite plants almost maxed out. Platts Analytics sees German gas-fired power generation overtake combined coal and lignite in 2025 for the first time ever. Policy support for a faster expansion of renewables will take time to filter through, but Platts Analytics already projects a record 46 GW new wind and solar to come online in Germany over the next four years. This alongside falling gas prices will help to deflate the current record-high power prices allowing for CO2 prices to again play their traditional role supporting a switch for coal to gas. Sky-high gas prices have pushed generation cost for an average 50% efficient gas-fired power plant in Q1 2022 to Eur202.90/MWh, almost double those for coal, Platts data show. Rising generation costs have made a much better business case for the 200 GW solar and well over 100 GW new wind capacity the incoming German government is banking on to exit coal in 2030 with a rising share expected to be subsidy-free benefiting from guarantees of origin.

4. Thailand, Vietnam battle for world's second largest rice exporter title

What's happening? No country will challenge India's pre-eminent status as the world's largest rice exporter, with January-September exports totaling 16.3 million mt and the country on course to represent around two-fifths of global rice exports in 2021. But neck and neck for the second spot are Thailand and Vietnam. Thailand's rice exports in January-October 2021 stood at 4.59 million mt, according to the country's Ministry of Commerce. Vietnam's exports for the same period are around 592,000 mt ahead of Thailand's.

What's next? The principal reason for Thailand's resurgence as a major rice exporter in recent months has been its return to price competitiveness. While Thailand faces hurdles toward the end of the year, such as a lack of containers and high freight rates, it appears that even if the country fails to reclaim its title as the world's second largest exporter from Vietnam, it will likely be very close. One Bangkok-based broker told Platts that "if the crop is good, there are many countries in which Thai volumes would go up. Especially in Africa… that should take it over Vietnam." The US Department of Agriculture forecast in November that the main season rice crop currently being harvested has increased to 15.6 million mt, up by 5.8% from the five-year average.

Reporting and analysis by Herman Wang, Meghan Gordon, Andreas Franke, Surabhi Sahu, Amy Tan, and Peter Storey.