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27 Mar 2025
12 Mar 2024 | 11:15 UTC — Insight Blog
Featuring S&P Global Commodity Insights
Several OPEC+ nations, such as Iraq and Kazakhstan, overproduced in February, raising output quota compliance concerns. Meanwhile, strong appetite for China's compliance carbon allowances is driving prices higher. Speaking of appetite, our editors are closely watching the S&P Global Commodity Insights' Food & Beverage Price Index, which is on the rise amid output concerns.
What's happening? OPEC+ countries overproduced by 175,000 b/d in February, the latest Platts survey(opens in a new tab) by S&P Global Commodity Insights found. Iraq and Kazakhstan continued to be the main overproducers despite saying, in mid-February that they may compensate(opens in a new tab) for overproduction in the previous month. The two biggest OPEC+ producers, Russia and Saudi Arabia, complied with their production targets.
What's next? Compliance with production targets is likely to be a key issue determining OPEC+ policy and unity in coming months. Current quotas are in place until the end of the second quarter, with Russia's target transitioning from a supply to production cut by June. This should bring Russian output on par with Saudi Arabia's. S&P Global expects the group to further extend voluntary cuts until the end of the year. Compliance and quota levels have caused friction within the group in the past. Most recently Angola decided to leave(opens in a new tab) OPEC, after a disagreement over its quota. The Joint Ministerial Monitoring Committee that oversees the production agreement next meets on April 3, followed bya full ministerial meeting on June 1.
What's happening? Carbon market participants in China have started hoarding emission allowances in anticipation of higher and more volatile prices on the back of recent policy signals, driving carbon price under Beijing's national emissions trading scheme to a new high of Yuan 83.33/mtCO2e ($11.74/mtCO2e) March 8. China's new ETS legislation, to be enforced from May, will impose a much higher fine on companies that fail to surrender allowances equivalent to their liable emissions. Companies that missed the Dec. 31, 2023, deadline for the last compliance cycle must surrender sufficient allowances before May 1 to avoid heavy penalties. Meanwhile, policymakers and advisors at China's biggest annual political gathering, called Two Sessions or lianghui, called for tightening emission allowance supplies and expanding ETS to cover new sectors.
What's next? The sustainability of currently high prices after May depends on two key factors: policies for the current compliance cycle and price signals from China's newly rebooted domestic voluntary carbon market. Regulators have not announced the volume of emission allowances for the current cycle. While some market participants expect the ETS to be expanded to the cement and aluminum industries this year, specific policies have yet to be released. Such uncertainties around policy lead to an unclear price trajectory. ETS participants can use domestic voluntary credits to offset up to 5% of their liable emissions, so the voluntary market also impacts the compliance market's supply and demand balance. China has not issued new voluntary credits.
What's happening? S&P Global's Food & Beverage Price Index increased in February(opens in a new tab) by 4.1% from January's revised figure to 120.7 points, representing an 8% year on year increase. The 4.7-point increase means that the index is close to surpassing the high registered in June 2022 at the peak of supply chain disruption caused by Russia's invasion of Ukraine. While the event led to sharp rises in grain and oilseed prices, the recent bullish market trend has been led by other commodities, notably softs, amid output concerns.
What's next? Erratic weather and politics are keeping agricultural markets on their toes. Prices in many key markets have been moving up in recent months, but favorable grain and soybean output expectations have markedly curbed overall food inflation. If trading houses' expectations pan out and 2024 is a year of plenty for grains, this will steadily creep into other prices as animal feed prices dip.
What's happening? Combined LNG exports(opens in a new tab) from Algeria, Angola, Egypt, Libya and Nigeria -- Africa's top five LNG exporters -- stood at 2.67 million mt in February, down from 3 million mt in January, according to data from S&P Global. The volumes exported in January were the highest levels since May 2023 of 3.04 million mt.
What's next? Despite a weakening monthly exports out of Africa's big five, analysts at S&P Global and market sources remain optimistic on their outlook. Traders expect exports this month to rise in March, predominantly feeding into the European and Mediterranean markets. Exports from North Africa can help to fuel East Mediterranean demand, especially with reduced volumes from Qatar. With stronger prices, netbacks from Europe and the Med have improved and could incentivize further selling interest from Africa.
What's happening? Mainland China's exports of sucralose rose 12% year-on-year in 2023 to 16,414 mt, according to data from S&P Global Market Intelligence's Global Trade Atlas. Sucralose, a high-intensity sweetener, has seen a rapid rise in demand over the past decade due to its appealing sugar-like taste profile and having sweetness 600 times higher than table sugar. Export prices have also declined significantly, reaching $15,326/mt FOB in December, 51% lower year-on-year, due to expanding manufacturing capacities in China.
What's next? Mainland Sucralose exports from China are expected to continue rising over the next few years due to its growing commercial demand. This will continue to be driven by declining prices, its flavor profile and its stable nature. Mainland Chinese export prices, in the meantime, are expected to decrease further as production capacity in the country continues to expand.
Research and analysis by Rosemary Griffin, Ivy Yin, Peter Storey, Aly Blakeway, Mark Chooi
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