Commodity Tracker: 4 charts to watch this week

Brisk US LNG exports to are resulting in higher shipments via both Panama Canal and the Cape of Good Hope. S&P Global Platts editors also look at China's newly-launched carbon market, Asian refiners' appetites for crude oil with ESG advantages, and European monoethylene glycol buyers face a volatile market.

1. High Panama Canal LNG transits continue in July

What's happening? The red-hot global LNG market, buoyed by strong pricing in end-user markets in Asia, has driven a 12% increase in LNG tanker transits through the Panama Canal from October through June compared with the same period a year earlier. The S&P Global Platts JKM—the benchmark price for spot-traded LNG delivered to Northeast Asia—has been on a bull run since early March, driven by persistent demand from the world's largest importers.

What's next? The Canal operator has been monitoring for high arrivals of LNG ships during the early part of July. Persistent congestion has spurred longer wait times for LNG vessels passing through without a reservation. That, in turn, can mean more favorable round-trip economics for exports from the US Gulf Coast, providing an incentive for even more eastward transits around the Cape of Good Hope.

2. China launches first phase of national emissions trading scheme

What's happening? China's long-awaited national carbon market started trading July 16. The first online transaction of China's Carbon Emission Allowances, or CEAs, was priced at Yuan 52.80/mt ($8.20/mt), significantly lower than current prices on regulated carbon markets in the US and Europe. The 2,225 power companies participating in this first phase collectively account for over 4 billion mt of CO2 emissions, according to the environment ministry. The European Union ETS has around 1.6 billion mt of circulating allowances, according to European Commission's official website.

What's next? Initial carbon prices were relatively low due to a generous allocation of allowances in an effort to familiarize the industry with carbon pricing. Allowances are expected to be tightened as China's carbon policy takes shape and after cost-effective abatement technologies are developed. S&P Global Platts Analytics highlighted the potential for the market to encourage retirement of inefficient coal plants and paves the way for further renewables build-out and integration, though at first modest carbon prices can be expected, with minimal short-to-medium term impact.

3. For Asian crude oil buyers, ESG considerations sometimes trump arbs

What's happening? Sweden's Lundin Energy, a partner in Norway's giant Johan Sverdrup oil field, said June 16 that all future net production from Johan Sverdrup will be certified as carbon neutrally produced by Intertek, under its CarbonZero standard. Japanese upstream company INPEX said its Ichthys oil and gas project in Australia is one of the world's largest and most complex operations of its type, featuring high energy efficiency technologies to minimize GHG emissions over its 40-year operational life.

What's next? A growing number of Asian refiners are keen to regularly buy European and Australian crude oil regardless of the arbitrage economics, as the end-users aim to fill a certain portion of their monthly feedstock baskets with crude and condensate certified as carbon neutral in an effort to enhance and incorporate their ESG considerations. South Korea's second-biggest refiner GS Caltex purchased 2 million barrels of Johan Sverdrup crude for delivery in September. Thailand's PTT bought two 650,000-barrel cargoes of Ichthys condensate for loading over July 17-21 and Aug. 16-17, respectively. PTT said it has been actively conducting Greenhouse Gas Accounting to track its GHG inventory, in emissions, absorption and storage, over the past several years.

4. European MEG sees price swings in 2021 amid market disruptions

What's happening? The monoethylene glycol markets have been suffering from supply disruptions, leading to increased spot price volatility in 2021. MEG is a key intermediate for polyester fibers used in the manufacture of PET bottles. It is also used to produce automotive antifreeze and de-icing products. Higher European dependence on US imports since the start of lockdowns and other market shocks, including an EU anti-dumping investigation, have added to the supply uncertainty for Europe. In February 2021, the US "big freeze" forced the shutdown of USGC facilities, contributing to all-time European price highs in March 2021. Since then, prices have whipsawed amid a major European consumer plant's force majeure followed by imposition of provisional EU anti-dumping duties in May, prompting a reverse Asia-Europe arbitrage in May 2021 as US supply become even more unreliable. The disconnect between European spot and contract prices led to delays and the need for dual month contract price settlements in recent months.

What's next? Uncertainty over import supply is likely to create further volatility, with India initiating its own anti-dumping duty investigation on US, Saudi and Kuwaiti imports. The market is waiting to see what decision is taken as this could impact imports further, with Europe increasingly dependent on Asian supply following the EU provisional duties.

Reporting by Harry Weber, Ivy Yin, Eric Yep, Philip Vahn, Fred Wang, Takeo Kumagai, Miguel Cambeiro and Callum Colford