Commodity Tracker: 4 charts to watch this week

S&P Global Commodity Insights editors highlight reduced gas demand for electricity in Europe due to increased solar and hydro capacity. Meanwhile, in Asia, weak demand and a supply surplus are expected to keep nickel prices low in the third quarter. Additionally, funding in African oil projects and rising Singapore biobunkers sales are key focuses this week.

1. Solar, hydro squeeze gas demand from Europe's power sector

What's happening? European gas-fired power plants will burn about a quarter less gas this summer compared to 2023 due to gains in solar capacity and replenished hydro stocks, while overall power demand remains slow to recover. Analysts at S&P Global Commodity Insights forecast the lowest summer (April to September) gas-for-power demand since 2001, with a year-on-year decline in 10 European markets closely tracked by Commodity Insights, equivalent to around 9.5 Bcm less gas burned. Italy and Great Britain register the biggest declines, while Germany bucks the trend amid 10 GW of coal closures that were postponed during the 2022 energy crisis.

What's next? Lower gas burn outweighs gas demand gains elsewhere, reducing Europe's demand for LNG. Platts, part of Commodity Insights, assessed the benchmark TTF front-month contract at Eur31.87/MWh on July 22. Atlantic LNG NWE DES for September was assessed at a Eur0.314/MWh discount to TTF September July 22, Commodity Insight data show. The ongoing heat wave across much of southeastern Europe may extend into August, boosting demand for gas-fired power generation and potentially delaying gas storage injections. Conversely, there is a risk of gas storages filling up quicker than expected with analysts currently forecasting late October across Europe.

2. Traders, Gulf banks move to fill financing vacuum in African oil

What's happening? The global energy transition, bearish oil demand projections and the exodus of international oil companies from mature African basins have created a financing vacuum on the continent. While new frontiers like Namibia and Guyana attract capital expenditures, legacy producers such as Nigeria, Equatorial Guinea, Angola and Gabon face plummeting investment and crude production. Trading houses and Gulf lenders are increasingly filling this gap. For instance, Gabon acquired Carlyle's 40,000 b/d Assala Energy assets in June with an $800 million loan and the Jeddah-based Islamic Development Bank invested $100 million in the East Africa Crude Oil Pipeline

What's next? Traders and Gulf sovereign wealth funds, banks and NOCs will continue funding African oil and gas projects, analysts say, but these new sources of financing bring their own risks. Loans from traders can financially strain cash-strapped countries down, especially with fluctuating oil prices. In addition, traders rarely fund exploration, focusing on marginal field production projects with quick lead times. Gulf financial support, comes against the backdrop of influence building in Africa by the UAE, Saudi Arabia and others, through diplomatic maneuvers, ports and military bases. Still, oil-dependent African countries are unlikely to be picky over the source of funding, analysts say, with the flight of capital putting long-term economic plans into doubt.

3. Asian nickel prices to remain subdued in Q3 amid supply surplus

What's happening? Chinese nickel sulfate prices saw a rebound towards the second quarter on supply disruptions in Indonesia and New Caledonia and an increase in the LME nickel price to $21,615/mt May 20 after the exchange banned on the delivery of Russian material. However, the uptick in nickel sulfate prices was short-lived amid weak demand from the NMC battery sector and the price plunged 18% to Yuan 27,000/mt DDP China between June 3 and June 28. Prices of other nickel products, like nickel pig iron (NPI), saw a similar trend, losing support due to weak Chinese stainless steel demand.

What's next? The upside for Asian nickel prices in Q3 is expected to remain capped on continued slow demand in the battery and stainless steel sector and a supply surplus is expected despite mine supply disruptions. The market continues to watch for nickel-related geopolitical developments.

4. Singapore B24 biobunker sales rise as maritime sector looks to cut emissions

What's happening? Singapore's consumption of B24 biobunkers -- a blend comprising 24% used cooking oil methyl ester and 76% low sulfur fuel oil -- totaled 153,300 mt in Q2, up 21% on the previous quarter. According to a market participant, some of the bigger participants in the industry in parts of Asia are picking up their purchases of biobunkers to prepare themselves to meet EU mandates affecting maritime sector emissions, rather than conduct smaller trials.

What's next? Some industry participants see demand continuing to be supported by the emissions mandates in the second half of 2024. Earlier this year, the EU Emissions Trading System was expanded to include CO2 emissions from all large ships entering EU ports. Concurrently, the FuelEU maritime initiative has set targets for reducing the greenhouse gas intensity of ship fuels by 2% by 2025; 6% by 2030; 31% by 2040; and 80% by 2050.

Reporting and analysis by Nikita Pravilshchikov, Andreas Franke, Charlie Mitchell, Louissa Liau, Chau kit Boey