Commodity Tracker: 5 charts to watch this week

Gas markets are in focus, with Europe hitting its storage filling target way ahead of deadline, while a heat wave in east Texas and the US Gulf Coast is driving gas-fired power demand. S&P Global Commodity Insight editors and analysts are also watching ammonia prices as well as China's refined products export quota and steel demand.

1. EU hits 90% gas storage filling target ahead of Nov. 1 deadline

What's happening? The EU reached it 90% gas storage target on Aug. 16(opens in a new tab), some 11 weeks ahead of the EU-mandated Nov. 1 deadline, according to data from Gas Infrastructure Europe. The setting of mandatory filling targets was part of the EU's response in mid-2022 to the gas crisis and record prices triggered by curtailed Russian exports.

What's next? Subdued demand and a wide winter-summer spread mean continued filling is also likely, with stocks in northwest Europe set to exceed 95% of capacity by end-September, according to S&P Global Commodity Insights forecasts. The current wide spread is seen incentivizing more injections through the remainder of the summer. With stocks nearing full capacity, traders have also turned to Ukraine's surplus storage capacity to store gas.

Infographic: EU hits 90% gas storage target well ahead of winter (opens in a new tab)

2. Heat wave keeps pressure on South Central natural gas market

What's happening? Blistering heat centered over east Texas and the US Gulf Coast is now forecast to persist through late August fueling strong gas-fired power(opens in a new tab) demand. Since late July, strong gas demand in the South Central region has prompted large withdrawals from gas storage totaling 57 Bcf through the week ended Aug. 11.

What's next? With near-peak summer gas demand forecast to continue through late August, supply-demand fundamentals in the South Central region should continue to tighten. Through the end of August, Texas power burn should average nearly 7.6 Bcf/d, just 5%-6% below the month-to-date average. In the Southeast, generator demand will average a robust 14.1 Bcf/d through the end of this month. According to a short-term forecast from S&P Global, the EIA will likely report another withdrawal of 4 Bcf from South Central inventory in the week to Aug. 18 with the possibility of additional withdrawals into late August.

3. Global ammonia price drop sparks concerns over future low-carbon ammonia market

What's happening? Low-carbon hydrogen and ammonia project developers across the world are facing challenges securing final investment decisions amid a downtrend in global spot ammonia prices and demand uncertainties(opens in a new tab). New project advancements have slowed in the market, amid government policy delays. However, the biggest barrier for projects is the cost gap(opens in a new tab) between current fossil fuel-based hydrogen and ammonia and lower emission technologies. Despite vast financial support schemes(opens in a new tab) to incentivize production, bridge the cost gap and drive demand-side support, weaker spot ammonia margins have added pressure on developers' financials. Canada's Nutrien announced Aug. 2 the suspension of its Geismar, Louisiana, blue ammonia project, slated to be the world's largest clean ammonia plant, attributing their decision to capital cost increases and clean ammonia demand uncertainty.

What's new? Countries with hydrogen import strategies and net-zero targets, like co-firing initiatives, are expected to be the first demand centers, with support schemes and mandates(opens in a new tab) to encourage demand. Under the EU's Carbon Border Adjustment Mechanism, slated to begin its transitional phase in October and formally starting in January 2025, traditional hydrogen and ammonia importers will be subject to CBAM penalty, thus kickstarting low-carbon trade flows by 2024.

Interactive: Platts Ammonia Price Chart (opens in a new tab)

4. China's oil firms set to cut September product exports when awaiting new quota allocation

What's happening? China's oil companies are awaiting new clean product export quotas(opens in a new tab) for September, with allowance availability likely fall to as low as 500,000 mt for the month, following July outflows of 3.6 million mt and August outflows estimated at 3.5 million mt. China's economic growth has been weaker than-expected due to a slowing property sector, slow infrastructure construction and weak manufacturing goods exports, capping domestic gasoil demand. Several wholesale traders told S&P Global that they have filled their tanks ahead of the peak season in September/October but were selling slow, leaving no room for replenishment.

What's next? Sources said the new quotas are expected to be issued by end-August, with the volume below 10 million mt. No additional quota allocations are expected for the rest of the year. The late allocation is likely due to the government's concern about ensuring sufficient supplies, especially gasoil, in the peak season in September and October, with demand driven by harvesting, fishing, construction and travel. Chinese oil companies are required to prioritize meeting domestic demand, especially after September 2021, when there was a shortage of gasoil. S&P Global lowered its forecast for China's real GDP growth for 2023 from 5.5% to 5.2%, and for 2024 from 5% to 4.8%, indicating the possibility of a less-than-robust peak season in September-October.

5. China's crude steel production seen slowing after strong July output

What's happening? China's crude steel production hit 90.8 million mt in July, according to preliminary data from the National Bureau of Statistics, flat on the month before but the fifth consecutive month of 90 million mt + production. Year-to-end July steel production of 626.5 million mt was down 2.5% on year.

What's next? S&P Global analysts expect China's crude steel production to slow down(opens in a new tab) for the rest of the year due to weak downstream demand and thin steel mill margins. S&P Global expects China's full year production at 1,016 million mt, 0.3% lower on the year. In 2024, S&P Global expects China's crude steel production at 1,012 million mt, down 0.4% on year, before seeing a further 0.3% reduction in 2025 to 1,008 million mt. The drop in steel production is mainly due to lower steel demand from key end-user sectors, infrastructure and property construction.

Reporting and analysis by Stuart Elliott, J Robinson, Santiago Canel Soria, Oceana Zhou, Paul Bartholomew, Crystal Hao, Sylvia Cao