Commodity Tracker: 5 charts to watch this week

It is a crucial year for renewable hydrogen as Asian buyers are set to launch tenders for their future needs for environment-friendly fuels. In shipping, a joint study by S&P Global Commodity Insights and S&P Global Market Intelligence showed that the size of "shadow" tanker fleet involved in transporting oil from sanctioned countries has grown. Meanwhile, LNG trade as well as the prices of biodiesel and low-carbon fuel standard credits are also in focus.

1. Carbon-neutral hydrogen prices in focus as ammonia deals enter early commercial stage

What's happening? Low-carbon and renewable ammonia supply deals are seen being secured in Asia-Pacific by early starters for delivery in late 2020s in what marks an early commercial stage for the environment friendly fuels. Sellers are mostly large project developers in the Middle East and India, such as ADNOC and ACME, while buyers are large industries and power producers with big decarbonization requirements, such as Norway's Yara and Japan's JERA. These participants are assessing not just prices but availability of the fuels, too. Platts, part of S&P Global Commodity Insights, assessed carbon neutral hydrogen ex-works Middle East at $2.35/kg April 29, up 4.44% month on month.

What's next? Low carbon/renewable ammonia trades are a precursor to low carbon/renewable hydrogen trades, which can take off when the technology develops for its transportation. Japan and South Korea are likely to unveil details of their subsidy plan for hydrogen(opens in a new tab) based on a contract-for-difference approach, the finalization of which could help renewable and low-carbon hydrogen project developers target Japanese and South Korean markets, and sign offtake agreements. The offtake agreements are crucial for 2024 and 2025 so that final investment decision is reached as a next step, and projects start construction with a view to fulfilling deals around 2027-2030.

Further reading: Hydrogen markets progress towards price transparency (opens in a new tab)

2. Sanctioned countries turn to shadow tankers for oil exports

What's happening? The number of ships engaged in transporting oil from sanctioned countries(opens in a new tab) has grown significantly in recent quarters. Based on a joint study by S&P Global Market Intelligence(opens in a new tab) and S&P Global Commodity Insights(opens in a new tab), 591 tankers as of April are either confirmed by Western authorities to have violated sanctions against Iran, Russia and Venezuela or at high risk of breaching them. The number stood at 443 in February 2023, when the price cap on Russian petroleum products came into effect three months after crude. Another 840 tankers have likely been shipping Russian oil within the cap, according to the study.

What's next? Mainstream tanker markets could face upward pressure on freight rates if more ships move into the shadow fleet. Moreover, shadow ships tend to be old, less maintained and lack proper insurance coverage, and some countries and shipping professionals have voiced concerns over their threats to maritime safety. The EU and International Maritime Organization could have additional regulations over how they operate.

3. LNG sellers await buying interest from Latin America, Egypt

What's happening? LNG trading activity has taken a hit in recent weeks as sellers have been heard to be turning a blind eye on bids from Northwest Europe. NWE have been bidding higher to replenish inventories and keep cargoes, but sources said sellers are waiting for bids from emerging demand hubs, including countries in Latin America.

What's next? Earlier this year, the market expected record high imports from Latin America. While this sentiment has cooled, traders expect that LNG flows to Latin America will increase, further adding to the current tightness seen in the Northwest European market. Brazil and Argentina are expected to import more LNG over the summer amid slightly lower hydro-reservoirs and increasing LNG infrastructure. Egypt is looking to pay premiums to TTF to attract LNG cargoes as they switch from an exporter to a net importer. Egypt has faced pressures from reduced pipeline volumes and lower gas production and is looking to import cargoes to meet peak summer demand for power generation and cooling.

4. Brazilian biodiesel spot price at more than 1-month high

What's happening? Platts biodiesel spot prices have been higher since March 15, peaking on April 11 at Real 4,990/cu m, and has been steady for two consecutive weeks at Real 4,840/cu m. The increase in the mandatory mixture of biodiesel into diesel to 14% started March 1, but a lower-than-expected diesel demand has been reducing the volumes of biodiesel to be traded in the spot market, subsequently leading to a premium compared with term contract values. Apart from that, Brazil's Petrobras has been keeping its diesel prices -- a reference for the whole market -- steady at Real 3,533/cu m since the beginning of 2024.

What's next? Diesel demand has been slow this is reflected in the biodiesel spot market trading activity as well. But sources expect demand regaining terrain with the term contracts to be settled for the May-June period. Soybean oil prices will also be on the radar as Argentina, the world's largest exporter of the edible oil, has started its soybean crop, eventually pressuring the main feedstock for biodiesel production in the region.

5. Low Carbon Fuel Standard credit prices remain low amid high renewable diesel supply

What's happening? The daily S&P Global front quarter Low Carbon Fuel Standard price average dropped to $58 per credit, averaging $62.17 per credit for the month through April 26. The current low prices are largely due to a large influx of renewable diesel from new plants and increasing capacity. Credit prices have also been influenced by high diesel prices in the past year, which have led to greater profits for renewable diesel producers.

What's next? S&P Global analysts expect an increasing deficit in gasoline due to tightening carbon intensity regulations. The diesel surplus is also expected to continue to grow, which will likely lower prices and increase the marginal cost of renewable diesel, causing LCFS prices to slowly increase.

Reporting and analysis by Ruchira Singh, Max Lin, Aly Blakeway, Priscila Pinheiro, Erin Tully