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Commodity Tracker: 4 charts to watch this week

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Gas prices are on top of our watchlist this week as benchmarks reach record levels amid high demand. Lithium carbonate is also seeing a rally, while butadiene has been hit by a glut.

1. Supply concerns drive up global gas prices

Global gas bullrun

What's happening? A tight global gas markettriggered by a cold, long winter, strong competition for LNG cargoes, low storage levels, and constrained Russian gas flows to Europe—has pushed prices across the globe to record highs. Low global LNG utilization rates are also keeping a lid on LNG supplies despite strong demand, especially in China which has become the number one LNG importer on impressive gas-for-power demand growth and a strong industrial recovery. Europe is also struggling to find enough gas to meet demand and fill storages, where stocks remain at very low levels for the time of year.

What's next? Heading into winter in the northern hemisphere, concerns remain over the possibility that current supply levels will not be able to meet demand, particularly in the event of a colder-than-expected season. In Europe, all eyes have been on the now-complete Nord Stream 2 gas pipeline from Russia to Germany, which could become operational in the coming months. Russia has said that an early approval from the German and EU authorities of the pipeline would help to bring European gas prices back into balance. But the certification process could last into early 2022, scuppering any hopes that Nord Stream 2 will be able to flow additional gas to Europe this winter.

Infographic: Sky's the limit? Global gas prices on stellar rally

2. Non-OPEC supply disruptions to ease in Q4

Non-OPEC supply disruptions

What's happening? Non-OPEC outages and maintenance surged in August and September. Hurricane Ida curtailed over 27 million barrels of crude supply to date, with nearly one-third of the US Gulf Coast's output remaining offline. Most production should resume in the coming weeks, but damage at West Delta-143 platform could reduce volumes for months. In Russia, a fire at the Urengoy condensate plant disrupted over 150,000 b/d of August production, and a full recovery could take until early 2022. Seasonal maintenance at the Tengiz field in Kazakhstan and Canadian turnarounds at the Suncor U2 and Scotford upgrades are affecting supply volumes through September, but these barrels should fully return by October.

What's next? Non-OPEC output is expected to ramp through year-end as maintenance wraps up, shifting attention to disruption threats in Nigeria and Libya. Nigerian crude supply is at risk from crude pipeline sabotage, persistent technical issues, growing violence in the southeast and a resurfacing of militant threats. Key export terminals in Libya have been sporadically shut by coordinated protests across the eastern part of the country, increasing the risk of a disruptive struggle over oil sovereignty and revenues. Declining OPEC+ spare capacity in 2022 will shift market attention to geopolitical supply risks, while prospects for an Iran nuclear deal have become increasingly uncertain.

3. Chinese lithium carbonate prices surge by over 85% from August

Lithium prices

What's happening? Active procurement from both precursor makers and traders have continued to drive domestic Chinese lithium carbonate prices to record highs on rising downstream lithium-iron-phosphate (LFP) battery demand. Ahead of what is viewed as the peak LFP battery production period in October, buyers are continuing to source for cargoes outside of their usual procurement schedules with sellers continuing to raise offers for available spot cargoes. The significant surge in prices have carried over to lithium raw materials, with spodumene concentrate prices surging up by over $1,000/mt on the week to $2,444/mt Sept. 17, on FOB Australia basis.

What's next? Sellers are expecting even higher prices for October delivery cargoes with spot demand showing no signs of letting up. With LFP batteries currently the dominant battery composition in China for electric vehicles, the next question would be if cathode material margins will continue to sustain upstream demand.

4. Glut sends global butadiene prices falling

Butadiene prices

What's happening? Global butadiene prices have taken a sharp downtrend as a supply glut saw demand sink despite ongoing outages in the US. Production in the US is still down by about 20% due to the impact of Hurricane Ida, but prices in North America fell over $550/mt in a little over two weeks, with the region well-supplied by cargoes from Europe and Asia. Inventories in the region were heard to be full, leaving little options for European and Asian export cargoes. Meanwhile, European supply was improving as increased naphtha cracking improved availability, while maintenances and unplanned outages ended. In Asia, prices have been under significant pressure amid reduced downstream automotive production, and following the start-up of fresh new capacity.

What's next? Supply in Asia may tighten somewhat in October, amid the start-up of several new nitrile plans in China. In the US, prices were expected to remain under pressure despite upcoming maintenances, amid substantial volumes projected to arrive from Europe and the Far East. This could be welcome news for producers of downstream styrene-butadiene rubber—used primarily in tires manufacturing—who are having to contend with reduced automotive manufacturing as a result of supply chain bottlenecks and a shortage of semiconductors.

Reporting and analysis by Stuart Elliot, Paul Sheldon, Ashutosh Singh, Parker Fawcett, Andre Matthew, Sami Yahya, Jun Kai Heng, Callum Colford.