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Commodity Tracker: 5 charts to watch this week

US gasoline prices, voluntary carbon markets and LNG freight rates are in focus this week. Our editors are also closely watching the surge in lithium prices as well as the impact of poor weather conditions on Argentina's wheat output.

1. US SPR could be tapped further to keep gasoline prices in check this winter

US crude inventory declines on SPR releases

What's happening? Fifteen million barrels from the US Strategic Petroleum Reserve are being sold for delivery in December, completing a historic 180-million-barrel drawdown from the reserve. US President Joe Biden approved the release to mitigate global supply disruptions from Russia's invasion of Ukraine and help lower energy costs.

What's next? Biden said further releases in the months ahead are possible "to prevent oil price spikes and respond to international events," as the US wants to avoid another runup in gasoline prices. Senior administration officials said they will decide in about a month's time whether to initiate any SPR sales in January. The Department of Energy will be waiting for WTI prices to fall to or below $67/b-$72/b to buy back oil to refill the emergency stockpile. Critics argued that draining the SPR only worsens supply risks for the US and instead called for long-term policies that encourage domestic oil production.

2. Voluntary carbon credit assessments fail to pick up ahead of COP27

Voluntary carbon markets

What's happening? With the broader macroeconomic scenario being vastly different this year, there are fewer expectations from the upcoming UN Climate Change Conference, or COP27, compared to the conference held in Glasgow in 2021. This year players are more preoccupied with soaring energy prices. As a result, there has been lesser focus on decarbonization efforts.

What's next? There is expectation that with a more widespread implementation of Article 6.2 and Article 6.4, there will be a growth in compliance markets across countries, which might reduce the significance of voluntary carbon markets. Players are waiting and watching for decisions at COP27 to make their moves on buying, selling and project development.

Watch: Counting down to COP27: 5 themes to watch at this year's talks

Watch the rest of the series here:

Episode 2: Will countries accelerate decarbonization goals?

Episode 3: What is the progress on additional agreements made last year?

Episode 4: What will India do?

Episode 5: Will COP remain relevant?

3. Asia-Pacific LNG freight rates hit record high

LNG tanker freight rates

What's happening ? Tight availability LNG carriers due to demand for floating storages and lack of regasification capacity in key importing countries in the EU have driven spot LNG freight rates in the Asia-Pacific region to their highest level since Platts, part of S&P Global Commodity Insights, started assessing the price for chartering this type of gas carrier in 2010. Pacific day rate for TFDE was assessed at $415,000/d on Oct. 21.

What's next? The recent outage at the Nigeria LNG terminal due to flooding and subsequent force majeure could free up ships scheduled to load there. However, shipbrokers noted the uncertainty around number of spot ships that can be relet onto the market as the scale of the outage is not clear. Market players are also concerned that the LNG carrier supply tightness could last well into the winter months. This has prompted some market participants to secure tonnage earlier than usual for 2023 despite expectations of even higher freight rates.

3. Chinese lithium prices bull run likely to continue to end-2022

China's lithium prices

What's happening? Platts-assessed prices of battery grade lithium carbonate and hydroxide have been on an uptrend since late September, posting a year-on-year increase of 179% and 180%, respectively as of Oct. 20. The price jump seen in 2022 was attributed to the stark contrast between rapid growth of new energy vehicles sales and longer construction cycle of mineral resources.

What's next? The output from salt lake producers will slow down when winter arrives. However, production is expected to remain robust during the traditional peak season in the fourth quarter. This will likely keep lithium salt prices moving up. Some market sources said lithium carbonate prices could breach Yuan 600,000/mt by the end of 2022.

5. Argentina's 2022-23 wheat output seen dropping, may tighten exports too

Argentina wheat output and export

What's happening? The US Department of Agriculture has scaled down its estimates for Argentina's wheat output to 17.5 million mt in October, down from 19 million mt in September. Argentina's wheat output estimates have been scaled down for marketing year 2022-23 (December-November) due to continued drought and frost conditions in its key growing regions. Major wheat growing regions such as Cordoba and Santa Fe have reported the sharpest decline in output projections.

What's next? A decline in Argentina's wheat output is likely to lead a shortage of milling wheat supply in South America and Southeast Asia. The USDA had pegged Argentina's wheat exports at 12 million mt in October, down from 13 million mt seen last month. A drop in Argentina's wheat supplies may also lead to an increase in exports from other sources, especially Australia.

Reporting and analyses by Jasmin Melvin, Vandana Sebastian, Jesline Tang, Lucy Tang, and Sampad Nandy