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Watch: Market Movers Americas, Jan 18-22: Biden brings sharp change in energy policy, traders eye pre-inauguration protests

This week's Market Movers Americas, presented by Christopher Newkumet:

* Oil traders eye pre-inauguration protests

* USGC refinery margins seek demand recovery queues

* Gulf Coast LNG netbacks from Platts JKM on autopilot

* Clean freight hits 2021 high amid tonnage crunch

* US automakers face disruptions on semiconductor shortage

Related coverage:

* US energy policy

* 2020 US elections

* Energy transition

View Full Transcript

In this week's Market Movers: Crude prices weather the protests; Gulf Coast refinery margins are on the upswing; US LNG to Asia remains a market plum; freight rates are setting new records; and the metals market is wary of production disruptions.

But first – All eyes will be on Washington this week, as President-Elect Joe Biden is set to take the oath of office, replacing Donald Trump in the White House. Sharp changes for energy policy and regulation are expected from the new leadership, but early progress on the Biden agenda could be slowed by the unsettled and ongoing impeachment process.

Oil traders will be among those paying close attention to planned protests across the country leading up to the inauguration on Wednesday. Futures have remained above $50/b since the violent protests at the US Capitol on January 6, as traders seemed to focus on OPEC plus production cuts.

A possible new wave of protests is seen as unlikely to impact oil prices, unless they escalate to the point of delaying Biden's planned coronavirus pandemic relief package or distribution of COVID-19 vaccines.

Pandemic risk continues to stalk the oil bulls. Initial US unemployment claims jumped to a five-month-high of 945,000 during the week-ended January 9, the Labor Department reported late last week. A weak labor market creates headwinds for demand recovery of refined products, especially gasoline.

The US Gulf Coast is watching refinery margins and product stocks as they gear up for spring.

Margins have steadily risen since October, led by key light-end product crack spreads. So far in January, Platts Analytics reported the five-day rolling average of margins at $7.68/b on Jan. 12, up $2.26/b from October.

Conversely, refined product stocks were reported higher last week, with gasoline inventories up 4.4 million barrels and total distillate stocks up 4.79 million barrels the week ended Jan. 8.

Should margins see a repeat of trends in the first few months in 2020, margins could surge around $2 to $4/b. But 2021 is unlike any other year, and margins hang in the balance of refiner discipline and the pace of coronavirus-related recovery.

Meanwhile, the incentive to ship US LNG to Asia has never been stronger. The only complication involves persistent extended wait times at the Panama Canal that have forced offtakers from the Gulf Coast to chart a longer route around the Cape of Good Hope.

Gulf Coast LNG netbacks from the Platts JKM benchmark recently hit an all-time high of $23.36/MMBtu, on the back of a record bull run of the spot price. The JKM for February was assessed at $26.99 on Jan. 15, almost 15 times higher than the benchmark's historic low recorded in April of last year. Platts assessed the first half of February at $33.49 and the second half of the month at $20.48.

Turning to the clean tanker market, freight rates returned to levels not seen since the end of December, feeding on tightened tonnage in the US Gulf Coast late in the week ended January 15.

However, upward momentum looks delicate as open ships were in position to refill the position list this past weekend. Freight for the Medium Range US Gulf Coast-Brazil route traded at $22.35/mt January 14, the highest level observed so far this year.

Shipping sources anticipate that open tankers could arrive this week from East Coast Mexico, where bad weather delayed loads and discharges in PA HA RITOS and TUXPAN in the first 10 days of January.

The US metals market this week will continue to the lookout for potential production disruptions among domestic automakers amid a global shortage of semiconductor microchips.

Due to supply issues, Ford paused operations at its Louisville plant last week, with Honda North America telling Platts it expects production issues to persist over the next few weeks.

At the same time, US hot-rolled coil prices hit an all-time high Jan. 13, breaking the previous mark set in 2008, to close at $1,089.75 per short ton, with buyers reporting more room for prices to rise. US HRC prices have increased a staggering 147.5% since early August as buyers depleted stocks to multiyear lows.

For more on all the issues affecting commodity markets, check out Platts Live, a section of our website created for our customers to continue engaging with us, and each other. You can find it at the address displayed on your screen.

Thank you for kicking off your Monday with us and have a great week ahead.