Iran sanction waivers granted to eight countries to import Iranian crude end on May 2. The end of the waivers raises concerns for many Asian customers of Iranian barrels, and the coming weeks will show how badly the region's refiners are affected by the disruption. Meanwhile, another wave of US crude cargoes is expected to reach Asia. The WTI's steep discount against international crude benchmarks like Brent and Dubai lured regional refiners to buy light sweet crude from the US.
In petrochemicals, market players are keeping a close watch on the spread between ethylene and naphtha, which has dropped to a five-month low.
In thermal coal, seaborne traders are watching buy tenders issued by Chinese power plants to gauge the direction of Indonesian prices in the near-term. In China's domestic market, spot prices could face headwinds this week on weak downstream demand several ports.
Tanker market activity in the region has picked up ahead of the Golden Week holidays in North Asia. While activities could slow down during the holidays, rates remain well supported by demand from other markets in the region.
This week: a wave of US crude cargoes come to Asia, China's economic data in focus, and ethylene-naphtha spread hovers at five-month lows.
But first, Iran sanction waivers granted to eight countries – including China, India, South Korea, and Japan - to import Iranian crude end on May 2. This raises concerns for many Asian refiners who were buying Iranian barrels. Uncertainties include lack of clarity on how the US will enforce energy-related Iran sanctions going forward, and the availability of incremental barrels from Middle East producers like Saudi Arabia. US officials have said that alternative suppliers are working directly with Iran's former customers for a smoother transition away from Iranian crude.
Still in oil, a wave of US crude cargoes is expected to reach Asia. The WTI's steep discount against international crude benchmarks like Brent and Dubai lured regional refiners to buy light sweet crude from the US. China's Unipec will take delivery of two VLCCs – its first US crude cargoes since it suspended imports in September 2018 because of the trade tensions between Washington and Beijing. Vietnam's Dung Quat refinery and Indonesia's Pertamina are also expecting cargoes from the US.
So for our social media question this week: Do you think there's enough US and Middle Eastern crude to replace Iranian barrels in the market? Share your thoughts on Twitter with the hashtag PlattsMM.
Moving on, commodity markets are expected to track a raft of economic data and trade talk deveopments this week.
The main indicator will be China's manufacturing data for April that is a bellwether of its industrial activity and oil demand. The numbers will show whether China can sustain its better-than-expected first quarter performance. Any weakness could point to a slowdown and depress benchmark oil prices.
Meanwhile, US representatives will be in Beijing for another round of trade talks from April 30. Besides trade tariffs, energy sanctions on Iran and Venezuela could also be discussed due to the impact on China.
In petrochemicals, the recent decline of ethylene-naphtha spread near breakeven level sparked speculation among market players about possible steam cracker operating rate cuts in Asia. The ethylene-naphtha spread has been currently hovering at around five-month low. Market players say additional ethylene supplies from Iran after a pipeline explosion could keep ethylene market bearish for the time being.
In thermal coal, seaborne traders are keeping a close eye on buy tenders issued by Chinese power plants to gauge the direction of Indonesian prices in the near-term. In China's domestic market, spot prices could face headwinds given the weak downstream demand seen at Qinhuangdao ports and Northern ports along the Bohai Rim due to sufficient port stocks.
In shipping, the tankers market has become much more active as North Asian buyers cover their requirements to move naphtha, especially for Japan, ahead of their Golden Week holidays. Market activities are expected to slow down, but rates remained well supported in light of the demand from China, South Korea, and Taiwan, among others.
That's it for this week. Thanks for kicking off your Monday with us. Have a great week ahead!