The highlights in Asia this week on S&P Global Platts Market Movers, with Digital Editor Barbara Lorenzo Caluag:
** Asian refiners expect slight increase in Middle East crude prices
** Progress of Trump's COVID-19 recovery to dominate market direction
** Fundamentals in Asia's transportation fuel markets seen muted in Q4
** Benchmark Glencore-Tohoku coal price talks seen bumpy
** India extends 5% GST waiver on export freight
Asian refiners expect slight increase in Middle East crude OSPs for Nov
This week: Trading muted in Asia amid an 8-day holiday in China, coal price negotiations continue between Australia and Japan, and India issues a last-minute waiver on GST for export freight.
But first, Asian refiners widely expect major Persian Gulf crude producers to slightly raise their official selling prices. OSPs for cargoes loading in November are expected to be announced this week.
The expected price hike is on the back of the mild recovery staged by the benchmark Dubai price structure last month, as shown here.
Still, refinery officials across Northeast and Southeast Asia said attractive OSPs will not lure them to increase crude purchases from Middle Eastern suppliers, as oil products demand remains fragile. Refinery run rates also remain relatively low after the recent resurgence of COVID-19 in the region.
This brings us to our social media question this week: Do you expect all Middle Eastern producers to raise official selling prices for crude? Share your thoughts with the hashtag PlattsMM.
The market will also be closely monitoring the recovery of US President Donald Trump from COVID-19, after his diagnosis late last week sent crude prices tumbling. The progress of Trump's fight against the virus will dominate market direction in the coming days.
On to refined products, where supply-side fundamentals in Asia's transportation fuel markets are likely to stay muted.
South Korean motor fuels exports are estimated at around 60 million barrels in Q4. According to a recent Platts industry survey, and as shown here, that figure is down 14% from Q4 2019, and 9% lower than in Q3.
On the other hand, Chinese gasoline exports are expected to remain heavy, with refiners seeking to use the regional market as an outlet to offset domestic inventory pressures. Chinese oil companies are expected to export as much as 1.4 million metric tons of gasoline in October.
In LNG, China's environment ministry has proposed replacing coal with clean energy as feedstock in the heating systems of 7 million households in northern provinces by end-October. This move could boost natural gas demand and LNG imports this winter.
The last time coal-based boilers in Chinese cities were switched to gas, in the winter of 2017, it triggered severe gas shortages. However the region's gas supply infrastructure has expanded since then, and China's gas supply has increased.
S&P Global Platts Analytics said the key will be the weather – if this winter is colder than average, as some forecasts indicate, there could be more demand for heating, which could see coal used for heating in tandem with gas.
More on coal, eyes are on the ongoing benchmark price negotiations between Australia's Glencore and Japan's Tohoku Electric Power for high-calorific value coal. Market sources are currently expecting a bumpy settlement process amid a wide bid-ask spread of more than 10 dollars per metric ton.
Meanwhile, China's domestic coal prices are looking firm amid winter stocking activity by utilities, while high-ash 5,500 NAR Australian coal prices are seen stable to lower during China's ongoing holiday.
Market participants in the metals space are awaiting China's return to the market to get a clearer sense of price direction. China's finished steel prices were on a downtrend in September, while raw material prices held up reasonably well. This had squeezed steel margins hard and Chinese mills and traders will try to lift prices. Whether higher prices will be accepted is another thing.
Finally, in shipping, we go to India where the government has extended the waiver of the 5% Goods and Services Tax on export freight until September 2021. This move comes as a relief to exporters grappling with weak demand and high container rates.
The waiver applies to both air and ocean export freight, and comes after weeks of speculation the government was not planning to extend the waiver. The announcement came on September 30, much later than in previous years.
Thanks for kicking off your Monday with us. Have a great week ahead!