On this week's Platts Market Movers Asia with Energy Transition Writer Ivy Yin: LNG markets face tight supply, pushing Asia-Pacific spot prices to all-time highs.
Also in Asia's commodity markets:
* High crude prices hinder fuel demand recovery (01:25)
* Palm oil prices hit record highs (02:27)
* China's Sep steel trade numbers in focus (03:39)
This week in Asia, oil prices remain high, palm oil market in frenzy, and China's steel trade report in focus amid a nationwide power rationing.
But first, desperation for LNG supply is palpable in the region's gas markets. S&P Global Platts Analytics said the physical LNG market is constrained in terms of liquidity. Asia competes with Europe for incremental LNG cargoes, and Asia-Pacific spot LNG prices have mirrored European gas prices for several months.
With a gas crisis in Europe and growing concerns on energy costs, LNG spot prices in Asia-Pacific surged to an all-time high of above 56 dollars per MMBtu on October 6, before correcting to around 35 dollars, as you can see on this graph.
Moving forward, key market drivers would be indications of demand destruction in Europe—including factory closures to conserve fuel during winter, European gas inventory levels, supply outages, and of course, the weather. Warmer temperatures would mean lower demand for heating, and this would help ease pressure on global gas prices.
In oil, Asian refiners remain largely dissatisfied with OPEC's cautious approach in raising crude supply. They believe high oil prices would put brakes on regional consumer fuel demand recovery.
Like LNG, October 6 was also remarkable for oil markets. Platts assessed international physical sour crude benchmark cash Dubai above the 80 dollar mark for the first time since October 2018—when OPEC and its allies agreed to open the taps just a little for a market thirsty for oil.
In a meeting last week, OPEC+ decided to stick to their original plan to increase crude oil production in November by just 400 thousand barrels per day. Nine major Asian refiners surveyed by Platts said OPEC+ should ideally raise supply by at least 800 thousand barrels per day as current oil prices appear overheated.
In agriculture, palm oil markets are also keeping a close tab on prices, after they kept hitting all-time highs in the first week of October. The front-month contract on Bursa Malaysia crossed the MR5,000/mt mark for the first time also on October 6.
According to a Platts survey, Malaysia is expected to report stocks to have dipped slightly at the end of September due to a 35% rise in exports and limited production growth in the month.
India and China—top buyers of Malaysian palm oil—will also release their import data later in the week. India's palm oil imports are expected to have surged above a million metric tons in September, well above its monthly average of 650 thousand to 750 thousand metric tons.
That brings us to our social media question for the week: Do you expect palm oil prices to continue to hit fresh all-time highs later this month? Share your thoughts on Twitter with the hashtag PlattsMM.
In metals, China's September steel trade numbers are in focus. Market players will be keen to know how the recent power rationing in China, as well as a slowdown in the property sector, has affected import and export levels.
And speaking of power rationing, the aluminum industry continues to face production hurdles. Smelters in Qinghai province have been asked to cut their power usage by 30% from September levels. Smelters in Inner Mongolia could further curb their output in the fourth quarter ahead of China's preparations for the Winter Olympics. Widening output cuts in China are expected to support domestic aluminum prices in the near term.
For more on the issues affecting commodity markets from wherever you are, make sure to check out Platts LIVE at the address displayed on your screen.
Thanks for kicking off your Monday with us. Have a great week ahead.