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Market Movers Asia, Oct 21-25: Lower logistics costs make Russian crude more attractive to Asian refiners

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Watch: Market Movers Asia, Oct 21-25: Lower logistics costs make Russian crude more attractive to Asian refiners

The highlights in Asia on S&P Global Platts Market Movers this week, with Commodity Associate Shermaine Ang: more Russian crude oil cargoes are seen heading to Northeast Asia on lower logistics costs, the LNG market is starting to move into peak winter demand, Japan and Saudi Arabia ministers are set to meet, and paraxylene plants lower operation rates.

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The highlights in Asia this week: the LNG market starts to move into peak winter demand, Japan and Saudi Arabia ministers set to meet, and paraxylene plants lower operation rates.

But first, in oil Asian refiners may find Far East Russian crude oil highly attractive this week as they increasingly favor short-haul crude supplies amid a recent sharp uptrend in international dirty tanker freight rates. Far East Russian export crudes including Sokol, ESPO Blend and Sakhalin Blend should appeal to many Asian refiners due to the grades' cheaper logistics costs. More than 15 spot cargoes of ESPO Blend crude for loading in December will be on offer this week.

Meanwhile, all eyes will be on potential Saudi-Japan tie-ups in the energy sector this week. Japan will hold the fourth round of the Saudi-Japan Vision 2030 ministerial meeting and the Saudi-Japan Vision 2030 Business Forum in Tokyo on Wednesday.

In LNG, eyes would be on the JKM/TTF spread as the market moves into peak winter demand. Tight supply in Pacific after the outage in the Northwest Shelf and maintenance at Gorgon along with the surging freight rates would mean that North Asian buyers need to pay more to move cargoes eastwards during winter. Demand from South Korean and Chinese end-users along with shipping rates hitting 2019 highs of 120 thousand dollars per day caused the Japan Korea Marker to breach the 7 dollar per MMBtu mark last week, for the first time since January this year.

How much higher do you expect LNG Asia prices to climb? Share your thoughts on Twitter with the hashtag PlattsMM.

Conversely in coal, Chinese domestic prices are expected to head south as more Chinese mines resume its full operation and demand is expected to remain tepid. Indonesian thermal coal prices are looking to trade stable to higher backed by pockets of Chinese tenders Q4 delivery cargoes, however lingering concerns over Chinese import restrictions have limited some price upside. Indian seaborne demand is expected to wane ahead of the Diwali festive season, amid high power plant stockpiles sufficient for about 10 days of coal burn.

Next, narrowed margins for paraxylene production is starting to manifest itself in lowered operating rates and also shutdowns at primarily older, smaller or non-integrated Asian paraxylene plants recently. Several plants in China and South Korea have lowered operating rates over the last couple of months, and some also closed down plants, hoping for margins to improve. However, there may not be any light in the tunnel anytime soon with more new PX plants in China and Southeast Asia about to start, which has led to reduced import demand for PX in China, as well as crunched margins for PX producers. On October 15 the PX-naphtha spread hit more than a 5-year low of $260/mt.

Thanks for kicking off your Monday with us. Have a great week ahead!