Other highlights from Asia's commodity markets:
*S&P Global Platts Steel Markets Asia conference this week (02:22)
*Weak outlook for Asian styrene monomer (02:04)
*Indonesian coal prices remain firm due to Chinese winter demand (02:57)
*Muted activity in carbon markets (03:14)
*La Niña threatens Australian wheat's protein content (03:41)
This week: La Niña raises concerns about Australian wheat quality, Indonesian coal prices firm amid Chinese winter demand, muted activity in carbon markets and the two-day S&P Global Platts Steel Markets Asia conference begins December 1.
But first, Asian refiners and oil traders will cautiously watch the December 2 meeting of OPEC and its allies, which will take a call on retaining the existing production hike of 400,000 barrels per day. The meet comes amid reports that OPEC+ might decide to drastically alter its current production strategy after countries like US, Japan, China, India and South Korea announced plans to release their crude reserves. The oil producers will also contend with concerns over the spread of the new Omicron variant of Covid-19 and the resulting demand shocks. Market participants expect the alliance to take a decision that would support the current high oil prices.
That brings us to our social media question for the week: Do you think OPEC+ will cut back production to support oil prices amid release of state oil reserves and a fresh Covid-19 threat? Share your thoughts on Twitter with the hashtag PlattsMM.
The new Covid-19 variant may also pose a threat to international travel, at a time many countries were gradually opening their borders.India announced last week it will allow more regular international flights from December 15. However, it subsequently announced that it will review the resumption date around concerns over the new variant. India's jet fuel consumption had surged to a 19-month high in October as domestic travel picked up and India formed more air bubbles.
Staying with oil, market participants expect another round of increase in the official selling price or OSP by Middle Eastern producers led by regional kingpin Saudi Aramco. The sour crude complex has rallied in November on the back of strong Asian demand in the early part of the month. So far, Cash Dubai in November is up more than $1 per barrel over October. However, traders say a sharp jump in OSPs could dent demand as buyers may favor arbitrage barrels from the West over Middle Eastern crude.
In petrochemicals, Asian styrene monomer's outlook remained weak after the spot prices hit an 8-month low last week. Additional new capacities coming online in China, estimated at around 5.62 million metric tons, exerted pressure on Asian styrene monomer's production margins.
In metals, Platts will be hosting the Steel Markets Asia Conference this week on December 1. The two-day event will discuss industry's decarbonization and how global steel markets are navigating the post-pandemic world.
In China, there is widespread speculation around plans for large scale output cuts in the run up to the 2022 Winter Olympics in 2022. According to reports, some steel mills in Tangshan city may shut down production for two months from mid-January. However, one will have to wait and watch to gauge the market impact as many steel mills have already curbed production.
In coal, Indonesian coal prices are expected to remain firm on the back of Chinese winter demand and supply tightness due to heavy rains and lower production. An increase in prices of Indonesian and South African coal is also expected to support rise in Australian coal prices.
In carbon markets, activity was muted as market participants plan their future strategy after COP26. Supplies seem to have dried up with most developers selling their credits for the year and buyers completing their yearly portfolio targets. The Clean Development Mechanism, the offset scheme run by the United Nations, has seen some interest. Prices seem to have stabilized a bit in the forestry segment after a sharp increase earlier in the month.
And finally, in agriculture, grain markets will be closely watching the weather in Australia as excessive rains due to La Niñacould hit wheat output and protein content.
Early harvest is indicating lower-than-expected protein levels, raising concerns over quality of supply. Australian export wheat prices have trended higher, and traders expect prices to continue rising in the coming days. Traders said poor milling wheat output in Australia may result in higher demand from the US and Canada, further pushing up global prices that touched a 9-year high last week.
Moving to Thailand, the country will be issuing its first 2022-23 Quota B raw sugar tender this Friday, nearly 9 months earlier as compared to the previous years' trends. Market sources said an early tender at a time global prices are high will be beneficial for Thailand's sugar production in the upcoming season.
Thanks for kicking off your Monday with us. Have a great week ahead!