On this week's Platts Market Movers Asia with Associate Editor Vickey Du: Oil markets will track the spread of omicron amid worries of a demand shock (00:15)
Other highlights from Asia's commodity markets:
*Spotlight is on China's steel trade data (01:23)
*China is likely to publish plans for energy and power, part of the 14th Five-Year Plan, this month (02:08)
*LNG freight rates in the region are at an all-time high (03:12)
*Spread of omicron in Australia may hinder wheat trade (03:43)
This week: Grain markets will closely track the spread of omicron in Australia, China's sectoral plan for energy under the 14th Five-Year Plan expected to be announced this month, and China's steel trade data to be released this week.
But first, oil markets will closely track the spread of the new COVID-19 variant and the US-coordinated release of strategic petroleum reserves. Last week, OPEC+ stuck to its plan of raising quotas by 400,000 barrels per day, but said it remains ready to reconvene to assess the threat from the omicron variant. There are fears that countries may impose fresh lockdowns due to the new variant, leading to a demand shock.
Bearish sentiment prevailed in Asian gasoline markets on expectation of waning demand and increasing supplies. India was heard selling gasoline cargoes in the spot market, a reversal from October's heavy buying activity.
China is also expected to see an increase in domestic supplies amid softening demand due to COVID-19-related travel restrictions.
That brings us to our social media question for the week: Do you think there will be a crude supply glut in Q1, with OPEC+ sticking to the output hike, SPR releases, and omicron? Share your thoughts on Twitter with the hashtag PlattsMM.
Moving to metals, markets will be keeping a close watch on China's steel trade data for November. China's steel exports had hit an 11-month low in October and this trend is expected to continue in November, according to industry officials. However, China's steel exports are expected to rebound in the first quarter of 2022 due to muted domestic demand.
In coal, Asian markets are waiting for further cues from China after its top planning body hiked the benchmark rates for long-term contracts by 31 percent. Market participants expect Indonesian coal prices to stay steady even as concerns over the omicron variant weighed on coal procurement decisions.
Meanwhile, China is expected to publish this month its sectoral plans for energy and power for the five years from 2021 to 2025. Part of the 14th Five-Year Plan, the strategy is significant because of two recent developments – the energy crisis that triggered power and coal rationing, and COP26 in which Beijing committed to net-zero emissions by 2060. Market participants expect the sectoral plans to indicate a roadmap for the decarbonization of power, and oil and gas sectors.
Turning to carbon, the market will be closely watching the spread between the Platts Nature-based Avoidance and Natural Carbon Capture assessments, after it touched a record low last week. Traditionally, prices of natural carbon capture credits have been much higher than avoidance credits. However, thin supply, increased confidence in standardized contracts provided by the exchanges and higher demand have pushed the price of avoidance credits higher.
In other news, LNG freight rates in the Pacific reached an all-time high due to the lack of available tonnage. Most head owners have chartered out their ships and only trading houses have ships available for relet in the market. The tight supply was exacerbated by the congestion in the Panama Canal as only two to four LNG ships could pass through each day. However, brokers expect freight rates to soften in January with more ships available for January loading amid lower cargo volumes.
And finally, in agriculture, grain markets will be closely watching the spread of the omicron variant in Australia. Traders expect local governments to tighten restrictions, which may hamper wheat trade during peak harvest time. With global wheat supplies seen dwindling, traders expect restrictions in Australia to push global wheat prices higher.
Thanks for kicking off your Monday with us. Have a great week ahead!