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Market Movers Asia, Dec 13-17: Markets eye China's oil import and export quotas for 2022, omicron threat

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Watch: Market Movers Asia, Dec 13-17: Markets eye China's oil import and export quotas for 2022, omicron threat

On this week's Platts Market Movers Asia with Insight Editor Barbara Lorenzo Caluag: Asia's jet fuel refining margins will likely remain under pressure as the new COVID-19 variant omicron has again caused uncertainty around air travel (00:14)

Other highlights from Asia's commodity markets:

*Oil markets are awaiting the release of first batch of crude import and oil product export quotas for 2022 by China (00:52)

*Chinese firms are looking to meet their carbon dioxide emissions compliance obligations by year-end (01:15)

*LNG freight rates have softened but market participants are eyeing winter demand (02:28)

*Higher than expected Malaysian palm oil stock levels exert pressure on prices (03:11)

View Full Transcript

This week: Markets could get an indication of China's oil import and export appetite for 2022, China's carbon market is likely to witness a year-end boost and stay till the end of the video to get access to our latest Insight magazine!

But first, Asia's jet fuel refining margins will likely remain under pressure as the new COVID-19 variant omicron has unleashed greater uncertainty for air travel. Many Asian countries are imposing new rules and movement checks to stem the spread of the virus, dashing hopes of a sustained near-term recovery in jet fuel demand. This graph shows that the Asian FOB Singapore jet fuel crack spread against Dubai crude swap has averaged 10.1 dollars per barrel to date in December, narrower than the monthly average in November, indicating weaker demand and refining margins for aviation fuel.

Still in oil, market players are waiting for Beijing to release the first batch of crude import and oil product export quotas for 2022. This will set the tone for China's external crude and refined products trend next year. The Chinese government is set to cut oil product exports in the coming years to reduce carbon emissions. The first batch of allocations will provide a hint on the reduction ranges.

Staying with China, companies eligible to fulfill their carbon dioxide emissions compliance obligations are in for a different kind of shopping rush this season. These companies need to make sure that either they are below their respective emission targets or have bought sufficient allowances in China's national carbon market if they have exceeded the emissions benchmarks – all by December 31. The potential rush for carbon allowances could boost China's carbon market trading activity.

Speaking of the season - worry not about your holiday parcels. Our sources said most of the container demand for Christmas season has been met. But there's still some lingering congestion in UK and US ports, and that's preventing freight rates from falling. Market participants also expect demand to pick up again in the coming days due to a rush ahead of the Lunar New Year.

Freight rates are also being closely watched by the polyvinyl chloride sector, as it's getting increasingly difficult for Chinese suppliers to find containers to ship products amid rising freight costs. In the medium term, exports of Chinese PVC could slow down as domestic margins drop and container freight availability tightens.

In LNG, spot demand has softened as winter temperatures in Northeast Asia have not fallen as sharply as expected and most importers are well stocked with LNG inventories. LNG shipping rates have come off record levels seen in November. But market participants are not letting their guard down – a sudden cold wave would be enough to reverse market sentiment as Platts JKM – the benchmark for Asian LNG spot prices – is still trading at around 35 dollars per MMBtu.

That brings us to our social media question for the week. Do you think restrictions due to omicron will affect LNG demand this winter?Share your thoughts on Twitter and LinkedIn with the hashtag PlattsMM.

In agriculture, industry observers expect palm oil prices to fall in the coming weeks as participants price in higher-than-expected stock levels going into 2022. Palm oil export data from Malaysia, the world's second largest palm oil producer and exporter, is said to be sending bearish signals.

Finally, don't forget to download the latest issue of S&P Global Platts Insight magazine, which brings into focus the role of data and technology in bridging the gap between old and new fuels in accelerating energy transition.

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