In this week's highlights: Are oil prices getting ahead of the facts? How many UK generation shocks will the market absorb this winter? And how are European power traders responding to the cold temperatures in the region?
*Demand question marks for recovering oil
*Power nerves set to ease?
*US grains report due
In this week's highlights: Are oil prices getting ahead of the facts? How many UK generation shocks will the market absorb this winter? And how are European gas traders responding to reduced LNG shipments?
First, to oil prices. The crude market was buoyed by Saudi Arabia's surprise decision last week to voluntarily cut its output by a million barrels a day, even as some other OPEC+ nations start to ease output cuts.
With front month futures prices reaching $55 a barrel in response, the question is whether these price rises are getting ahead of the fundamentals.
After all, it's less than a month since oil was languishing below $50, and the signs on the demand side are not exactly encouraging, in the short term at least, as the coronavirus crisis deepens.
Also taking stock this week is the Norwegian Petroleum Directorate, which provides its annual update on Thursday. Europe's largest oil-producing nation looks increasingly confident it can withstand the current crisis, even as it pledges conformity with long-term energy transition goals.
In European gas, the remarkable rally in Platts JKM spot LNG prices in Asia will remain a key focus this week, with demand in the region expected to continue drawing cargoes away from Europe. The Platts JKM benchmark for Asian spot LNG has risen more than ten-fold since early May, as supply-side issues coincide with strong Asian demand and a tightening LNG shipping market.
With gas demand high across Europe due to a cold snap, pipeline suppliers need to step up to fill any LNG gap. Traders will be keeping a close watch on weather forecasts, both in northeast Asia and Europe, to get a handle on likely demand evolution in the coming weeks.
European power traders are also tracking temperature and wind forecasts closely after demand spiked last week to two-year highs, with nuclear powerhouse France switching to a net import position.
Across the Channel, hourly prices in Great Britain hit one-thousand-pounds a megawatt-hour last week after the system operator once again warned of a possible generation shortfall.
Milder and windier weather this week could ease that tension - but fuel and carbon prices remain high, and, as we've seen many times before, unscheduled outages can aggravate the situation.
That takes us to our social media question for the week: Are current power price spikes a one-off case of cold winter wobbles, or are plant closures and growing renewables making volatility the new normal? Tweet us your thoughts using the hashtag #PlattsMM.
European ethanol producers will be keeping a close eye on the US Department of Agriculture's World Agriculture Supply and Demand Estimates report, published on Tuesday, for changes in global grains balance sheets. Rallying grains prices due to unfavorable weather conditions and Chinese demand have turned ethanol crush margins negative. EU lockdown restrictions saw a 44% drop in T2 ethanol prices over Q4 2020. Lower run rates are expected if current margins persist on a more bullish US report, offering support for T2 ethanol FOB Rotterdam.
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Thanks for kicking off your Monday with us and have a great week ahead!