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Market Movers Europe, Jan 22-26: European refiners are considering run cuts; mild weather looks set to dampen gas demand

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Watch: Market Movers Europe, Jan 22-26: European refiners are considering run cuts; mild weather looks set to dampen gas demand

The focus in oil this week is on the World Economic Forum in Davos, Switzerland, where US President Donald Trump will be under scrutiny for his comments on foreign and trade policy. Of particular interest to the market will be a panel discussion on Wednesday featuring the architects of the OPEC/non-OPEC production cut pact Moving downstream, refiners in Northwest Europe are considering cutting runs as distillate crack margins have fallen back from the highs hit in mid-November.


Meanwhile, the EU is expected to withdraw on Monday its appeals against the proposed removal of antidumping duties on imports of biodiesel from Indonesia, while in the gas market, NWE is set to experience much milder weather this week.


UPDATE: As forecast in this week's edition, S&P Global Platts can now confirm that an EU Council representative in a Tweet this morning (Monday, January 22) confirmed that the Council has ‘agreed to withdraw appeals to the ECJ on six biodiesel duty cases related to imports from Indonesia and Argentina.’


Last, but not least, attention will also be on Germany, which is now a step closer to a new government after an extraordinary Social Democratic Party conference on Sunday voted for official coalition talks with Chancellor Angela Merkel's Christian Democrat bloc.


Finally, the European steel industry will be bracing itself for the US administration’s reaction to an investigation into the impact of steel imports on national security.


What are your thoughts on the weekend's events in Germany? Tweet us your comments with the hashtag #PlattsMM.

View Full Transcript

Video Transcript


In this week's highlights, European refiners are considering run cuts; mild weather looks set to dampen gas demand; the biodiesel market will be watching out for a key decision by the EU on Indonesian imports; and Germany's efforts to build a new government will be closely watched.


But first, the focus in oil this week is on the World Economic Forum in Davos, Switzerland, where US President Donald Trump will be under scrutiny for his comments on foreign and trade policy. Issues such as climate change and the future of motoring are also likely to be discussed.


Of particular interest to the market will be a panel discussion on Wednesday featuring the architects of the OPEC/non-OPEC production cut pact, Saudi Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak.


They appear alongside US Energy Secretary Rick Perry. This meeting of rival power centers in the oil world comes after OPEC officials met in Oman at the weekend to assess the state of the production cut pact. Some commentators argue the pact has now done its job and is merely encouraging a boom in US shale production.


Moving downstream, refiners in Northwest Europe are considering cutting runs as distillate crack margins particularly for jet fuel have fallen back from the highs hit in mid-November. Crack margins measure the difference between the price of an oil product and crude oil. On Thursday, the front-month crack margin for jet fuel hit a six-week low.


In the European biodiesel market, all eyes will be on Monday's meeting of EU ministers, who are expected to withdraw the appeal cases against a World Trade Organization ruling that antidumping duties on Indonesian biodiesel should be removed. This would open up the market to palm-derived biodiesel imports in volumes on a scale not seen since the duties were imposed in 2013.


However, the end of the measures might only spell a brief respite for Indonesian palm oil producers. On Wednesday, the European Parliament voted to remove palm oil from the list of authorized feedstocks for biofuels in Europe after 2020.


To the gas market, where Northwest Europe is set to experience much milder weather this week, with temperatures forecast to be as much as 7 degrees Celsius above seasonal norms across the region, including in the UK, which will likely have a bearish impact on European gas demand and prices.


Spells of wind-power output close to recent record highs are also forecast. The chart on your screen shows how wind generation has increasingly picked up in the UK over recent weeks. With zero marginal cost renewables pushing more expensive thermal generation off the system, near-curve electricity contract prices could be dragged lower.


Attention will also be on Germany, which is now a step closer to a new government after an extraordinary Social Democratic Party conference on Sunday voted for official coalition talks with Chancellor Angela Merkel's Christian Democrat bloc. Those talks could last until Easter, with working groups debating the finer policy details in areas such as energy, transport and climate change.


Markets will be keeping an eye on working group line-ups for any hint of who the new environment and energy ministers might be. However, even if a final deal is done it will have to be put to a vote of all SDP members, who could still reject it and take the whole process back to square one.


Thanks for kicking off your Monday with us, and have a great week ahead.