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Market Movers Europe, Feb 8–12: Heating demand and financial results to dominate the week

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Watch: Market Movers Europe, Feb 8–12: Heating demand and financial results to dominate the week

In this week's highlights: The European gas market will be facing cold winter temperatures this week; maintenance in French reactors will challenge utilities; and plastics converters will see a hike in production costs.

Oil majors' quarterly results, recovery in focus

European gas faces test as temperatures tumble

French nuclear availability set to dip

Tightness in downstream petrochemicals market

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In this week's highlights: The European gas market will be facing cold winter temperatures this week; maintenance in French reactors will challenge utilities; and plastics converters will see a hike in production costs.

But first, in oil, the industry is focused on the pace of demand recovery, and the possibilities particularly for aviation. But the reality on the ground remains challenging, with lockdowns and travel bans still very much in place in Europe, while refiners continue to minimize jet fuel yields against more profitable products such as naphtha.

Among the most attractive oil products in Europe include very low sulfur fuel oil and low sulfur fuel oil, which continue to see support from exports to Asia, to satisfy strong winter heating demand.

For European oil and gas companies the recovery from the pandemic is intertwined with questions about peak oil demand and energy transition, and we expect these issues to remain front and center as the last of the fourth quarter results are published in the next couple of weeks: Norway's Equinor reports on Wednesday, and Total on Thursday.

Total, as Europe's largest refiner, tends to be revealing on the fuels outlook, but is also heavily involved in Africa, including traditional producer states such as Angola and Nigeria, and we can expect updates on new projects, in Uganda and Mozambique.

Equinor was trumpeting good news last week with the first oil and gas discovery of the year in the heart of the North Sea, near the Troll field, but there is little hiding the damage to the sector in results published so far. Providing a broader perspective will be the monthly oil market reports of OPEC and the International Energy Agency, both published on Thursday.

And that takes us to our social media question for the week: How do you think investment in fossil fuel exploration will evolve considering constraints around ESG? Tweet us your thoughts using the hashtag #PlattsMM.

Moving on to European gas, the market faces a short-term test this week with temperatures across the continent set to tumble. This late winter blast could see Europe's remaining gas stocks drawn down further as demand for heating increases. Temperatures are set to fall to as much as 10 degrees Celsius below seasonal norms in Northwest Europe over the course of the week. Europe's natural gas stocks have been called on to meet demand in much bigger volumes this winter compared with the past two milder winters, leaving stocks less than 50% full, according to data from Gas Infrastructure Europe. However, this cold snap is expected to be short-lived, with temperatures expected to return to seasonal norms by the end of the week.

The cold weather could pose more challenges for UK power supply as key power exporter France undergoes a dip in nuclear availability.

An unprecedented 11 French reactors are going into maintenance this month, with Platts Analytics assuming February output of 46GW on average, a record low for this time of year, as you can see from the chart on your screen. The UK generally imports around 10% of its power needs but has become increasingly dependent on interconnectors this winter. The return of the BritNed link to Netherlands this week should help, but the UK is expected to maintain its healthy price premium over continental Europe.

And finally, the recent surge in European polyethylene spot and contract prices is expected to intensify further in February.

Supply tightness coupled with demand for food packaging and pharmaceutical applications during lockdowns has led to tense bilateral contract price negotiations, with producers heard to be seeking monthly increases of as much as Eur250/mt in February. Some plastics converters will be able to pass the higher costs, including those of feedstocks, through over the course of the month but others linked to low demand segments such as construction, automotive or travel and tourism are facing little choice but to accept margin loss, reduce output, or even close their plants.

For more on all the issues affecting commodity markets from wherever you are, make sure to check out Platts LIVE at the address displayed on your screen.

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