In this week's Market Movers: oil prices continue to be buffeted by the coronavirus, French electricity utility EDF's 2019 results are due; the sugar industry will be gathering in Dubai; and metals traders will be looking at whether palladium will continue its rise or fall.
In this week's Market Movers: French utility EDF's 2019 results are due; the sugar industry will be gathering in Dubai; and metals traders will be looking at whether palladium will continue its rise or fall.
But first – oil prices continue to be buffeted by the coronavirus. Platts Analytics expects China's refineries expected to slash crude throughput by around 8% or 1 million barrels a day in February. Fears of demand destruction last week caused a key committee to recommend that the OPEC plus producer group cut 600,000 barrels a day of oil output on top of the 1.7 million previously agreed. However, key non-OPEC member Russia has held off agreeing to additional cuts.
Two reports out this week will include in-depth analysis of the situation. OPEC publishes its monthly oil market report on Wednesday, and the International Energy Agency publishes its report on Thursday.
On the corporate front, new BP CEO Bernard Looney will hold his inaugural press event, outlining his ambitions, on Wednesday. BP announced the departure of downstream chief executive Tufan Erginbilgic on Friday. This week's event should provide a better steer on how Looney plans to tackle some of the big challenges facing BP.
And that takes us to this week's social media question: What do you think the biggest challenge will be for the new BP CEO. Tweet us your replies under the hashtag #PlattsMM.
Gas demand too has been hit in China by the coronavirus outbreak. This means the European gas market will be watching closely for a fresh influx of LNG cargoes diverted away from China. These expectations have been fueled by major Chinese oil and gas company CNOOC declaring force majeure on some of its LNG import contracts. Europe can act as a sink for surplus LNG cargoes, given its liquid trading hubs and plentiful LNG import capacity.
The CEO of Austrian oil and gas company OMV, Rainer Seele, said last week that because of the coronavirus outbreak, he expects more LNG cargoes to land in Europe hitting the hub prices, especially in Northwest Europe.
As you can see from the chart on your screen, European hub prices have already slipped below 10€ per Megawatt given the extremely warm winter, high stocks and an oversupplied global LNG market.
Spot Asian gas prices are currently trading at an all-time low and on a par with spot prices at the Dutch TTF hub.
One commodity which has bucked the bearish trend caused by the corona virus is sugar. This week the industry will be gathering for the Dubai Sugar Conference.
As you can see from the chart on your screen, the conference comes at a time when global sugar prices are ignoring bearish headwinds and have climbed 15% since start of 2020.
However, the rally may soon be capped at the point where ethanol's premium to sugar in Brazil erodes completely. This should make for lively discussions about the proportions of the cane that will go to either sugar or ethanol for the new season, which starts in April in the world's largest sugar exporting region, Center-South Brazil.
Given the recent meltdown in ethanol's premium to sugar, the Brazilian industry is expected to depart from the maximum ethanol scenario of the past two seasons and raise sugar production. On the other side of the equation, the threat of possible sudden deaths to the crops in Thailand and the Indian state of Maharashtra will be under the spotlight at the conference as they will remain the key supportive factors in the weeks ahead.
And speaking of drops in production, Europe's biggest power generator, France's EDF will report its 2019 earnings on Friday, offering guidance for the first time on 2020 nuclear output.
Last year, EDF's 58-reactor strong fleet stuttered to record-low output in the fourth quarter. The first quarter of 2020 is looking similar.
Most attention, however, will center on anything EDF says about market reform and the ARENH regulation. This involves the mandatory sale by EDF of a large slice of its nuclear output to smaller competitors. It is under government review, both in terms of price - currently 42 euros a megawatt hour -- and volume. The government has made positive noises around the reform, with greater volume release to be coupled with a more supportive, sustainable price structure – for EDF at least.
In the meantime, falling wholesale prices are now neck and neck with the regulated rate for the first time in three years – making any talk of a higher rate in future politically awkward.
Another bullish commodity is palladium. The metal is a key ingredient in emissions-reducing auto-catalysts. However, market participants will be looking to see if a price of $2,300 per ounce can be sustained, up 28% from three months ago, after top producer Nornickel last week said it would release three tons of the metal back onto market in an attempt to cool prices. The market is mixed on what happens next, with some saying tight fundamentals justify the price. Others have described the surge in prices as a bubble caused by panic buying from the auto industry and speculators weighing in.
Thanks for kicking off your Monday with us and have a great week ahead.