Prices fall across the oil complex due to the coronavirus pandemic; the jet market eyes storage space; petrochemicals contract prices are expected to come in low; and steel producers are revisiting their production plans.
This week: The jet market eyes storage space; petrochemicals contract prices are expected to come in low; and steel producers are revisiting their production plans.
But first: high on everyone's agenda will be the large price falls across the oil complex caused by the coronavirus pandemic, and the effects of any moves by governments and central banks to support the global economy.
ICE Brent futures have crashed from more than 50 dollars per barrel at the beginning of March to less than half that level, with the front-month contract trading at under 24 dollars per barrel in Asia trading this morning.
Traders will be watching and waiting to see if prices slide further, or whether moves by policymakers or major oil producing countries can put a floor under the market.
Jet fuel prices could be in for another turbulent week. The coronavirus has curtailed nearly all demand for air travel, just about wiping out demand from European buyers. The market will be looking for updates on how much storage space might be available for the glut of airplane fuel.
Jet fuel cracks - or the price of jet fuel relative to the crude oil from which it has made - are a good indicator of the situation. With plane fleets grounded and borders closed, financial swaps linked to jet fuel cracks in Northwest Europe turned negative last week. In normal times, jet fuel is the highest-value product compared with crude.
In Europe, gas is sharing oil's fate as lockdowns across the continent slash demand and prices. The month-ahead price at the Dutch TTF hub has fallen to the lowest level since Platts began assessing it in 2004. On Friday it stood at just 7 euros and 15 cents per megawatt hour.
As you can see from the chart, European prices were already at 10-year lows before the coronavirus outbreak due to an oversupplied global gas market.
With lockdown end dates uncertain, the bearish sentiment is not expected to lift, especially as maintenance work on gas fields and pipelines offshore Norway has been largely shelved because of restrictions on groups of people working in close proximity to prevent the spread. This means more gas production when the market least needs it.
Even the bright weather will bring no comfort to European power prices. While high-pressure weather patterns are forecast to keep temperatures below norms into early April, they are also keeping conditions sunny. Solar output has been seen ramping up now to midday peaks that are having a material impact on hourly prices. This is adding to impact of the lockdowns which have cut demand by up to 20% week on week.
That has prompted a collapse in day-ahead prices - with every prospect of further declines this week as days lengthen.
One market suffering a knock-on effect from the rout is carbon emissions. Wednesday will be a key date for the EU carbon market, when the European Commission's data in underlying demand for carbon allowances in 2019 will be published. An 8 to 9% drop is expected.
Emissions allowance prices crashed to a two-year low last week.
Prices have fallen almost 40% since a February peak. Prices seemed to find a new base at around 15 to 17 euros last week. The outlook for the market is now heavily tied to the spread of the virus and its curtailment.
Moving on to petrochemicals, monthly contract settlements will be coming in for some products this week. As with energy, some markets are bracing for steep falls following price routs in the last two weeks.
That includes the benzene market, where spot prices have hit all-time lows in extremely volatile markets. Drops are expected for the ethylene contract price as well, showing a bearish start to April for two commodities that feed into a wide array of polymers and consumer products.
On the consumer side, some products are bucking the downward price trend and this is expected to continue. In the UK, demand for virgin and recycled PET used to package food and for drinks bottles is soaring. This is because packaged food and soft drinks are being stockpiled by consumers.
And finally back to one commodity which is firmly following the coronavirus trend, steel. The market will be looking for any further announcements of production cuts across Europe. Companies including ArcelorMittal, Thyssenkrupp, Tata Steel and Liberty Group said last week they would be seeking to reduce output as demand melts away.
However, blast furnace-based operations throughout Europe are expected to be maintained, as in Italy, where ArcelorMittal's Taranto plant was on Friday the only Italian steelworks still in operation.
Thanks for kicking off your Monday with us, stay safe and well, and have a great week ahead.