In this week's highlights: Oil and gas dwindling storage options pose a major challenge; Norway's Equinor is set to unveil its first-quarter results; and European electricity markets keep a sharp eye on signs of demand recovery as lockdowns begin to ease.
In this week's highlights: Norway's Equinor is set to unveil its first-quarter results; and European electricity markets keep a sharp eye on signs of demand recovery as lockdowns begin to ease.
But first, to the European oil markets, where dwindling storage options are expected to pose a major challenge in the week ahead.
Huge surpluses of refined products are being pumped into onshore tanks as well as onto tankers being used as floating storage after the collapse in demand for transportation fuels caused by the coronavirus pandemic.
The gasoline and jet fuel markets have been in a race to store product by any means possible. As a result, refiners are left with no other option but to cut production.
The time lag between the plunge in product demand and refiners adjusting their production is now playing out in crude markets, with demand for many European crudes expected to remain weak for some time to come.
Weak demand and its effects, are likely to be in the spotlight when Norway's state-controlled oil and gas company Equinor publishes its first-quarter results on Thursday. There will be a particular focus on any updates to its European gas export strategy, given record low prices.
Day-ahead prices at Europe's main gas hubs continue to trade well below 2 dollars a million British thermal units, which is putting significant pressure on the main suppliers to the continent.
As you can see in this chart, Norwegian gas flows to Continental Europe and the UK have been well below 300 million cubic meters a day in recent weeks despite limited planned and unplanned maintenance.
Such flows are significantly below Norway's export capacity, indicating Equinor is reducing output from its flexible gas producing fields of Troll and Oseberg.
In its results, Equinor will give an indication of how much Norwegian gas it has deferred in the first quarter due to low prices and likely update the market on its plans for the summer.
The company last summer cut production significantly in line with its "value over volume" strategy where it defers output during periods of low prices with the aim of achieving higher prices for gas later on.
Equinor has said it can get its Norwegian gas to Europe for well below 2 dollars per million BTU, but the UK NBP hub price, for example, has fallen closer to just 1 dollar per million BTU in recent weeks.
It hit a 17-year low of just $1.14 in mid-April.
With European storage likely to fill quickly over the summer, prices could stay under pressure, and the market will be keeping a close eye on how Norwegian gas supply behaves.
By contrast, European power markets will be focusing more on the demand side, looking for any signs of recovery in the next few weeks as lockdowns begin to ease.
Spanish and Italian electricity demand ticked up in April after a partial lifting of restrictions, while French, UK and German demand stabilised or rose due to changing weather. Year on year, however, demand is 10 to 20 percent lower, with any full recovery a long way off.
In addition, historic falls in coal fired power generation are set to be confirmed when Italian utility ENEL and its Spanish subsidiary Endesa release their first-quarter results on Wednesday and Monday, respectively.
And that brings us to our social media question: How do you see electricity demand in Europe developing in the next few weeks? Send us your feedback by tweeting with the hashtag #PlattsMM.
And finally, European carbon emissions market participants will be watching out for potential price falls in May after the April 30 annual deadline to surrender allowances for 2019 carbon emissions has passed.
However, more price volatility is likely, as the market weighs the short-term demand collapse due to the coronavirus lockdowns against a longer-term tightening of supply as Europe's regulators take aim at tougher climate targets for 2030, with proposals expected after the summer.
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Thanks for kicking off your week with us, and have a great week ahead.