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Watch: Market Movers Europe, May 18-22: The commodity complex starts to move out of lockdown

In this week's highlights: Prospects of a modest oil price recovery in the coming months are growing; how low can European gas prices go? US crude is set to be delivered to Belarus; and updates on French nuclear power availability will be closely monitored.

  • End of lockdowns, storage eyed for oil market direction
  • Will it be a low five for European gas?
  • European ethylene market seeks balance
  • Belarus imports oil from US after Russia dispute
  • French nuclear availability exercises power market
  • Germany looks to post-coronavirus era

Platts Live

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In this week's highlights: How low can European gas prices go? US crude is set to be delivered to Belarus; and updates on French nuclear power availability will be closely monitored.
But first, the prospects of a modest but sustained oil price recovery in the coming months are growing as output curbs and a demand rebound from the easing of coronavirus lockdowns drain the world's oil surplus faster than expected. This will remove some of the pressure on both onshore and floating storage. However, jitters about storage still remain after the lack of tank space at the key US hub of Cushing in Oklahoma caused the benchmark May US light, sweet crude contract to go off the board in negative territory. Flare-ups of the coronavirus pandemic as countries emerge from lockdown could also have a bearish influence on oil prices.
Storage will also be one of the key factors in the price dynamics of the European gas market. A perfect storm of bearish factors following two mild winters, sky-high stocks, an oversupplied global LNG market and weak demand driven by the coronavirus pandemic has battered prices.
The price for day-ahead delivery of gas at the Dutch TTF hub has now dipped below 5 euros a megawatt-hour, the lowest in 14 years. This has left traders wondering how much further the contract could fall. Russian and Norwegian gas supplies to Europe have dropped in recent weeks due to low demand and prices. However, LNG cargoes have continued to land in Europe given limited demand for it elsewhere. This has kept a lid on prices. Injections into storage have been healthy since the start of April, and traders will be keen to see how quickly it will fill up. Market participants expect sites to reach capacity well before the start of the withdrawal season in October. Some are even predicting full storages as early as July. This could lead to further cuts in Norwegian and Russian exports to Europe as the market tries to find some kind of balance.
Another market seeking to find its balance is European ethylene. Demand is set to increase following a fire at Borealis' cracker in Stenungsund, Sweden last week. The site's unaffected downstream units' usual ethylene demand is around 50,000 metric tons a month. Borealis entering the market as a buyer will supplement extra demand for ethylene from food, medical and packaging applications caused by the coronavirus pandemic. Other supply issues such as maintenance and slower restarts because of coronavirus-related restrictions on working practices mean Europe is expected to turn away from exports for the time being and instead seek cheaper imports from the US.
And talking of imports from the US, Belarus is in the process of importing Bakken crude. Belarus borders Russia, one of the world's largest oil producers. A tanker is on its way across the Atlantic carrying 80,000 metric tons of oil and is expected to arrive at the Lithuanian port of Klaipeda at the beginning of June. The crude will be processed at Belarus' Naftan refinery.
Belarus is looking for alternative crude suppliers after a dispute with Russia led to supply disruptions at the start of 2020. It has received crude from Saudi Arabia, Norway and Azerbaijan so far this year. Deliveries from Russia have also recovered, doubling on the month to around 361,000 barrels a day in April. On Friday, Russia's largest oil company by output, Rosneft, said it had agreed to ship around 66 million barrels of crude to Belarus between April and December this year.
And that brings us to our social media question for the week: What do you think the implications are of the US exporting oil into Russiaõs backyard? Send us your feedback by tweeting with the hashtag #PlattsMM.
Availability of supply will be a key factor in the French power market. Traders will be glued to their screens for utility and plant operator EDF's daily updates on reactor availability.
You can see what happened from the chart on your screen when EDF said last Wednesday that it was 'cautious' on the outlook for its winter reactor availability. The fourth-quarter French power contract plunged 12%. There is no let-up in sight not least because of other hard-to-predict outcomes relating to the easing of lockdowns and the timing of new interconnection projects between France, the UK and Italy.
And finally, with the coronavirus pandemic increasingly under control in Germany, the government has to decide how to stimulate the economy without endangering climate targets. This will be a difficult balancing act, with the coalition split on many issues from hydrogen strategy to details of the coal exit and carbon pricing. Specifics on the restart package and what type of cars can hope for cash incentives are expected in early June, while the hydrogen strategy is still expected to pass cabinet this month. This will give a clearer idea of how Europe's largest economy plans to decarbonize heavy industries such as steel and petrochemicals. Calls to cut electricity taxes and the green power levy have grown louder, with electricity expected to drive the energy transition. Cabinet meetings from which something may emerge will be held on May 20th and 27th as well as June 3rd.
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Thanks for kicking off your Monday, with us. Stay safe and well and have a great week ahead!