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Market Movers Europe, June 7-11: Risk on sentiment in the crude oil complex, gas supported

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Watch: Market Movers Europe, June 7-11: Risk on sentiment in the crude oil complex, gas supported

In this week's highlights: Oil prices maintain their bullish trend; a solar eclipse to challenge European power markets; crude oil prices on the rise; tightness in downstream petrochemicals markets persists.

  • Oil prices on a continuing rise
  • European gas faces test, eclipse approaching
  • Tightness in downstream petrochemicals markets
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In this week's highlights: A solar eclipse to challenge European power markets; crude oil prices on the rise; tightness in downstream petrochemicals markets persists.

But first, in oil, with ICE Brent futures having crossed the $70/b price mark, all eyes are on whether the bullish sentiment will continue as market participants look for further signs of demand recovery. A fall in crude oil production in the US has further boosted sentiment. Meanwhile, scrutiny will be on Platts OPEC+ survey and OPEC market report due out this week to see how the planned production rises for May took effect as the alliance remains cautious in bringing back additional barrels.

European refiners are expecting a rise in transportation fuels demand in June as mobility restrictions are easing and holidays season is approaching, which will lead to a gradual increase in refinery runs. However, demand recovery continues on an uneven footing, favouring road travel and fuels such as diesel and gasoline compared to air travel and jet fuel.

Global scheduled airline capacity was 6.4% higher week on week reaching a 14-month high of 67.9 million seats for the week started May 31, with the largest increases seen in Europe and North America, according to aviation data company OAG. This represents the highest number of seats offered by airlines since March 30, 2020. However, global seat capacity has only recovered to 63.6% of its pre-pandemic January 2020 level.

Comparatively, stable demand recovery has continued for European diesel and gasoline, with US demand for gasoline particularly expected to reach pre-pandemic levels, supporting in turn European gasoline export volumes.

Seven countries began using the European Union's "Digital COVID certificate" on June 2, which allows citizens to easily travel across the bloc amid ongoing local vaccine requirements. The European Commission said Bulgaria, Czech Republic, Denmark, Germany, Greece, Croatia and Poland have begun issuing the first certificates. Other countries will follow as well when all functions are deployed nationwide, ahead of a planned full launch for all 27 member states on July 1. The latter will contribute to an evening out of the transportation fuels recovery trends, however the impact will likely not be immediately noticeable.

And that takes us to our social media question for the week: How do you think road and air travel choices will affect fuel demand this Summer? Tweet us your thoughts using the hashtag #PlattsMM

In European natural gas, contracts have continued to find support in early June trading with concerns continuing to linger in the market regarding storage levels for the winter ahead, with limited availability of gas to be placed back into reservoirs. With Norwegian flows now constrained by annual maintenance work and no clear signs of an increase of supply from Russia, LNG will be keenly eyed in terms of supply, with demand also being watched closely as summer progresses.

Additionally, a solar eclipse this Thursday may cause some havoc for intra-day power markets. The partial eclipse covering up to 20% of the sun across Northern Europe may still reduce solar generation in Europe's biggest market Germany by up to 5 GW - but will have less of an impact than the full eclipse in March 2015 that caused massive swings in hourly power prices. Germany's government may also sign off this month on a climate emergency program including a higher 2030 target for solar at 150 GW, almost tripling current installed capacity.

In the European ethylene market, players will be keeping a close eye for signs of softening demand from the complex. Demand from downstream markets remains strong for the moment, which would likely support ethylene and naphtha pricing with more petrochemical-grade naphtha expected to hit European shores from the US. Price trends are softening in other regions, however, and this could ultimately exert pressure on Europe. With resistance felt in the market this week against proposed increases to polyethylene offers from producers, sentiment indicates that the market's bullish run could be nearing an end.

The Platts Atlas of Energy Transition is your map to the sustainable commodity markets of the future. You can explore the Atlas by visiting the address displayed on your screen.

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