In this week's Platts Market Movers, with associate editor Gary Clark, Nord Stream gas pipeline is set to return from its maintenance shutdown as gas prices in Europe reach a 10-year low, with thermal coal prices facing considerable downward pressure due to cheap gas and shipping delays. Middle distillates traders will be watching the diesel arbitrage to Europe, and steelmakers announce earnings this week amid weak demand and high production costs.
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In this week's highlights: European thermal coal prices will be under pressure; oil products face logistical challenges in the Turkish Straits; and market weakness could take the shine off steel sector earnings.
But first: the 55-billion-cubic-metres-per-year Nord Stream gas pipeline from Russia to Germany is set to return from its annual two-week maintenance shutdown on Wednesday.
That will bring the strategic link to Europe back into service at a time of very low gas prices.
During the outage, Russia's Gazprom has supplied its European customers with more gas via the Ukraine route, as well as through storage withdrawals from its key European storage sites.
Sales on Gazprom's electronic sales platform have also been subdued during the Nord Stream maintenance.
With Nord Stream's return, the European gas market will be watching closely how much Russian gas flows to Europe in the coming weeks, with European gas storage already well stocked and coal-to-gas switching in the power sector maxed out.
Sales on Gazprom's electronic sales platform could also recover once Gazprom has its full suite of export options open once again.
With European gas prices back at 10-year lows, more Russian gas would likely add to the bearish market sentiment.
As you can see on your screen, the Dutch TTF natural gas price has fallen to less than €10 per megawatt-hour from over €22 per megawatt-hour at the beginning of the year.
That brings us to our social media question: What could trigger a resurgence in European gas prices? Tweet us your thoughts with the hashtag #PlattsMM.
While we're on the subject, weak natural gas prices are also expected be reflected in earnings this week, with BP reporting on Tuesday, and Shell to follow on Thursday.
Total and Eni have already reported their earnings, and pointed to weak natural gas prices as a key driver of lower profits.
Also feeling the effect of low gas prices is European thermal coal.
European thermal coal prices will be facing considerable downward pressure this week as cheap natural gas prices, surging freight rates and bearish indicators from China and India are all keeping demand low.
In addition, low water levels on the Rhine could create a bottleneck and cause coal stockpiles in the Amsterdam-Rotterdam-Antwerp region to balloon.
That would add further downward pressure on prices.
Trade sources expect the market to fall back below $60 per metric ton, after hitting this level only last week.
From coal to oil products now.
Strong demand from Egypt, Libya and Tunisia, combined with delays in the Turkish Straits, could further tighten Mediterranean ultra-low sulphur diesel and gasoil cargo markets this week.
Delays at the Turkish Straits have been a recurring theme since new shipping rules were implemented there in September last year.
The delays have been acute in recent days.
The total passage time through the Dardanelles and Bosporus for northbound and southbound tankers is currently two to four days.
The shipping rules require tankers over 250 meters in length to have compulsory pilotage and a tug escort in the Dardanelles.
The same applies to tankers over 200 meters in length in the Bosporus.
Speaking of middle distillates, traders will be watching the diesel arbitrage to Europe this week.
Europe seems likely to pull more diesel from the US, despite soft market sentiment on both sides of the Atlantic.
While the diesel arbitrage from Asia to Europe is firmly shut, the diesel arbitrage from the US Gulf Coast to Europe looks open.
The spread between NYMEX heating oil futures and ICE low-sulphur gasoil futures was trading low, at around 3.87 cents per gallon on Friday.
That is expected to attract cargoes from the US to Europe, keeping diesel supply healthy, and putting Northwest European diesel cash premiums under pressure.
In the metals markets, ArcelorMittal and Evraz are among steelmakers set to announce second-quarter earnings this week.
Weak demand, persistently high iron ore, coking coal and carbon costs, and import levels which have approached nearly one quarter of total consumption are expected to take their toll on European producers.
A published consensus of market analysts is that the world's biggest steelmaker ArcelorMittal will report earnings of $1.53 billion for the second quarter.
That's down from $3.1 billion achieved in the second quarter of 2018.
Thanks for kicking off your Monday with us, and have a great week ahead.