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Watch: Market Movers Europe, Aug 3-7: Will oil demand mirror OPEC+ supply? German coal phase-out starts

In this week's highlights: Will oil demand keep up with more OPEC+ supply? BP will outline how it's going to build back better; it's the beginning of the end for coal-fired power generation in Germany; and contract price negotiations start in the polymers sector.

  • Will oil demand keep up with more OPEC+ supply?
  • Coal phase-out starts in Germany
  • Upper Rhine water levels sink
  • Contract settlements for plastics expected

Platts Live

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In this week's highlights: BP will outline how it's going to build back better; it's the beginning of the end for coal-fired power generation in Germany; and contract price negotiations start in the polymers sector.

But first, in the oil market, the focus will be on the pace of demand recovery and how that matches up with the easing of crude oil production cuts by OPEC-plus nations that officially got underway on August 1. From Saturday, the group, led by Russia and Saudi Arabia, was set to ease cuts that were reducing the world's oil supply by about a tenth, providing an additional couple of million barrels a day. The OPEC-plus nations are keen to regain market share lost as a result of their cuts, begun in May.

However, the actual change may be blunted by a number of countries having to maintain cuts to compensate for earlier under-compliance. In this context, signals on global demand such as mobility data will be closely watched to see whether higher production is warranted. We may get a steer on Saudi Arabia's thinking on that when Saudi Aramco unveils quarterly earnings on August 9. Talking of results, BP rounds off a torrid corporate results season on Tuesday.

The market is arguably well prepared for bad news. BP flagged back in June that it expects financial impairments of between 13 billion and 17.5 billion dollars. It also said it plans radical change in an effort to 'build back better,' and reposition for a greener future. Several of the majors have been hit not only by lower prices, but production cuts in OPEC-plus nations where they operate. BP, which operates in countries such as Angola, may be no different.

And talking of a greener future, Germany's phase-out of coal-fired power generation starts in earnest this week with a first plant closure compensation auction. Up to 165,000 euros per megawatt has been made available for four gigawatts of hard coal plant closures. Bids have to be in by September 1, with the winners announced in December. Almost immediately afterward the capacity will close, regional grid security notwithstanding.

As you can see, this is hardly an issue at present, as coal plant spreads are lower than those for gas-fired generation, which for now has assumed the role of first-call back-up plant in Germany. A second coal compensation auction will then follow at the end of the year, followed by six more over the proceeding four years.

Germany will also be a focus for Northwest European oil-product traders. Water levels on the Upper Rhine are falling toward levels that mean barges are not able to carry full loads at the key chokepoint of Kaub. This could lead to logistical problems. Diesel supply could be affected. Consumption has surged over the last few weeks as consumers hop back into their cars now lockdown restrictions have been eased. However, diesel traders say they are confident inland inventories are sufficient to meet local demand.

And that takes us to our social media question for the week: What you think the impact on the commodity complex will be of low Rhine water levels? Tweet us your thoughts using the hashtag #PlattsMM.

And finally, European producers of polyolefins such as polyethylene and polypropylene will be negotiating August contract price settlements with plastics converters this week. They will have to reconcile an around 12% rise in feedstock naphtha prices in July, on one side, against renewed concerns about a second wave of coronavirus infections across Europe, as well as expected low demand across various polymer grades. A further factor will be the more bearish outlook for the European naphtha market heading into this week, with widespread expectations of constrained demand across all grades given the weak macro-economic backdrop. Lower demand from Asia is also adding to the bearish sentiment.

And before you go, please check out Platts Live, a new section of our website that has been created for our customers to continue engaging with us, and each other. You can find it at the address displayed on your screen.

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