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Market Movers Europe, Aug 12: Global economy concerns keep oil market on alert; gas storage injections in focus

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Watch: Market Movers Europe, Aug 12: Global economy concerns keep oil market on alert; gas storage injections in focus

In this week's Platts Market Movers with Sarah-Jane Flaws, global economy concerns have translated into downgrades in oil price forecasts and demand, while the discount in prompt gas prices is incentivising storage injections. New EU emission limits come into effect this week, as Germany seeks to phase out coal. Finally, trans-Atlantic trips are expected to continue to be attractive to ship-owners in Q4.

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In this week's highlights: Concerns about the global economy will keep the oil market on its toes; Saudi Aramco is set to hold first earnings call; New emissions rules in Europe are set to limit coal-fired power plants

This week the oil market is set to remain under pressure as concerns around the global economy cause analysts and agencies to downgrade demand and oil price forecasts.

Participants will be on high alert for further verbal intervention or talk of policy responses from Saudi Arabia and its OPEC and non-OPEC allies.

In that context, Russian energy minister Alexander Novak will meet his Iranian counterpart Bijan Zanganeh in Sochi, Russia, with the OPEC and non-OPEC deal under discussion along with the Caspian energy cooperation.

State oil company Saudi Aramco will hold its first earnings call in a bid to boost transparency as the kingdom plans to offer a stake in the company in the world's biggest stock market listing by 2021.

Saudi Arabia values the company at 2 trillion dollars.

Aramco was recently merged with petrochemicals giant Sabic.

Aramco is the world's most profitable company and has more than 260 billion barrels in reserves, but the valuation is in doubt, especially with oil prices under pressure.

Talking of prices under pressure, in European gas, the current discount in prompt prices to September prices should incentivize the injection of more gas into storage in the coming weeks.

Day-ahead prices at some of the key European gas hubs are trading at a discount of more than 2 euros a megawatt-hour to September prices.

However, the problem is European gas storage sites, which have filled more quickly than usual over the summer, leaving limited capacity.

Stocks in Austria, Belgium, France, Germany, Italy and the Netherlands combined are nearly 26% above the five-year average.

A pick up in August injections would hit demand for gas to store in September.

This could be bearish for prices.

In power, new EU rules limiting coal power plants' access to capacity payments apply from Thursday.

The rules set emission limits which will effectively block new coal plants from receiving capacity payments from national governments, unless contracts are concluded before the end of this year.

The new rules come into force one day after Western Europe's largest coal-fired generator RWE is set to report second-quarter earnings on Wednesday.

Market interest will be focused on the German utility's evolving production strategy as the country seeks to phase out coal.

RWE is under pressure to close 3 gigawatts of lignite or brown coal-fired plants by 2022, with compensation talks with the government set to conclude in the autumn.

Traders will also be keeping an eye on German GDP data Wednesday to see if Europe's biggest economy did indeed shrink in the second quarter.

Adjusted power demand fell over 3% on the year in the first half of 2019.

This takes us to our social media question: What impact do you think the German GDP data will have on the commodities complex? Tweet us your reply under the hashtag #PlattsMM

And finally, in the dry bulk shipping market, trans-Atlantic trips are expected to continue to be attractive to ship-owners.

The short duration means the route still has an advantage ahead of bullish predictions for fourth-quarter freight rates.

This could have the potential ramifications of lowering short-route freight rates in the Atlantic as the availability of ships will outweigh that of cargoes.

However, ship-owners will likely be well positioned to take longer, more lucrative, fixtures into the fourth quarter.

This will also come at a time when rates are expected to be higher ahead of the reduction in sulfur emissions limits from 3.5% sulfur to 0.5% for shipping, known as IMO 2020.

The new rules effective from the start of 2020 are expected to raise fuel costs.

That's it for this week.

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