In this week's Market Movers: Industrial unrest rattles oil production; Germany ponders its power future; olefins production heats up as weather cools.
In the North Sea, a fifth day of strikes by the Unite trade union takes place Monday at Total's oil and natural gas platforms, with more set to come; and further afield, market watchers will be keeping a close eye on potential trouble spots around the Mediterranean.
While the hot European summer has turned up the heat on Germany's coal commission ahead of its third plenary meeting this Thursday, now temperatures have fallen back, petrochemical companies are expected to raise their operation rates gradually after weeks of low runs. This is expected to raise olefins supply in in the region.
Elsewhere, in gasoline, European prices have risen after unusually strong export demand from Asia and the Middle East caused by a flurry of refinery issues and tightness in the market is set to continue this week.
Finally, in Turkey, the lira may have stabilized somewhat after its recent plunge, but the country's economic woes continue to reverberate across the metals, oil and petrochemicals markets.
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In this week's highlights: the summer is turning up the heat on Germany's coal commission; demand for gasoline is unexpectedly robust; and Turkey's economic woes are still reverberating.
But first: in the North Sea, a fifth day of strikes by the Unite trade union takes place Monday at Total's oil and gas platforms. The strikes, which center on the three-week stints Total wants its offshore workers to accept, have been going on for a month -- and more are set to come. The company is apparently considering Unite's latest proposals, but there is no sign of a breakthrough yet. There are also rumblings of discontent among workers elsewhere in the North Sea, notably at the Culzean gas project.
Further afield, market watchers will be keeping a close eye on potential trouble spots around the Mediterranean. Workers at Libya's Zawiya oil terminal have been planning protests that could undermine a recent recovery in the country's output to over 1 million barrels a day.
The hot summer has turned up the heat on Germany's coal commission ahead of its third plenary meeting this Thursday. The debate about how to exit generating power using coal is intense – and this summer's heat wave could boost voices within the commission calling for more urgent action on coal closures. Less coal generally means more gas, but debate here is also intense because of the planned Nord Stream 2 pipeline. Chancellor Angela Merkel hosted Russian President Vladimir Putin on Saturday, demanding Russian guarantees to continue gas transit through Ukraine after the end of 2019, when the 55 billion cubic meters a year pipeline is expected to come online.
S&P Global Platts Analytics says growing gas demand caused by the exit from nuclear and coal coupled with dwindling European gas production suggests there could be room for both, with plans for a German LNG terminal also edging forward.
The hot weather may have boosted German power generation, but it caused European ethylene crackers to reduce operations. Now temperatures have fallen back, petrochemical companies are expected to raise their operation rates gradually after weeks of low runs. This is expected to raise olefins supply in Europe.
Moving to gasoline, the European market is likely to be tight this week. European prices have risen after unusually strong export demand from Asia and the Middle East caused by a flurry of refinery issues. Recently, India's Reliance Industries declared its fluid catalytic cracking units at Jamnagar were undergoing a short shutdown, expected to last around two weeks. And Saudi Arabia's YASREF shut its continuous catalytic reformer last week, halting gasoline production.
Historically, by the middle of August, prices start to fall as the summer driving season draws to a close. But as you can see from this chart, prices have remained high this year. Over the coming weeks, demand for gasoline from Asia is likely to remain high, with market participants noting strong demand due to the Haj pilgrimage in Saudi Arabia.
The Turkish lira may have stabilized somewhat after its recent plunge, but Turkey's economic woes continue to reverberate. The steel industry has not been able to take advantage of a weak domestic currency and export to Europe after additional duties on steel and aluminum imports to the US took effect a week ago. This is mainly due to Turkey's need to import its raw materials on a dollar basis. Uncertainty over steel exports to Europe is expected to continue. The collapse of the lira also threatens to curb Turkish oil demand.
The economic uncertainty also means the use of plastics for construction is expected to take a hit. The effect of any reduction in Turkish petrochemicals consumption will extend beyond its borders. Turkey is the largest market for PVC from the EU. Turkish markets are expected to slow down this week due to the Eid al-Adha holidays.
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