The highlights this week on S&P Global Platts Market Movers EMEA:
**OPEC+ in the driving seat with crucial output decision
**Second UK-France subsea cable in testing
**European gas storage withdrawals pick up
**Recycled plastics new tax boosts demand
In this week's highlights: The steel market keeps a close eye on ArcelorMittal Italia's imminent public-private partnership; a new subsea French-UK power cable could alleviate the pressure during winter tightness; gas traders monitor storage withdrawals due to the colder weather; and plastic markets scramble as the new EU Plastic Tax fast approaches.
In oil, this week is all about the OPEC+ meeting taking place Monday and Tuesday, again in a virtual format. Crude markets have joined in the worldwide financial rally in recent weeks, on the assumption that new vaccines mean the worst could be over with regard to COVID-19, and OPEC+ countries, led by Saudi Arabia and Russia, would probably extend their production cuts, amounting to nearly 8 million bd, or roughly 8% of pre-pandemic demand, into 2021.
All that is looking a little less certain, however, as objections to the cut extension have started to emerge, not just from perennial skeptics such as Iraq, but even from the UAE, arguably Saudi Arabia's closest ally within OPEC.
As ever, some of the objections may be discounted as posturing, but there are clearly worries about a potential lack of agreement and flood of extra production, exacerbated by Libya's remarkable comeback in recent weeks.
A little closer to home, here in Europe, we should also get a view on the longer-term prospects for North Sea oil when Oil & Gas UK releases an economic report on how well, or badly, the industry has weathered this year's COVID-19 price collapse. North Sea oil output levels have been remarkably resilient so far, but that's by no means certain to continue as investment levels fall.
The steel market is expecting imminent news on the size of the stake the Italian government will take in ArcelorMittal Italia, which operates the troubled Taranto steelworks in the south of the country, formerly owned by Ilva. Prime Minister Giuseppe Conte last week confirmed a public-private partnership is to be set up via the Invitalia agency to revitalize and decarbonize the steelworks, Italy's largest, with the aim of boosting its output to 8 million metric tons per year of crude steel.
ArcelorMittal agreed to buy Ilva in 2018 under a lease-and-purchase agreement for Eur1.8 bil and to invest another Eur2.4 billion to clean up and modernize the plant. A year ago, the major steelmaker announced plans to pull out but has apparently been persuaded to stay by the government.
And that takes us to our social media question for the week: Will the Italian government's participation help solve the steelworks' environmental issues? Tweet us your thoughts using the hashtag #PlattsMM.
In power markets, a new subsea power cable linking the UK and French markets has just begun to provide some welcome flexibility between two markets prone to periods of winter tightness.
As you can see from the chart, the French month-ahead contract has remained below its UK counterpart since October. The 1 GW IFA 2 link is now in testing and should enter full commercial operation within a few weeks. High pressure over northwest Europe in late November has seen much reduced wind generation, with the UK importing heavily on existing links to France, Belgium and the Netherlands.
Twinned with commissioning of IFA 2, an improved French nuclear situation is set to ease UK system operator National Grid's generation adequacy headaches.
In European gas, traders will be closely monitoring the level of storage withdrawals, which have picked up strongly due to the first real cold weather of the winter.
Withdrawals across the EU reached more than 375 million cu m/day last week on strong demand, the highest withdrawal level since February.
Despite the strong draw-down on stocks, European storage levels remain healthy, having been built to almost capacity ahead of the winter.
According to data from Gas Infrastructure Europe, storage sites in the EU are currently still 90% full.
And finally, buyers in the recycled high-density polyethylene market will continue to scramble to secure material this week as the January 1 deadline for the new EU Plastic Tax fast approaches. Sellers are expecting a surge of activity in December, which is usually a quiet time in the market, as buyers seek to lock in volumes ahead of the Eur800 mt tax that will be levied on non-recycled plastic packaging. Already in the fourth quarter of 2020, recycled HDPE premiums to virgin HDPE have doubled to 100 mt.
For more on all the issues affecting commodity markets from wherever you are, make sure to check out Platts LIVE at the address displayed on your screen.
Thanks for kicking off your Monday with us and have great week ahead!