In this week's Market Movers Americas, presented by Matthew Kohlman:
* US crude production holds breath amid futures dip
* Crude demand destruction weighs on Aframax freight
* Global LNG spreads signal US terminal ramp-up to persist
* Availability seen boosting US steel plate prices
In this week's Market Movers: California electric customers brace for potential power outages, the US Gulf Coast crude oil export market comes under pressure, and US hot-rolled coil prices stabilize as lead times extend.
Pacific Gas and Electric warned electric customers about potential power outages as hot, dry conditions mixed with strong winds over the weekend and into the coming week could increase the risk of wildfires. During a Labor Day heat wave, PG&E, along with other California utilities, initiated Public Safety Power Shutoffs, which are proactive outages when severe weather threatens a portion of the electric system. The event caused Southern California power price spikes into the $160s/MWh. Five of the top 20 largest wildfires in California history have occurred in 2020 with more than 8,000 wildfires burning over 3.6 million acres in California so far.
In what could be a good sign for US coal markets, the price for delivered thermal coal into Northern Europe last week pushed to new highs for the year, driven by supply tightness in Colombia, Australia and Indonesia, as well as increased Chinese import demand. Stronger global markets will open export opportunities for US producers, who have been struggling with low domestic power and steel demand.
In crude, the US Gulf Coast export market has been under pressure with values moving to a discount to the local terminal market, an unusual price dynamic potentially caused by oversupply. Platts American Gulf Coast Select averaged over a 26 cents/b discount to WTI at the Magellan East Houston terminal in the month leading up to September 25, down from a 4 cents/b premium the month before.
Weakness in Platts' new waterborne benchmark has coincided with narrowness in the spread between Brent and WTI and weak demand abroad. This week the market will be watching for improved demand in Northwest Europe and Asia to help restore values on the water to at least parity with the local market.
Gasoline cracks have strengthened as US inventories have returned to normal with the front-month ICE New York Harbor RBOB crack versus Brent climbing to above $8/b on Sept. 25, the strongest since August.
Total US gasoline stocks fell to 227.5 million barrels in the week ended Sept. 18, US Energy Information Administration data showed Sept. 23, putting stocks just 0.9% above the five-year average. This is the narrowest supply overhang since mid-March and deflates a surplus of as much as 10.4% seen in early June.
In US mills, tight supply led US hot-rolled coil prices to stabilize around $600 per short ton last week, with market sources indicating that extending lead times at US flat-rolled mills should help mills keep offer levels firm in the coming week. Platts data showed that average hot-rolled coil lead times extended to 7.2 weeks and both cold-rolled coil and hot-dip galvanized products saw their longest lead times since early June 2018 last week, with cold-rolled coil lead times stretching to 7.9 weeks and hot-dipped galvanized sheet lead times at 8.8 weeks.
For more on all the issues affecting commodity markets, 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.
Thank you for kicking off your Monday with us and have a great week!