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Market Movers Europe, Jun 8-12: Oil market eyes implications of OPEC+ deal as shipping markets sink


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Смотреть видео: Market Movers Europe, Jun 8-12: Oil market eyes implications of OPEC+ deal as shipping markets sink

In this week's highlights: OPEC+ producer nations plan to extend a major production cut, tanker rates are expected to sink; Rhine water levels are sinking; and gas eases out coal in the German power generation mix.

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In this week's highlights: Tanker rates are expected to sink; Rhine water levels are sinking; and gas eases out coal in the German power generation mix.

But first to the oil market, where the main focus is on the implications of the weekend agreement by OPEC-plus producer nations to extend a major production cut, of 9.7 million b/d, from June through to the end of July, rather than an earlier plan to moderate the cuts to 7.7 million b/d. As ever compliance will be an issue, and the market will be monitoring participants' actual output closely.

The decision raises lots of questions, not least for non-OPEC producers such as the US, and closer to home in the North Sea, which hopes that the worst of the slump in prices is over and activity can resume.

The protracted talks delayed Saudi Arabia's publication of official crude oil selling prices for July. The differential for its Arab Light crude headed to Asia was set at 20 cents against the average of the Dubai and Oman benchmarks. That is up by six dollars ten cents per barrel from the June price - far above a two to five dollars-per-barrel increase expected by traders in a Platts survey. The Saudi prices are closely watched as a cue for other Middle Eastern exporters.

Despite the recent slump in crude prices, the hit to demand from the coronavirus pandemic means European refiners are expected to continue to shift their focus to sweeter grades this week, as they seek to boost margins. Sweet grades cost less to refine.

A gradual recovery in consumer demand following the easing of national lockdowns has caused product cracks, which are the difference in price between an oil product and the crude from which it is derived, to rise. This is despite quite high stocks of oil products as participants anticipate continued end-user product demand, causing refiners to emerge from their recent crude purchasing hibernation.

According to S&P Global Platts Analytics, total outages at European crude distillation units reached 2.13 million barrels a day in May, the highest average for any month on record. It now forecasts crude distillation outages in Europe will fall in June, with that trend accelerating in July.

Despite this, tanker rates are expected to come under increasing downward pressure as a lack of outgoing cargoes weighs on both clean and dirty markets as we enter the traditionally quieter summer months. Clean tankers transport finished oil products, dirty tankers transport crude and fuel oil. Aframax rates in dirty markets are now approaching close to operating costs as tonnage grows in the absence of outgoing cargoes. Clean tanker markets could fall in the weeks ahead because of fewer cargoes for long haul shipments and growing competition between medium- and long-range tankers for available cargoes.

Moving inland, the oil-product and petrochemical markets will be keeping a close eye on Rhine water levels this week. Last week water levels dropped to as low as 100 centimeters at the key chokepoint of Kaub in Germany last week. Gas barges were underloaded by at least 25%, while liquid barges were underloaded to a greater degree. However, weak demand across petrochemicals markets will likely minimize the impact of the low Rhine. Normally low water levels can have a major impact because barge availability quickly vanishes.

While the water levels on the Rhine may be falling, the country's gas-fired power stations could set new generation records this summer and beyond according to S&P Global Platts Analytics. June should be the first month on record in which German gas-fired generation exceeds that in the UK - a symbolic moment. Gas in Germany has always played a back-up role to coal, with a phase out not scheduled until the mid-2030s at the earliest.

And that takes us to our social media question for the week: How do you see the role of gas developing in the German power mix? Tweet us your replies with the #PlattsMM.

And finally, mining companies, traders, equipment suppliers and authorities active in the Democratic Republic of Congo will start holding online meetings as a prelude to DRC Mining Week, which will run on until June 19th. The DRC, which supplies more than 60% of global cobalt supplies and has rich copper reserves exploited by major miners including Glencore, Ivanhoe Mines and China Molybdenum Company, is striving to address problems relating to artisanal or wildcat mining amid an environmental, social and governance push by international companies. DRC initiatives to formalize artisanal mining, including training and educating local citizens to contribute meaningfully to a mining operation, will be showcased in some of the online events.

While you're here, 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 week with us, have a great week ahead!