In its latest report, the International Energy Agency said that global market oversupply remained a cause for worry. Crude buyers in Asia will be looking at how the market reacts to these comments as they set their buying strategy for the coming months. Meanwhile, extensive flooding in Russia is affecting coal supply to Asia. And Taiwan's increasing demand for refined sugar has boosted Thai white sugar cash premiums. Associate editor Kevin Seo explores these and other topics that may impact Asia’s commodity markets this week.
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Video Transcript
In this week’s highlights in Asia’s commodity markets, floods in Russia impact coal supply, China to release a slew of data, and Thai sugar premiums surge.
The International Energy Agency said Friday that OPEC crude output rose 230,000 b/d in July to a year-to-date high, led by a dramatic recovery in Libya, which is exempt from OPEC-led production cuts.
It pointed to encouraging signs in global demand and OECD stock levels, but cautioned that sustained rebalancing in the market is only likely if all producers comply with output cut agreements.
The IEA also said global market oversupply was still a worrying feature. Crude buyers in Asia will be looking at how the market reacts to these comments as they set their buying strategy.
China is due to release its closely-watched crude oil production and throughput data for July Monday, which is not expected to show a sharp jump from June.
India is also due to release its oil products demand data for July this week, and the market will be watching to see if its recent positive momentum was sustained in July.
Moving on to thermal coal, stockpiles at Pacific Ocean ports in Russia’s Far East are running low after extensive flooding at rail links in the region.
This has also impacted met coal, PCI prices rising due to the supply disruptions caused by the heavy rain. Russia is a key supplier of PCI to Asia.
In China, aluminum prices jumped to a near 5-year high last week on continuing talk of smelter cuts. Two domestic industry meetings were held to discuss the matter last week, and the market is hoping clearer direction will emerge this week.
China is also due to release steel data for July Monday that is expected to show steel output remaining at a record high. Steel margins have soared since the elimination of 120 million mt/year of induction furnace capacity by June.
In agriculture, increasing demand for refined sugar from Taiwan boosted Thai white sugar cash premiums. However most of these cargoes are later shipped to China. The market is watching to see whether this trading route is sustainable.
Summer restocking in the Asian LNG market was expected to continue this week, and could potentially push spot prices higher. High temperatures have sparked buying interest from end-users in Taiwan, China, South Korea and Japan.
In shipping, Capesize freight rates have spiked on the back of strong iron ore prices, which have prompted tonnage demand. Market fundamentals remain strong and freight rates are expected to increase further this week. Where do you see freight rates heading?
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