In this week's Market Movers Americas, presented by Courtney Love:
* US natural gas freeze-offs hit as demand spikes
* Weak Q4 expectations for US coal producers
* Brazilian ferrous scrap prices set to rise further in February
* Container box increases unlikely in February
In this week's Market Movers: soybean prices remain volatile on Brazilian rains, US Gulf Coast fog takes its toll on shipping markets, natural gas prices weaken amid mild weather, and the spread between WTI Magellan East Houston and WTI Midland continues to narrow.
After a sharp rally following a bullish World Agriculture Supply and Demand Estimates report earlier in the month, soybean prices have fallen from multi-year highs amid favorable weather reports from Brazil.
The front-month CBOT soybean futures contract plunged nearly 60 cents/bushel, or nearly 4.5%, on January 22.
Despite a large volume of soybeans still to be harvested in Brazil, prices have seen limited pressure as Brazilian producers have already sold about 60% of the expected crop and are holding out for higher prices to resume sales.
Looking at shipping markets, Aframax shipowners are hopeful the coming week will bring cargoes into the market. Shipowners showed strong resistance to fixing at last-done levels after fog delays slowed fixing and inquiry in the second half of the week ended January 22.
Freight for the US Gulf Coast-UK Continent route rose 15% over the previous week. However, non-ice class Aframaxes in the North Sea may decide to ballast over to the US Gulf Coast in search of higher rates, adding supply to a delicately balanced market.
The spread between West Texas Intermediate crude at the Magellan East Houston terminal and Midland, Texas, fell to its narrowest point since November 2016 last week, with continued narrowness expected through the beginning of 2021.
WTI Magellan East Houston, a market with access to the heart of US Gulf Coast refiners, sank to 40 cents/b over WTI in Midland near Permian Basin production.
The spread remained narrow through most of 2020 as refiners processed a glut of the crude while lease operators slashed production amid the coronavirus pandemic.
Production is set to continue to decline through the first half of this year, but the completion of ExxonMobil's Wink-to-Webster pipeline in H2 2021 may help keep the spread narrow as field takeaway capacity expands.
Turning to the Southeast, the Henry Hub balance-of-the-month natural gas contract remains under pressure amid muted demand and rising temperatures in Texas and the Southeast. The contract was trading at $2.45 per MMBtu on January 22 after settles averaged $2.70 per MMBtu through January 21.
Total demand in the region is expected to dwindle to about 36 Bcf/d over the next two weeks as milder winter temperatures continue, about 5 Bcf below the levels during the second week of January.
Heavy sea fog in the Texas and Louisiana Gulf Coasts last week lowered total deliveries to LNG facilities. Feedgas deliveries are expected to remain depressed until the fog clears.
While the Southeast warms up, colder weather is forecast to hit the Northeast this week, driving up power demand in ISO-New England territory, which could lead to power price increases during peak hours.
Mass Hub on-peak day-ahead prices jumped $16.50 on January 22 to trade in the low $50s per megawatt-hour for January 25 delivery on the Intercontinental Exchange.
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Thank you for kicking off your Monday with us and have a great week ahead.