This week, markets look to the OPEC meeting and digest the outcome of the G20 summit for cues, and we highlight LNG flows from Europe to Asia and steel production cuts in China.
But first, Markets are focused on the oil producers' meeting between OPEC, Russia and nine other allies in Vienna on Monday and Tuesday.
This graph shows the coalition's compliance in the first five months of 2019. The producers – which together produce almost half of the world's crude – are expected to decide on whether to extend their production cut agreement amid increasingly tense geopolitics and concerns about maritime safety in the Persian Gulf. Saudi Arabia and Russia have already endorsed a nine-month extension to their earlier cut agreement that expired at the weekend.
A decision to extend the cuts – or the lack of it – would give a direction of oil price movements and impact Asian buyers' oil purchasing plans in the coming months.
So for our social media question this week: Do you think OPEC+ will extend its production cut agreement? Share your thoughts with the hashtag PlattsMM.
Separately, leaders of the G20 reached consensus over the weekend on the importance of energy security following recent ship attacks near the Strait of Hormuz, with member countries making efforts to ease tensions in the region.
In a joint declaration, they also said global growth appears to be stabilizing and was projected to pick up moderately into 2020.
The US and China agreed during their summit meeting in Osaka Saturday to resume trade negotiations, with the US agreeing to halt further tariff hikes on Chinese goods and China agreeing to immediately start increasing purchases of American goods.
These developments are positive for the recovery of commodity trade flows between the two countries, which had declined sharply since the trade conflict began, and US crude oil and agricultural product exports to China are likely to be among the first to benefit.
In LNG, more supply is expected to flow into the Asia Pacific, with the JKM/NBP spread widening to $1.597/MMBtu DES last week from an average of 96 cents/MMBtu in June. A higher premium for spot LNG prices in Northeast Asia will encourage more cargoes to flow to this region from both Europe and the US.
With more Atlantic cargoes expected to flow into the region for the second half of August, the intra-month structure for August JKM flipped Friday from contango to backwardation.
And finally, in the steel market, eyes are on China after Tangshan city announced last week that it will impose a new set of output cuts effective June 27 to August 1. This boosted market sentiment and drove both Chinese domestic prices and futures higher. Platts Chinese HRC prices on an FOB basis have risen 2.6% since the announcement was made. Will steel prices continue to rally? And will China export volumes pick up in the rest of the year even though demand shows weakness? Our metals team will keep you posted on that.
Thanks for kicking off your Monday with us. Have a great week ahead!