The Brent-Dubai benchmark spread spiked to an 18-month high last week on the back of a force majeure declared for Forties grade crude contracts following a pipeline outage. The shutdown is expected to last for a few weeks. Traders say the wide spread could dampen the attractiveness of various Brent-linked crude grades in Southeast Asia, Oceania and West Africa compared to Dubai-linked Persian Gulf and Far East Russian grades.
The Brent-linked Southeast Asian crude trading cycle going into full swing this week. PetroVietnam Oil is expected to issue a slew of spot tenders for medium sweet Vietnamese grades. The market is also expecting offers of light sweet crude cargoes from Malaysia.
Asian LNG spot prices in Asia are still hovering at three-year highs, and market participants are expecting further upside. Depleting inventories and uncertainties over winter supply to Northeast Asia are supporting prices.
Commodity Associate Desiree Quah talks about these and other factors that could drive commodity prices this week.
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Video Transcript
The highlights this week: The Southeast Asian crude trading cycle goes in to full swing, while the oil markets continue to feel the impact of the Forties pipeline shutdown; LNG and methanol prices are seen to test higher levels; then we’ll look at China for changes in thermal coal import restrictions.
Let’s start with the oil markets. The Brent-Dubai benchmark spread spiked to an 18-month high last week on the back of a force majeure declared for Forties grade crude contracts following a pipeline outage.
The shutdown is expected to last for a few weeks. Traders say the wide spread could dampen the attractiveness of various Brent-linked crude grades in Southeast Asia, Oceania and West Africa compared to Dubai-linked Persian Gulf and Far East Russian grades.
Note that the Brent-linked Southeast Asian crude trading cycle going into full swing this week. PetroVietnam Oil is expected to issue a slew of spot tenders for medium sweet Vietnamese grades. The market is also expecting offers of light sweet crude cargoes from Malaysia.
In LNG, spot prices in Asia are expected to continue extending gains this week. The Platts JKM is hovering at three-year highs, supported by depleting inventories and uncertainties over winter supply to Northeast Asia as a result of supply disruptions in Europe driving up gas hub prices.
Here’s our social media question this week: Do you expect LNG prices continue to rise or do you think prices have peaked? Share your thoughts on Twitter with hashtag PlattsMM.
On to thermal coal. Traders are expecting a few factors to spur market activity this week – the easing import restrictions at Chinese ports, a drawdown of stocks to 16 days from 19-20 days at the end of November, and firm coal consumption above 700,000 metric ton per day, driven by winter heating demand.
Nonetheless, concerns over custom clearances will continue to hang over the market, slowing the pickup in buying interest. This could lend support to the Supramax market, which is expected to see pressure from ample tonnage availability in the region.
Still in shipping, the Capesize market is expected to be hampered by muted freight activity given the upcoming holiday season.
Finally, in petrochemicals, market participants expect methanol prices to continue testing higher levels this week. This is after prices surged to more than three-year highs after an unplanned shutdown of a major plant in South East Asia last week exacerbated already tight supply.
That’s all for this week! Remember to join our conversations on Twitter with #PlattsMM. Thanks for kicking off your Monday with us and have a great week ahead!