In this week's market movers: The oil industry meets to discuss long-term plans; the electricity industry seeks answers on the short-term impact of Brexit; ArcelorMittal and Equinor's 2019 results are due; and demand for medical gloves in Asia due to the coronavirus could open an arbitrage for petrochemical butadiene from Europe.
In this week's market movers: The oil industry meets to discuss long-term plans; the electricity industry seeks answers on the short-term impact of Brexit; ArcelorMittal and Equinor's 2019 results are due; and demand for medical gloves in Asia due to the coronavirus could open an arbitrage for petrochemical butadiene from Europe.
As coronavirus weighs on global markets and OPEC and its partners consider their response, issues of energy security will be in the spotlight at the Baker Hughes Annual Meeting industry conference in Florence, Italy, that starts Monday.
International Energy Agency executive director Fatih Birol and US assistant secretary for fossil fuels Steven Winberg are set to address the energy security issue and the current state of oil markets alongside an array of government ministers and company executives.
The event though, is also designed to addresses the long-term future of the global energy industry, including technological efforts to stay competitive and reduce carbon emissions. These topics will be discussed by Shell projects and technology director Harry Brekelmans, and Total upstream director Arnaud Breuillac, as well as representatives of national oil companies and regulators from Angola to Colombia to Nigeria.
Also up for discussion will be the prospects and challenges of the global LNG market. We can expect insights from Egypt's petroleum and mineral resources minister Tarek El-Molla, the chief strategist of JERA, the world's largest LNG buyer, Hendrik Gordenker, and from US LNG developers such as Tellurian chief executive Meg Gentle. Another key contributor will be David Stover, CEO of Noble Energy, which has just launched Israel's first gas exports to Egypt.
With the UK's exit from the EU finally achieved, and trade negotiations now underway, UK and European power traders want some answers. First – how will access to the internal energy market change? What about governance and arbitration in the event of disputes? Will the UK have any say in EU agencies which regulate the sector? Any move from implicit to explicit cross-border capacity auctions is going to add cost. While this is currently a minor concern, it will grow. In 2019 power imports met under 10% of UK demand, but they're forecast to double by 2025.
Brexit also matters for the EU emissions market, with the UK now set to stay in the system until the end of 2020 under a transitional arrangement. This is important for carbon allowance prices because the UK will soon bring all of 2019's supply of allowances -- held back last year because of Brexit uncertainty -- into the market this year through auctions and free allocation. The exact timing still needs to be agreed between the UK and European Commission. This has been a key factor curbing the upside for prices in the first quarter, adding to other bearish elements including a mild winter and low natural gas prices. A low price makes less emissions-intensive gas more competitive against coal for electricity generation, reducing demand for carbon allowances.
And that takes us to our social media question: What do you think the implications of Brexit will be for your market? Tweet us your replies using the hashtag #PlattsMM.
As the 2019 results season gets into full swing, traders and analysts will be keeping their eyes peeled for indications of market direction for 2020. ArcelorMittal will be one company publishing on Thursday, closing a difficult year for the world's largest steel maker. The outlook for its key markets remains subdued, with European steel industry association Eurofer trimming EU growth expectations to 1.2% from 1.4% last week. Gas production strategy will also be in focus when Norway's state-controlled oil and gas company Equinor releases its results the same day.
Norway is a key supplier to Europe, meeting around a quarter of EU gas demand. As you can see from the chart on your screen flows of Norwegian gas into the UK and Northwest Europe have fallen by 10 to 15 percent so far this winter, and talk of deferred production could be confirmed in the results.
The European butadiene market will watching to see if greater demand for medical-grade rubber gloves due to the coronavirus outbreak will materialize. Nitrile grade rubber gloves are made from butadiene. Asia is a major export market for European sellers. However, despite an uptick in demand for the end-product, trading has been limited due to the outbreak and the Lunar New Year. Any increase in demand could open up an arbitrage opportunity.
Also in petrochemicals, the European polyethylene terephthalate industry will be meeting this week in Brussels for the annual industry body meeting. Top of the agenda will be a focus on circularity and recycling ahead of tough EU legislation on recycled plastics in packaging.
The European PVC industry is set to announce higher prices for February this week in an effort to recoup margins and bring European prices into line with the global market. Other polymer markets have a chance to follow upwards, as demand is expected to grow moving into February.
Thanks for kicking off your Monday with us, and have a great week ahead.