In this week's highlights: OPEC+ cuts are to start on Friday; oil and gas company results begin to stream in; the butadiene contract price's fall spells trouble for olefins; a Dutch wind auction closes; and a German hydrogen strategy emerges.
In this week's highlights: The butadiene contract price's fall spells trouble for olefins; a Dutch wind auction closes; and a German hydrogen strategy emerges.
But first, this week, all eyes in the commodity markets will be on oil and whether output cuts by the OPEC plus group of countries, led by Russia and Saudi Arabia, can stem the price slide after US crude futures plunged into negative territory last week.
Friday is when the OPEC plus cuts kick in, reducing supply by some 9.7 million barrels a day, or about a tenth of global production before the coronavirus crisis, over May and June. There are some indications of individual countries in the group cutting early. But a tidal wave of Saudi crude hitting the US at the moment can only add to doubts about the deal's effectiveness in the face of an unprecedented collapse in demand caused by the coronavirus pandemic.
And indications of the state of the oil market will not only be emerging from producer countries. The results season for European oil and gas majors gets going in earnest this week. Already we know this isn't going to be pretty, with capital expenditure cuts in the region of 25% now becoming routine. BP publishes its first-quarter results on Tuesday, Austria's OMV on Wednesday, and Shell and Total on Thursday. Some oil and gas producers in the North Sea face a particularly tough fight for survival, along with the myriad drilling and other supply companies that service the sector. We expect an update on that score from industry group Oil & Gas UK on Tuesday.
And that takes us to this week's social media question:
What will have the biggest impact on oil the prices in the next few weeks? Tweet us your thoughts using the hashtag #PlattsMM.
The nervousness in the oil market is also spilling over downstream into the petrochemicals sector. There the focus will be on the settlements of key ethylene and propylene May contract prices this week.
This follows last week's 200 euro drop in cracker co-product butadiene's May contract price to 325 euros a metric ton, a near 13-year low. In addition, European export prices FOB Rotterdam for butadiene have plunged to their lowest since Platts began assessing them in 1985. The market will be watching to see if there are any further drops or signs of a rebound.
As far as ethylene and propylene go, there is an oversupply of ethylene in Europe as refineries' focus has shifted to petrochemicals due to the collapse in demand for gasoline and other transportation fuels. However, demand for co-product propylene has held up. Olefins such as ethylene, propylene and butadiene are used in a wide variety of ways, feeding into downstream polymers and additives that touch all areas of everyday life.
For the plastics recycling sector, hopes are for waste collections and sorting facilities will continue to ramp up production this week, despite lockdowns across Europe. May orders are starting to arrive and buying demand is set to be firm.
And talking about going green, in the Netherlands the latest offshore wind power auction closes Thursday with the government seeking unsubsidized bids for an up to 760-megawatt project. The winner of the previous two auctions, Sweden's Vattenfall, pulled out of the race for coronavirus-related reasons, leaving the field open to the likes of Orsted, Shell and Equinor. The Netherlands' target is for 40% of its power to come from offshore wind in 10 years' time.
Germany is another country looking for ways to bring about an energy transition. On Wednesday the government may finally agree on a national hydrogen strategy. The policy has been delayed by an inter-departmental tussle on whether sustainable production from electricity should be prioritized over conventional reforming of gas with carbon capture. Both pathways are considered necessary to decarbonize hard-to-abate sectors such as steel and chemicals.
And finally, please check out Platts Live. Platts Live is a virtual alternative to our face-to-face events and forums, featuring content on the coronavirus pandemic. It has been created to allow our customers to continue to engage with us, and each other.
You can access it at spglobal.com/platts-live
Thanks for kicking off your Monday with us, stay safe and have a great week ahead!