In this week's highlights: Crude prices fluctuate amid global uncertainty; anxiety continues to build in Europe over gas flow reductions; the EU Parliament is set to vote on crucial carbon market reforms; and Q3 petrochemical contract pricing negotiations begin.
- Oil prices see-sawing (00:12)
- Nord Stream stress (01:01)
- Carbon market reforms vote (01:56)
- Methanol contract price negotiations (02:34)
In this week's highlights: Anxiety continues to build in Europe over gas flow reductions, the EU Parliament is set to vote on crucial carbon market reforms, and Q3 petrochemical contract pricing negotiations begin.
But first to oil markets, where Brent crude prices continue to see-saw around $120 a barrel, swayed on one hand by bearish concerns over global recession fears and the pace of demand growth in China as COVID outbreaks continue, and on the other by doubts over whether OPEC and other key producers will be able to pump enough oil as sanctions against Russia ramp up.
In the overheated oil products markets - where diesel and gasoline are seeing blowout crack spreads in the $50-60/b range - plant outages are raising concerns that the global refining system is unable to respond to rising demand. Record pump prices, driven by inventory stocks at historic lows, the seasonal surge in road fuel demand and Russian refining outages, are causing consumer pain and with it rising political pressure.
In European gas, all eyes will again be on Russia this week and just how much gas it will be supplying to key buyers in the EU after flows via the Nord Stream pipeline were reduced to just 40 percent of capacity last week.
Gazprom has been delivering lower than expected gas volumes to customers in Germany, Austria, France, and Italy, among others - ostensibly due to issues with the maintenance of turbines at the crucial link's main compressor station - and prices surged again last week as a result.
Any further reduction in Russian flows could force EU member states to start implementing emergency market measures, and looking further ahead there are growing concerns over whether Europe will be able to refill its gas storage sites ahead of the next winter season.
And that takes us to our social media question for the week: Will EU countries manage to fill their gas storages to the required levels by the end of the summer? Tweet us your thoughts.
Meanwhile, there will be an important vote for the development of carbon markets this week as the EU Parliament considers proposed reforms to the EU Emissions Trading System and the rules governing a Carbon Border Adjustment Mechanism on June 22. This is seen as a last chance to agree a common position on a revision before the summer recess.
As you can see in this chart, carbon prices reached an all-time high of over 90 euros per ton in February on the back of rising demand and tightening supply of allowances. Any agreement by the parliament would mark a major milestone in the proposals becoming law, clearing the way for negotiations with EU member states.
And finally, in petrochemicals, negotiations for the Q3 contract price kick off this week.
European methanol spot prices have been rangebound at a more than 30 percent discount to contract prices during Q2, correcting down following a panic buying driven spike in the wake of Russia's invasion of Ukraine in February. Spot market prices, in addition to higher natural gas and energy prices, will be key considerations in the discussions as parties negotiate for the new contract price.
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Thanks for kicking off your Monday with S&P Global Commodity Insights!