In this week's highlights: Oil markets watch for the OPEC+ group's plans to ease output cuts; carbon prices rebound to test an all-time high; all eyes are on the auction for Ukrainian gas transit capacity; and steel markets expect Russia to impose a new export tax.
- Focus back on OPEC+, Delta variant
- Carbon price rebounds to test all-time high
- All eyes on Ukraine gas transit auction
- Russia eyes 15% steel, metals export tax
In this week's highlights: Carbon prices rebound to test an all-time high; all eyes are on the auction for Ukrainian gas transit capacity; and steel markets expect Russia to impose a new export tax.
But first, in oil, all eyes are on the OPEC+ group of producer nations and their plans to ease output cuts, together with an apparent slippage in mobility, caused by the Delta variant of COVID-19. The OPEC+ producers hold a full meeting online on Thursday July 1 to discuss production quotas for August and possibly beyond. A technical meeting takes place Tuesday June 29, followed by a Joint Ministerial Monitoring Committee on Wednesday, in the run-up to the full meeting.
It follows forecasts of a supply shortfall and potential run-up in oil prices unless OPEC+ does more to open the taps. These have been amplified by uncertainty about US sanctions on Iran, and whether Washington could permit Iranian oil exports – hopes raised by recent talks in Vienna, but now tempered by the election of new Iranian president Ebrahim Raisi.
The 23-country alliance has committed to withholding 6.6 million b/d of crude output in June, including a 400,000 b/d voluntary additional cut by Saudi Arabia, tapering to 5.76 million barrels per day in July.
And now to the European carbon market, where prices have rebounded in June to test a recent all-time high of Eur56.90 per metric ton, as you can see from this chart.
The market will be watching closely this week to see if prices break through this level on the upside. The mood continues to be bullish for carbon, after the European Parliament on June 24 gave its final nod to the EU's agreed 2030 emissions reduction target, of at least 55% below 1990 levels. Watch out for further price volatility ahead of July 14, when the European Commission is set to unveil the legislative tools designed to achieve the new climate target. These will include more stringent carbon caps under the EU ETS, meaning tighter supply of carbon allowances out to 2030.
In European gas, all eyes will be on the auction for additional Ukrainian gas transit capacity this week, to see whether Russia's Gazprom will take up the offer to send more gas to Europe via Ukraine in July. With two of its key supply routes set for annual maintenance shutdowns in July, including the Nord Stream line, Gazprom may have to book additional Ukrainian capacity to help meet its supply obligations to European buyers. Gazprom has in the past used gas it held in European storage sites during its annual pipeline shutdowns, but storage stocks at Gazprom facilities remain low. With prompt European gas prices having surged past Eur30/MWh in June, the direction of travel for prices through July will largely depend on Gazprom's appetite for booking more Ukrainian transit capacity.
And that takes us to our social media question for the week: How much capacity do you think Gazprom will book in this week's Ukraine transit auction, and why?"
Tweet us your thoughts using the hashtag #PlattsMM.
And lastly, a final decision is expected this week on the Russian government's proposal to impose a temporary 15% tax on the country's exports of semi-finished and rolled steel, as well as on primary aluminum, nickel and copper exports, to contain domestic metal price inflation. The proposed duty would be imposed in early August and remain in force through year-end. Analysts say this could bring down domestic metals prices by around 13% in second-half 2021.
Government officials claim the recent rally in metal prices, together with increasing export volumes, is jeopardizing implementation of public construction and infrastructure projects in Russia by inflating their costs over initial budgets. In January to May, Russia's ferrous metals export prices grew by 30% while its non-ferrous metals export prices rose 50% on year.
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Thanks for kicking off your Monday with us and have a great week ahead!