In this week's highlights: The oil market focuses on Vladimir Putin's visit to Saudi Arabia, EU carbon prices eye the next Brexit developments; the troubled EU steel sector will be in focus at the worldsteel meeting in Mexico; and the power and gas markets await a key report on French nuclear reactors.
Infographic: Iran tanker trouble in Red Sea highlights oil risks
In this week's highlights: EU carbon prices eye the next Brexit developments; the troubled EU steel sector will be in focus at the worldsteel meeting in Mexico; and the power and gas markets await a key report on French nuclear reactors.
First up though, the oil market, where the focus will be on the Middle East and Russia's role in the region, as President Vladimir Putin visits Saudi Arabia Monday. The visit is taking place at a time of heightened tensions over Middle Eastern oil supplies. For the market, the main question is: Will OPEC and Russia continue, and deepen, their cooperation on curbing production?
Look out for deals to be signed during Putin's visit, and a general Russian effort to promote itself as a power broker, able to talk to all sides and ease tensions. Russian officials will then head to Vienna on Friday for an ‘OPEC-Russia Energy Dialogue' event.
Whatever messages come out of the meetings, the risks to trade in oil and other commodities in the Middle East will be at the forefront of traders' minds. The market was reassured by the speed of Saudi Arabia's recovery from an unprecedented attack on oil facilities on September 14. But the explosion on an Iranian tanker in the Gulf at the end of last week has caused a renewed attack of the jitters. For an infographic on geopolitical risks, follow the link below this video.
Staying with geopolitical roller-coaster rides, Europe's carbon markets will be focused on the next installment of the Brexit saga. Thursday's summit of EU leaders is seen as the last chance for a deal to stop the UK falling out of the EU carbon market October 31. In the event of a no-deal Brexit, UK-based companies would be expected to sell surplus allowances they would no longer need to cover calendar 2019 emissions and unwind forward positions in the futures market.
You can see the market's sensitivity to Brexit from the chart on your screen.
EU carbon allowance prices rebounded from a six-month low last week to hit 24 euros a metric ton, on tentative signs that the EU and UK could yet hammer out a Brexit deal.
While all eyes in the carbon market will be on London and Brussels, the steel industry will cast its eyes further afield to the World Steel Association's annual meeting in Monterrey, Mexico. As the event kicks off, the market will be seeking direction from worldsteel's updated global short-range steel demand outlook announcement, due to be presented Monday.
The EU steel industry has been struggling with global trade policy upheavals and a high level of protectionism. You can see from the chart the toll weak demand has taken EU hot-rolled steel coil prices over the last two years.
Research by S&P Global Ratings has found that EU producers are suffering more than their global peers. The latest expectations are that steel demand in the bloc may fall 2% this year before stabilizing or showing a modest recovery in 2020.
That brings us to our question of the week: How much downside is there for EU steel prices for the rest of 2019? Tweet us your view with the hashtag PlattsMM.
Finally, power traders are awaiting a decision by French nuclear safety regulator ASN on the issue of substandard steam generators at six nuclear reactors.
The issue rattled power and gas markets when operator EDF first flagged the problem in September. Winter contracts still have a risk premium despite EDF's assurances that no immediate repairs were necessary as the ASN has overruled EDF's preferred options in a number of cases recently.