In this week's highlights, it's the moment of truth for voluntary carbon market negotiations at COP26 in Glasgow, Gazprom is set to free up gas to flow into Europe, oil demand forecasts suggest a strong bounce-back next year and petrochemical producers focus on surging energy prices and hedging strategies.
- Crux time for voluntary carbon market negotiations (00:16)
- ArcelorMittal COP26 carbon reduction investment (01:13)
- All eyes on level of Russian gas supply (02:01)
- Oil could see pandemic recovery (03:04)
- Petchem buyers eye energy costs, hedging (04:08)
In this week's highlights, Gazprom is set to free up gas to flow into Europe, oil demand forecasts suggest a strong bounce-back next year and petrochemical producers focus on surging energy prices and hedging strategies.
But first, week two of the UN Climate Change Conference (COP26) in Glasgow will likely see a reduction in public statements and an increase in tough negotiations on carbon markets.
Major announcements on finance, methane and coal in week one ensured positive vibes as delegations produced the first iterations of the so-called "Paris Rulebook".
Providing this detailed framework for international carbon markets is a key deliverable of the talks.
If an ambitious, rigorous rulebook emerges from the meeting, we will expect both volumes and prices of voluntary carbon credits to ramp up as new finance finds reliable routes to market.
As our graph shows, carbon credit values have risen strongly as volumes are held back in anticipation of a post-COP26 premium.
Also on COP26, the steelmaker ArcelorMittal, which is expected to release its Q3 results this Thursday, announced a 164 million dollars decarbonisation investment in its Port-Cartier pellet plant in Canada, which will enable the plant to convert its entire 10 million metric tonnes/ year pellet production to direct reduced iron pellets by the end of 2025.
And that takes us to our social media question for the week: Do you think emissions reduction commitments at COP26 so far are enough to hold global warming below 1.5 degrees Celsius?
Tweet us your thoughts using the hashtag #PlattsMM.
In the European gas market, all eyes will once again be on Russia, after President Vladimir Putin ordered Gazprom to begin restocking storage sites in Germany and Austria from November 8.
Gazprom is set to complete its domestic storage injection program on the same day, potentially freeing up gas to flow into Europe to help fill the company's near-empty sites.
Russia's supply approach has been key to the sharp rise in European gas prices over the past couple of months, with wild daily price swings and a record TTF day-ahead price of Eur116.10/MWh recorded on October 5, according to Platts assessments.
It remains to be seen whether Russian flows this week will ramp up in line with Putin's call, and if they do, whether any extra gas will merely end up in storage or be used to meet the current European demand.
In oil, prices have eased off in recent days amid rising US crude oil stocks, some expectations of a US strategic stock release, and signs of a pandemic-induced weakness in Europe. Hence, S&P Global Platts Analytics see prices easing below the 80 dollars per barrel mark over the next six months.
Meanwhile here in Europe, markets remain tight, especially for gasoline, as the US draws supplies across the Atlantic. And, in general, oil demand forecasts still suggest a strong bounce-back in 2022.
In terms of events, we will be keeping a close eye on the monthly oil market report due from OPEC on Thursday, after the latest OPEC+ meeting confirmed the wider producer group on its course of a gradual output increase.
Platts also releases its own OPEC+ production survey this week.
A final Q3 results push from European petrochemical producers this week will focus on surging energy prices and hedging strategies.
Market participants are watching for gas and power-related surcharges into year-end, following earlier producer announcements affecting a swathe of plastics precursors.
Buyers are contesting the hikes, noting producer responsibility to hedge against any fluctuations in energy prices.
Surcharges aside, the rise in energy costs is supporting strong European polymer prices, with construction staple polyvinyl chloride hitting 18-year highs.
Recent utility woes have compounded the price effect of sustained operational issues in the PVC chain, industry-wide logistics challenges and a sharp uptick in post-pandemic demand.
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Thanks for kicking off your Monday with us and have a great week ahead!