The impact of rising coronavirus infections is back on the headlines with the number of cases rising in major European economies, affecting mobility. We also…
Nov 22, 2021
The impact of rising coronavirus infections is back on the headlines with the number of cases rising in major European economies, affecting mobility. We also take a look at Russian gas flows into Europe, Southeast Asia’s appetite for Middle Easter crude, the surge in demand for Australian carbon credit units, and China’s soybean demand in the years ahead.
What’s happening? European mobility is declining on both seasonality and the recent rise of coronavirus cases. Despite the decline, mobility has held up better than in 2020. At this time last year, mobility had declined to only 75% of January 2020 pre-pandemic levels. Mobility correlates reasonably well with combined gasoline and diesel fuel demand in Europe, where diesel fuel accounts for 75% of the total, albeit on a declining trend.
What’s next? With COVID-19 cases rising throughout Europe, mobility is likely to continue falling, perhaps appreciably so. S&P Global Platts Analytics expects combined gasoline and diesel fuel demand to see a continuing decline into end-2021 and January 2022. Year-end transport fuel demand is likely to slip to 1.5%-2% below average 2019 levels, but still be up significantly from what was seen in 2020.
What’s happening? No additional month-ahead pipeline capacity was booked to ship Russian gas to Europe on the two key transit routes via Ukraine and Belarus for December. Russian gas transit via Ukraine and Belarus has averaged only 88 million cu m/d and 19.3 mcm/d, respectively, or a combined 107.3 mcm/d so far in November.
What’s next? Russian flows will remain low, unless short-term capacity is booked in day-ahead and/or within-day auctions next month. The supply outlook is further complicated by a recent decision by the German energy regulator to suspend certification of the Nord Stream 2 pipeline that will carry Russian gas to Germany, meaning first flows on the new string are unlikely to start in the near term. There is little precedent for significant short-term day-ahead or within-day capacity bookings for Russian gas transit via Ukraine and Belarus, but they are likely to be necessary to allow Russian gas flows to rise to meet the seasonal increase in European gas demand in the absence of flows via Nord Stream 2. The market will therefore be watching the results of these daily auctions closely and any capacity bookings or lack of capacity bookings will have the potential to drive significant market volatility throughout December at European gas hubs.
What’s happening? Carbon credit prices are going up on the back of positive sentiment following the UN Climate Change Conference, or COP26. Australia has seen a surge in demand for carbon credits, driving prices to record highs. Australia carbon credit units, or ACCUs, reached a record A$38.00/mtCO2e ($27.63/mtCO2e) Nov. 17. Prices have now climbed more than 95% from early July, growing alongside global demand for carbon credits since the second half of the year. Australia has been expanding the project types eligible for generating ACCUs, covering more and more new technologies and methods. The government has also put in place policies to simplify registration and trading practices to reduce market entry barriers. This attracts local farmers to supply ACCUs from reforestation, soil carbon sequestration and other methods.
What’s next? Demand for ACCUs is expected to increase significantly over the next decade. The Australian government is increasing the specialized fund for purchasing carbon credits while private companies under the compliance emission trading scheme are building up their ACCU portfolios and hedge future exposures. A growing number of corporates outside the compliance regime is also proposing voluntary emissions reduction targets and investing in ACCUs to meet their commitments.
What’s happening? The market has been worried about China’s slackening soybean demand in recent months on the back of negative crush margins and sporadic cases of the African swine fever. China-based crushers have been struggling with negative margins amid high costs of raw soybeans and sliding soybean meal prices.
What’s next? Platts Analytics expects China’s robust pork industry consolidation to support soybean demand in the coming years, overshadowing the negative crush margin trend seen in 2021. According to Platts Analytics, China’s soybean demand in 2022 and 2023 are forecast at record levels of 102 million mt and 104 million mt, respectively.
Full infographic: China’s soybean demand set for record levels
What’s happening? Southeast Asia’s state-run oil and refining companies typically secure around 70%-75% of crude oil requirements via term deals and their own upstream operations, while the rest is sourced from spot purchases. However, the refiners are looking for every possible means to reduce their spot procurement ratio recently as market premiums extend rally amid tight supply conditions.
What’s next? Thailand’s PTT Exploration and Production, or PTTEP, plans to bring home most of its equity crude barrels from its overseas upstream operations in 2022 rather than trading the oil, taking some pressure off domestic refinery feedstock procurement managers who constantly seek top-up barrels in the expensive spot market. PTTEP is set to provide domestic refineries at least 5 million barrels of Oman crude for delivery over January-June 2022. Apart from the equity Oman barrels, PTTEP also aims to supply domestic refineries its equity barrels from Algeria, Australia and the Americas.
Reporting and analysis by Alan Struth, Jake Horslen, James Huckstepp, Ivy Yin, Eric Yep, Asim Anand, Phil Vahn, Fred Wang, and Pankaj Rao.
Crude oil trading is set to undergo a major shift as the fossil fuel industry increasingly looks to offset its carbon emissions while navigating energy…
Nov 03, 2021
Crude oil trading is set to undergo a major shift as the fossil fuel industry increasingly looks to offset its carbon emissions while navigating energy transition.
The spot market for trading carbon-accounted crude — including carbon credits and measuring the carbon intensity of the oil — is on the rise with S&P Global Platts launching a Market on Close assessment process for these transactions, similar to the window used to assess the Platts Dated Brent price benchmark.
The new assessment process for carbon-accounted crude introduced by Platts is already gaining traction after Occidental Petroleum received approval on Nov. 2 to enter the process, paving the way for more liquidity and transparency in these markets.
“It does represent a new stage in transparency but also really in having truly robust standards around what these terms mean in the market,” said Jonty Rushforth, senior director of markets & energy transition at Platts.
These transactions could become more popular as more energy companies commit to net-zero targets and may offer a way for crude to stay environmentally relevant as global leaders meet at the UN Climate Change Conference in Glasgow to thrash out targets for reducing emissions.
More oil companies and trading arms have been in contact with Platts to enter this market. Rushforth said Occidental was the first example of “a market participant stating that they intend to pursue transparency in this space.”
Platts has an MOC process for a wide variety of crude oil and refined products markets worldwide, including Dated Brent, assessed on the basis of activity seen in the daily North Sea crude MOC.
Companies wishing to bid, or offer, a cargo in the Platts MOC for carbon-accounted crude, will need to show that emissions associated with these liquids have been independently verified by a third party. Also, any trade incorporating offsetting through carbon credits, will need these credits to be of a sufficient quality.
“It addresses questions people have had around on how do you really know that the claims included in this trade are defensible,” added Rushforth. “Well, you need verification and quality of credits for that, so that is what this answers.”
Platts recently published its methodology and standards for its MOC assessment process covering carbon-accounted crude.
Carbon Accounting is a process used to measure the volume of greenhouse gases emitted by a particular entity or process over a particular period of time.
This follows, Occidental Petroleum’s move in January this year when it delivered 2 million barrels of “carbon-neutral oil” to Reliance Industries in India. The US company said it was the energy industry’s first major petroleum shipment in which greenhouse gas, or GHG, emissions associated with the entire crude lifecycle, from wellhead to combustion, were offset.
In April, Norway’s Lundin sold 600,000 barrels of “certified carbon neutral” crude to Mediterranean refiner Saras, covering “life of field” emissions, and not combustion.
These trades will also focus on the carbon intensity of the crudes in question.
From October, Platts began publishing monthly carbon intensity calculations and daily carbon offset premiums for 14 major crude fields.
Carbon intensity as an attribute of the crude, is being viewed similar to the way the market looks at sulfur. The higher the carbon intensity of a crude, the lower will be its value, as this oil is crude produced at a relatively high rate of emissions.
These new assessments help producers, investors and shareholders better understand the emissions associated with producing different grades.
The Nov. 3 Platts Carbon Intensity Premium assessment for the Saudi Arabian giant Ghawar field was 24 cents/boe. In contrast, the CI Premium of Canadian oil field Cold Lake Blend, which produces an a very heavy blend, was assessed at $1.12/boe on Nov. 3.
According to the US Environmental Protection Agency, 2 million barrels of crude is equivalent to about 860,000 mt of CO2 emissions.
CO2 emissions per barrel of crude oil are determined by multiplying heat content times the carbon coefficient times the fraction oxidized times the ratio of the molecular weight of CO2 to that of carbon, according to the EPA.
Platts also began publishing daily assessments reflecting the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, carbon credit market, called Platts CEC, or Jan. 4.
The Platts CEC was assessed at $7.15/mtCO2e on Nov. 2.
The Platts CEC assessment reflects the most competitive CORSIA-eligible credit within the voluntary carbon credit market, and continues to be set by renewable energy credits, 2016 vintage, from larger-scale projects in India, China and Turkey.
China’s primary aluminum imports in October rose 47% month on month and 25% year on year to 139,663 mt, customs data showed Nov. 22. Alumina…
Nov 22, 2021
China’s primary aluminum imports in October rose 47% month on month and 25% year on year to 139,663 mt, customs data showed Nov. 22.
Alumina imports fell 39% month on month to 219,434 mt.
China’s primary aluminum imports were expected to remain at elevated levels as cargoes booked in September will reach domestic markets in the fourth quarter, industry sources said.
Meanwhile, alumina imports may not see a significant increase in November despite some profitable opportunities, market participants said.
Domestic alumina prices are under pressure amid a steady decline in primary aluminum prices and weaker demand from smelters due to ongoing output cuts faced by the industry.
The import arbitrage window is closing due to a significant drop in domestic primary aluminum prices over the past few weeks and widening import losses, sources said.
The most-active aluminum contract — January — for delivery on the Shanghai Futures Exchange closed at Yuan 19,205/mt ($3,010/mt) on Nov. 19, down 21% from Oct. 19, SHFE data showed.
The ratio between SHFE’s most-active contract and London Metal Exchange’s three-month closing price fell to 1.12 on the same day, from 1.22 on Oct. 20, excluding the exchange rate.
China’s alumina imports saw a month-on-month decline for the third straight month, led by higher seaborne prices and dampened demand from primary aluminum smelters curbs, market sources said.
In October, the volume imported from Australia — the largest exporter to China — fell 29% from a month earlier to 119,336 mt. Imports from Australia accounted for 54% of China’s alumina imports.
Australian alumina was at a $34.00/mt discount to Chinese production on import-parity terms Nov. 19, from a discount of $10.30/mt available Oct. 20, S&P Global Platts data showed.
The discount calculation was based on the Nov. 19 assessments by Platts of Australian alumina at $398/mt FOB Australia and China’s spot alumina at Yuan 3,580/mt ex-works Shanxi. Calculations also include freight rate of $48.10/mt for ship 30,000 mt from Western Australia to Lianyungang, China, Platts data showed.
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