Commodity Tracker: 6 charts to watch this week

Europe is looking at healthy gas inventory levels ahead of winter, with reservoirs reaching over 80% capacity almost two months ahead of schedule. In Asia, the anticipation of the return of the Chinese aeronautical industry should stimulate the demand for jet fuel. Meanwhile, S&P Global Commodity Insights editors are also watching Turkish rebar prices, California’s power demand, India’s rice export policy and US aromatics stocks.

1. EU gas storage hits November target ahead of schedule

What is happening? EU gas stocks exceeded 84 billion m3 on 29 August with gas tanks in the region are now more than 80% full, according to the GIE AGSI. The initial target, adopted following Russia’s invasion of Ukraine, was for gas storage sites to be filled to at least 80% capacity by November 1.

And after? EU gas reservoirs could overflow by the end of October if net injections of gas across the EU continue at the current high rate, and could still reach almost 90% of capacity before November if net injections into storage approach five-year average rates. Maintaining net injections at a high level could prove challenging, with key factors to monitor including the level of Norwegian gas flows to Europe, LNG arrivals and any unlikely increase in Russian gas flows through the Nord Stream gas pipeline or via the Ukrainian transit route. .

2. Asian jet fuel demand is expected to rebound strongly in 2023

Kero Jet Fuel Application

What is happening? The aviation sector continues to normalize, but the recovery has been uneven across regions. Asia has lagged, particularly in the first half of the year, mainly due to China’s intermittent lockdowns as it sticks to its “zero momentum” COVID-19 policy. Airlines in the region carried a combined total of 11.3 million international passengers in July, according to the Association of Asia-Pacific Airlines, surpassing the 10 million mark for the first time since February 2020. this, the number of passengers was still 66% lower. compared to the corresponding pre-pandemic month.

And after? Kerosene/jet should be the main driver of global oil demand in 2022, contributing a third of the growth, as countries open their borders to international visitors. With a return in the second half of the year, Asia is expected to account for 18% of global kerose/jet demand growth this year before jumping to 63% in 2023 with China back in the picture. However, even with this growth, jet fuel/kerosene demand in Asia in 2023 will still be around 17% lower than in 2019, as the full recovery of international and leisure travel takes time.

3. Turkish rebar bids jump after 50% energy cost hike

Turkish Rebar Offers

What is happening? Turkish rebar producers sharply increased their export offers by $20-40/mt on September 1 in reaction to recent increases of at least 50% in gas and electricity prices, which to their tower have driven up the cost of smelting scrap metal to produce steel via electricity. arc furnace route. New rebar export offers were raised to a minimum of $685/t FOB Turkey. No increase in buying activity was observed following the increase in supply. The situation also pushes Turkish producers to seek to reduce other input costs.

And after? With energy costs not expected to drop any time soon and scrap prices remaining firm, Turkish factories are expected to stick to their higher rebar offers for some time to avoid serious erosion of the margins. Rebar export demand, which has been very sluggish recently, needs to pick up for higher bids to gain traction. Without improved finished steel sales and high input costs, Turkish steelmakers may be forced to implement further production cuts.

Go Deeper: Turkish Rebar Export Price Valuation Explained

4. What California’s ICE Car Ban Could Mean to Fuel Demand

Electric Vehicle Adoption in California

What is happening? The California Air Resources Board voted Aug. 25 on the Advanced Clean Cars II project, banning the sale of new internal combustion engine passenger vehicles in the state by 2035. The regulations begin by requiring that 35% of sales of new vehicles are zero emissions in MY 2026 with an interim target of 68% for MY 2030. 100% in-state sales of new zero-emission passenger cars and trucks by 2035.

And after? This decision can reduce the ICE on-road fleet by nearly 5 million vehicles and add more than 14 million electric vehicles to the state’s vehicle fleet if the 100% ZEV sales goal is met. The targets will help build certainty around previously announced greenhouse gas emission reduction targets, particularly in the transportation sector, but will increase demand on the California power grid.

5. Indian rice market confused as government continues to mull over export restrictions

Rating of Platts Indian broken rice year-to-date

What is happening? Buyers are pulling out of India’s rice market amid conflicting reports citing unnamed government sources on the country’s rice export policy. Speculation has been circulating for months, but a recent report said the government is planning to ban exports of broken rice. Platts Indian 100% broken white rice closed Sept. 2 priced unchanged for the week at $325/ton FOB.

And after? Participants will be eagerly watching for updates on the pace of sowing of kharif or main season crops, which have been affected by sporadic rains, fueling speculation over the ban. As of August 26, planted area totaled 36.8 million hectares, 7.4% below average, according to government data.

6. US aromatics prices are under further downward pressure

U.S. Gulf Coast Aromatics

What is happening? U.S. aromatics producers on the Gulf Coast fought hard against falling prices due to weaker demand for blends that appeared to affect other octane boosters as well. Prices for toluene and mixed xylenes peaked in June, surpassing pre-pandemic levels, but fell sharply as the summer driving season draws to a close. Inventories stood at 196.1 million barrels in the week ended August 26, the lowest level since the start of the year, according to data from the US Energy Information Administration.

And after? Any upward movement in toluene and mixed xylene prices should be limited. The higher reid vapor pressure gasoline production season has begun, favoring other blending components. There could be pockets of opportunity to increase aromatics inventories, but prices could fall further if demand does not meet accumulated supply.

With reporting and analysis by Nikolaos Aidinis Antonopoulos, JY Lim, Kang Wu, Wojciech Laskowski, Jamie Dorner, Peter Storey and Sue Koh

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