Credit: S&P Global
1. Asian refiners expect limited OPEC+ cut impact on H2 term crude supply
What’s happening? Saudi Arabia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, Oman, and Gabon said April 2 they would start voluntary oil production cuts from May until the year’s end, reducing the total reduction to 1.66 million b/d. This is on top of the 2 million b/d collective cuts that all OPEC+ members started in November and will be carried through 2023. Saudi Aramco has allocated full May-loading crude oil nominations to several term buyers in Japan, South Korea, as well as China and Southeast Asia, industry sources told S&P Global Commodity Insights on April 10.
What’s next? Despite the new production cut commitment, South Korean and Japanese refiners are confident that their term Middle Eastern crude contractual volumes for the second half of 2023 will not be reduced much as OPEC+ crude production has been significantly below its targets in the first place due to the sanctions on Russia, as well as technical issues and underinvestment by many members.
2. US “Freedom Gas” finds a way into Europe, but price-spike risk lingers
What’s happening? Exports of US LNG – so-called “Freedom Gas” – to Europe reached new heights last winter, even amid industrial action at French regasification terminals in March, and the absence of the Freeport LNG liquefaction facility in the preceding months. The US exported over 41 Bcm of natural gas equivalent to Europe during Winter 2022, up nearly 9 Bcm year on year, following historic wholesale prices. The Winter 2022 TTF contract averaged $47.101/MMBtu in the preceding summer, a nearly fourfold increase on the year, and peaking just shy of $100/MMBtu in late August.
What’s next? Shippers continue to circumvent strike action by delivering to alternative countries and recently commissioned floating storage and regasification units while using pipeline infrastructure to reach target markets. Freeport LNG is ramping up to nameplate capacity after an eight-month outage. While progress has been made in alleviating Europe’s inflationary energy crisis, analysts have warned of a potential repeat in wholesale-price spikes to secure winter supply.
3. Weak demand and supply glut expected to put lithium prices under pressure in Q2
What’s happening? The Platts Chinese lithium price assessments saw a massive drop in the first quarter. Platts assessed lithium carbonate at Yuan 220,000/mt DDP China on March 31, down 56.9% year on year, according to S&P Global data. The Yuan 380,000/mt drop in the price of lithium carbonate from the peak of Yuan 600,000/mt in November 2022 had wiped out 15 months of gains in just four months. The sharp fall was primarily due to the surge in COVID-19 cases in China after it lifted restrictions, as well as the country’s termination of electric vehicles subsidies in end-2022.
What’s next? With prices still on a downtrend, sources are uncertain when lithium prices will bottom out. Furthermore, sufficient inventories could mean that procurement demand would remain weak. Sources look forward to more clarity on lithium prices in Q2 as spot liquidity is expected to pick up as the Chinese economy recovers.
4. US plans to transition to electric vehicles get a commitment boost
What’s happening? More than 50 public and private commitments in the US were announced by the White House on April 17 to support the country’s transition to electric vehicles. US electric vehicle sales have tripled while the number of publicly available charging ports has increased by over 40% since President Joe Biden took office. There are currently more than 3 million EVs on US roads, with over 135,000 public EV chargers across the country, according to the White House.
What’s next? The Biden administration is aiming to have 50% of all new vehicle sales be electric by 2030. EV incentives, part of the White House’s EV Acceleration Challenge, are expected to “lower the cost of EVs and EV charging infrastructure, increase consumer demand and competition, promote equity and inclusion, and accelerate the growth of the EV market.”