This week: Global markets await the outcome of the US Presidential Election, crude trade flows in Asia seen changing, and dry bulk freight rates come under pressure from a decline in Brazil’s iron ore exports
But first, all eyes are on the US Presidential Election on November 3, as the outcome will influence sentiment across many commodity markets, and may unleash changes in the US energy sector. This could have repercussions on crude oil prices, as well as potentially determine the future direction of the US-China trade deal.
The US became China’s fourth-largest crude supplier in September, and ample flows are expected to continue in the fourth quarter, as the Phase 1 trade deal between Beijing and Washington provides a push to the flow of energy products.
China’s crude import volumes from the US in September surged 75% month on month to a record high of 3.9 million mt, customs data showed
This brings us to our social media question this week: Do you think the heightened crude exports from the US will continue? Share your thoughts with the hashtag PlattsMM.
In other oil news, Saudi Arabia and other major OPEC crude producers will likely cheer a recent change in Asia’s crude oil procurement patterns, as some of the region’s major oil consumers make U-turns in their refinery feedstock diversification strategies.
South Korean refiners for one, said they will now heavily favor Saudi crude oil over US or other arbitrage barrels for the rest of the year, as staple medium sour Middle Eastern crudes are proving the most economical feedstock option in a time of volatile refining margins and tepid consumer demand for fuel.
Thirdly in oil, Malaysia’s crude oil exports to Australia are under threat as the major buyer of its light sweet crude grades struggles to keep refining operations viable due to slim product margins and weak fuel demand. Australia’s light sweet crude imports from Malaysia are forecast to fall 33% on year to 22 million barrels in 2020, according to traders and distributors surveyed by Platts.
BP Australia in recent days has announced plans to shut its Kwinana refinery in Western Australia and convert it into a fuel import terminal, leaving Australia with just three operating refineries.
In dry bulk shipping, market activity is expected to remain muted in the lead-up to Diwali festivities in India in mid-November. Winter in China is a seasonal bearish period for the market, and exports from Brazil are also weakening.
Vale’s iron ore exports from Brazilian ports fell almost 18% in the week to October 30, pressuring down the Capesize T4 low sulfur index by over $3,000 in just four about days to $15, 689 per day on October 30.
In agriculture, all eyes are on the outcome of the US presidential election result due to its impact on the Phase 1 trade deal agreement between the US and China. China has accelerated its buying of US agricultural products in recent months after falling behind early in the year, purchasing soybeans, corn, wheat, barley, sorghum and pork at well above year-ago levels. Market experts say China intends to fulfill its commitments under the deal, noting its commitments for US corn remain at an historic high of 10.6 million mt to date in 2020-21.
And finally in thermal coal, seaborne traders are keeping an eye out for Chinese power utility tenders for winter restocking this week, as Kalimantan export sentiment remains dull.
Buyers in India are also mostly postponing procurements due to the impending Diwali festival, to avoid a clash in the delivery periods.
In addition, benchmark October negotiations between Australia’s Glencore and Japanese utility Tohoku for 6,000 kcal/kg NAR Australian coal are making slow progress, with the bid-ask spread narrowing to $5/mt.
This comes as recovering power demand in Japan is lending some support to seaborne high-cv thermal coal prices.
Thanks for kicking off your Monday with us. Have a great week ahead!