Oil markets will closely watch out for the release of crude oil reserves by China, India, and Japan. Oil traders expect China to release crude oil from its state reserves via auctions. But they anticipate low bidding interest from refiners due to slowing domestic demand as pandemic related curbs come into play ahead of the Winter Olympics.
In addition, Asian refiners are planning to bring home most of their equity crude barrels from overseas upstream operations in 2022. Thailand’s state-run upstream company PTTEP, will provide domestic refineries equity barrels from Oman, Algeria, Australia, and the Americas. South Korea’s SK Innovation also has similar plans.
The physical Dubai crude market structure strengthened sharply in recent trading cycles. The spread between front-month Platts cash Dubai and same-month Dubai swap averaged around $3.6 per barrel in November.
Moving to metals, Japan will release its crude steel production figures for October. The data is expected to show improved consumption from local manufacturing units but automotive sector demand is likely to show a decline. Local vehicle makers have cut their 2021 estimates due to a shortage of semiconductor chips and automotive parts.
In aluminum, China’s primary aluminum prices are under pressure due to weak demand and accumulating stocks. Markets participants said the outlook remains muted, but they ruled out an increase in domestic supply in the near-term due to the recent output cuts in some provinces. China’s aluminum market is also facing the heat, as domestic primary aluminum prices fell sharply over the past few weeks and the demand from primary aluminum smelters weakened.
Moving to coal, Indonesia thermal coal prices are expected to edge lower despite lingering supply tightness. Australian coal prices are also expected to cool down further amid limited buying interest.
In petrochemicals, the outlook for Asian polyethylene was mixed as lukewarm demand offset higher crude costs. According to market sources, while suppliers are bullish and see prices moving up in line with rising oil costs, the end-users seemed less optimistic. Traders said productions cuts are likely if margins don’t improve.
Asia Pacific LNG shipping day rates have surged to an all-time high of around three hundred thousand dollars a day for a standard LNG carrier. Ahead of the peak winter season, vessel demand outpaced the tight supply of ships in the region. These pushed day rates to nearly six times that of around fifty thousand dollars a day recorded at the start of November.
In carbon markets, Australia has seen a surge in demand for carbon credits, driving prices to record highs. Prices have risen more than 95% from early July, as the COP26 deal on carbon markets led to bullish sentiments.