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Market Movers, Jul 03-07: MidEast crude selling prices to Asia seen set to be lowered

With Sammy Six

July 03, 2017 09:30:37 EST (3:07)

With Asian refiners diversifying their crude supply sources, will Saudi Aramco and Abu Dhabi National Oil Company announce lower official selling prices this week? How will South Korea's planned restart of coal-fired power plants affect the LNG spot market? And how will various commodities react to the imposition of India's new Goods and Services Tax? Senior Oil Analyst Sammy Six explores these topics and others that may impact Asia’s commodity markets this week.


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Video Transcript


Welcome to Platts Market Movers, your three-minute look at what the week ahead holds for the Asian commodity markets.


In this week's highlights, Middle East crude selling prices seen set to be lowered, the restart of eight coal-fired power plants in South Korea to impact LNG demand, and Australian wheat prices seen set to surge.


We’ll start with oil markets, where Saudi Aramco and Abu Dhabi National Oil Company are expected to announce their official selling prices this week.


Traders expect both to lower their differentials by up to 30 cents per barrel. This is due to the general trade weakness and lower Dubai/Oman crude structures in the past month.


Traders in Asia said fierce competition from arbitrage barrels, particularly for light sour crudes, has also played a role.


The cut in production by OPEC has narrowed differentials between Brent and Dubai, prompting Asian refiners to diversify their crude supply sources.


China in particular has taken in a wider variety of crudes in recent months, reducing its share from the Middle East.


In LNG, all eyes will be on South Korea's spot demand this week, with eight of the country’s coal-fired power plants due to restart to meet summer power demand. They were shut in June to reduce air pollution, and the restarts could result in South Korea needing fewer spot cargoes of LNG.


In Australia, the restart of the North West Shelf LNG project is proving slower than expected after a partial outage on June 24. This could restrain supply in the Pacific Basin this week. Sources said most of the production returned last week, but one of the five trains could remain offline until mid-July.


In coal, all eyes are on China this week, which is planning a partial embargo on thermal coal imports arriving at some of its second tier ports. The tightened customs checks at these ports are expected to complicate the process of obtaining customs clearance, and it is unclear whether the restrictions will be extended to other ports. The price of Indonesia's thermal coal exports is expected to face pressure from China's move.


In India, a new Goods and Services Tax came into force Saturday, replacing several regional and state taxes. The bunker market is expected to face headwinds as the new GST on fuel oil is 18 per cent, while the previous tax on bunker fuel was in the range of zero to half of one per cent.


In agriculture, prices of Australian white wheat are expected to surge again this week. Weather forecasts are pointing to prolonged dryness and high temperatures in the coming months, which is putting pressure on new crop supply.


Meanwhile ethanol prices have fallen to a one-year low amid peak cane crushing season in Brazil. That country’s exports will be watched closely this week as buyers debate whether a price bottom is in sight.


So, our big question this week is, just how low do you think ethanol prices can fall?


Please send us your views on Twitter with #PlattsMarketMovers. Thanks for kicking off your Monday with us and have a great week ahead!





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