Market Movers Asia, May 2-6: Asian refiners will continue to benefit from rising oil product margins

This week: All eyes are on China as the country temporarily suspends import tariffs on coal, palm and soybean oil prices rise after Indonesia declared an indefinite ban on all palm oil exports. palm, and the Asia-Pacific LNG market continues to grapple with concerns over Russia’s detention. pipeline gas deliveries to Europe.

But first, Asian refiners and traders are expected to continue to focus on rising refining margins and cracks in oil products. Tight supply and rapid improvement in people’s mobility amid relaxed COVID-19 restrictions are expected to inject strength into the market. Refining margins are high as sanctions against Moscow are limiting trade in Russian oil products.

China’s fuel production and exports are low amid lockdowns in the country’s major cities, with higher margins for diesel, gasoline and jet fuel due to rapidly improving mobility of people in Asia and Oceania. Gasoline demand is expected to be supported by the Ramadan and Eid holidays in Indonesia and Malaysia, as well as increased mobility in the Philippines ahead of the May 9 presidential election. Demand is also expected to rise in Australia as Sydney has rolled back COVID-19 restrictions, including mandatory isolation for close contacts.

Next, in the Asian thermal coal market, all eyes will be on China as the country temporarily waives import tariffs on coal of any origin from May 1. Whether Chinese buyers will take advantage of the upcoming tax break remains to be seen. and increase imports, or whether they will continue to rely on cheaper domestic supplies of coal to meet their needs.

Turning to agriculture, markets are eyeing developments in vegetable oils after Indonesia, the world’s largest supplier of edible oils, declared an indefinite ban on all palm oil exports from April 28. The move comes at a crucial time as the world battles food inflation, led by strained supply chains and higher input and energy costs. Indonesia’s announcement expands its earlier ban on stopping exports of refined palm olein, which sent ripples through global vegetable oil markets.

Meanwhile, in the case of cereals, markets are closely watching Australia’s wheat planting season as rising fertilizer costs are expected to affect wheat plantings for the upcoming marketing year. The US Department of Agriculture projected a 20 percent year-on-year drop in Australia’s wheat production in the next marketing year due to a drop in area and yield. This would eventually reduce its wheat exports by 20% annually to 22 million metric tons. A sharp drop in wheat shipments in Australia, a key wheat exporter, will be significant as global wheat supplies are already tight, causing prices to rise sharply.

Turning to LNG, the Asia-Pacific LNG market continues to grapple with concerns over disruptions to gas deliveries from Russian pipelines to Europe with cuts in gas flows to Poland and Bulgaria. This was despite lukewarm demand from most end-users in the Japan, Korea, Taiwan and China region, with China and Japan having healthy inventory levels. The current COVID-19 situation in China could continue to depress downstream demand, which has led local governments to slash gas prices for power plants and city gas.

That brings us to our social media question for the week: Will China’s thermal coal imports increase after the import tariff is lifted? Share your thoughts on Twitter and LinkedIn.

And finally, prices in the voluntary carbon market are expected to remain weak as fundamentals remain shaky amid lack of demand. Concerns about rising inflation further damaging the economy took the wind out of the carbon market last week. Platts CEC and CNC prices fell, and traders were also not expecting momentum to pick up this week.

Thank you for starting your Monday with us. Have a great week!

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