Commodity Tracker: 4 Charts To Watch This Week

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This week, the editors and analysts of S&P Global Commodity Insights look at China’s interest in US LNG, tanker freight rates in light of shifting oil trade patterns, France’s nuclear output, and US power use.

1. US LNG developments attract China buyers

What’s happening? New LNG developments in the US have been gaining interest from international buyers, including a number of state-owned groups in China. Facilities owned by Cheniere, NextDecade and Energy Transfer signed separate deals this year with Chinese buyers comprising around 650 MMcf/d in future US feedgas demand.

What’s next? Researchers suggest the traction between US LNG projects and buyers in China marks more than a commercial bonanza for US LNG, with the sector presenting a broadening area of cooperation between Beijing and Washington. Regardless of historic trade tensions between the US and China, recent rapprochement on LNG trade between the geopolitical rivals may mark the beginning of a trend with staying power. Rising interest from China is one key reason why US LNG exports are forecast to roughly double to 22 Bcf/d between now and 2027, according to data from S&P Global Commodity Insights.

2. Tanker freight rates outlook bullish as trade flows change

What’s happening? With almost a million barrels of Russian oil moving long-haul to Asia every day, instead of short haul trips to Europe, tankers are being employed for a longer duration. Persian Gulf-China VLCC freight has more than doubled from the abysmally low levels at the start of the year. Owners are now earning more than $40,000/day.

What’s next? The tanker freight outlook remains bullish due to the massive global oil trade disruption caused by the Ukraine war. While OPEC+ decided to cut oil production by 2 million b/d from next month, analysts consider the negative impact on shipping to be negative in the near-term as some of the member countries are unable to meet their quota targets. High gas prices are also resulting in a switchover to oil.

3. Strikes hit French nuclear power plants

What’s happening? Strikes at French nuclear power plants has prompted operator EDF to further delay planned returns from maintenance at five reactors. Nuclear output so far this October is averaging below 27 GW compared to a 31 GW average forecast for the whole month mainly due to the strikes. The reactor ramp-up schedule for units returning in October and November has also fallen behind schedule.

What’s next? Analysts at S&P Global Commodity Insights forecasts nuclear output to average around 35 GW in November and 43 GW in December before rising above a 47 GW average for January and February. French President Emmanuel Macron said Oct. 12 that reactor availability would rise from 30 currently to 40 over the coming weeks, with 45 reactors to be available in early January.

4. US generators to be more reliant on natural gas this winter amid coal retirements

What’s happening? US power generators have shuttered nearly 10.3 GW of coal-fired generating capacity so far this year. Before end-2022, another 3.3 GW of coal capacity is also scheduled for retirement.

What’s next? US power generators are expected to rely more on gas this winter with the continued retirement of coal-fired power across the US this year. This could add more fuel to the rally in gas prices this winter. During the peak heating-demand months from December 2022 to February 2023, US power burn is forecast to outpace the record 2019-2020 winter season when low gas prices lifted generator demand to an average 29.9 Bcf/d over the same three-month period, data from S&P Global show.

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Source: S&P Global

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