This week, we take a look at what Emmanuel Macron’s election victory means for French power prospects, record prices for Brazil’s soybeans, and the rise in food inflation. Also in focus are India’s crude demand and the cost of shipping fuel from Asia to the US, says an article published in Platts.
1. French power prices keep rising after Macron victory amid near-term nuclear woes
What’s happening? French power prices for 2023 hit a new record-high April 25 after President Emmanuel Macron secured a second term in office following a run-off election April 24 amid rising power generation costs across Europe. The vote was held during volatile times with Russia’s invasion of Ukraine moving the goalposts of European energy policy as the continent seeks to end its reliance on Russian energy imports. French year-ahead power rose 34% over the past month to Eur260/MWh ($279 MWh), while French winter premiums over European neighbors widened even more.
What’s next? Macron seeks to strengthen France’s nuclear sector amid unprecedented reactors outages and the current fleet set for the lowest annual production in over two decades. Long-term, however, France is set to lead Europe’s ambitions in building new nuclear plants, analysts from S&P Global Commodity Insights said. In its European Electricity Long-Term Forecast, S&P Global forecasts France to see the highest level of new nuclear build in Europe, albeit not enough to prevent capacity falling to 2050 as existing reactors come to the end of their technical lifespan. S&P Global forecasts French nuclear to average around 30 GW this summer, the lowest on record for the current fleet.
2. FAO expects food inflation to persist for longer
What’s happening? Global food prices have skyrocketed to an unprecedented level in March. The Food and Agriculture Organization of the United Nations, or FAO, Food Price Index reached 159.3 points in March, soaring 34% from the year-ago level, and hitting the highest point since the inception of index in 1990. The index averages in prices of global agriculture commodities such as staple grains and vegetable oils. Countries were already witnessing strong pricing environment since the pandemic started in 2020, but the Russia-Ukraine conflict further jolted global markets.
What’s next? Countries are waging a battle against reining in food inflation through policy actions, such as improving subsidies and price freezes. But food prices are expected to remain elevated for multiple seasons, FAO Economist Monika Tothova told S&P Global. Wheat, one of the most-impacted commodities, has risen around 30% since the war started in late February, S&P Global data for Russian wheat assessments showed. Tothova said buyers should be “prepared to pay higher prices for imports,” and further indicated the impact of war will be on whole sector of agriculture commodities, not just on Black Sea exports.
3. Brazilian soybean prices surge
What’s happening? The war between Russia and Ukraine continues to generate uncertainties on global grains, crude oil and vegetable oils supply in the near term, supporting grains and oilseeds prices. South American FOB soybeans outright prices have surged to historical highs, reaching $690/mt April 20.
What’s next? With current high prices reducing crush margins at their destinations, markets will be looking at how key buyers of soybeans will behave in the near term. Market participants are also closely following the progress of US soybeans crop planting as well as yield expectations, which would depend on the weather in the coming months.
4. Indian refiners enjoy robust domestic, export demand
What’s happening? India’s overall crude runs eased to 106% in March, from 107% in February, according to the latest survey from India’s oil ministry. Despite the dip, the refinery run rate was still higher than the 99% level recorded in March 2021. Average run rates in the fiscal year 2021-22 (April-March) cumulative 12-month period stood at 97%, compared with 89% in 2020-21. This indicates reflecting a much smaller impact of the second wave of the pandemic in 2021 compared to the first wave in 2020.
What’s next? International Monetary Fund expects India’s GDP to grow by 8.2% in the FY 2022-23. Along with the higher GDP growth, analysts expect the country’s oil and gas to remain strong. Robust demand for Indian oil exports, such as gasoil, is prompting Indian refiners to keep their run rates much above 100%.
5. Jet fuel and gasoil deliveries from Asia to US and Australia spike
What’s happening? Transactions for 200,000 mt of jet fuel loadings in April with options to deliver in US have so far been done. Since there is also demand for moving diesel and gasoline to the US, it is pushing up the freight, which has risen by more than 40% so far this month for Medium Range tankers on the South Korea-USWC route.
What’s next? It will cost more than $76/mt to move a 35,000 mt jet fuel cargo from South Korea to the US West Coast on an Medium Range tanker, according to S&P Global data. Ship owners are comparing their earnings on the voyages within East Asia with the returns they will get if they charter them out for delivering cargoes of refined products to the US West Coast.
On the other hand, at current freight, charterers are reluctant to hire in ships and are holding back cargoes. A few more loadings on the trans-Pacific route are expected in the coming weeks.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Platts
