- The announcement lifted EUA carbon allowances to a record Eur75/mt on Nov. 25 with the German government also calling for a European carbon floor price.
- Rising generation costs have made a much better business case for the 200 GW solar and well over 100 GW new wind capacity the incoming German government is banking on to exit coal in 2030 with a rising share expected to be subsidy-free benefiting from guarantees of origin.
- No country will challenge India’s pre-eminent status as the world’s largest rice exporter, with January-September exports totalling 16.3 million mt and the country on course to represent around two-fifths of global rice exports in 2021.
- But neck and neck for the second spot are Thailand and Vietnam
Following the announcement of the US SPR release and the threats posed by the omicron version of COVID-19, all eyes are on the impending OPEC+ summit on December 1-2. The examination of Germany’s coal phase-out law and the world’s leading rice exporters are also on the agenda as reported by S&P.
1. What would OPEC do?
What’s happening?
The US declared on November 23 that it will release 50 million barrels from its Strategic Petroleum Reserve by early 2022, according to the White House. On top of the 18 million barrels sold in the coming months that were already required by Congress to be sold by the end of 2022, the release includes an exchange of 32 million barrels that will be supplied in mid-December through April and returned in 2022-2024. China, India, Japan, South Korea, and the United Kingdom will join the United States in releasing the SPR. SPR releases in Asian nations have yet to be scheduled.
What’s next?
Depending on the quality of the petroleum released, S&P Global Platts Analytics said any immediate pricing impact in the US would likely be felt in Gulf Coast differentials, which would be greater on LLS or Mars benchmarks. However, any further impact will be short-lived, as the SPR release will not significantly alter balances, and OPEC+ will be less tempted to boost production. On December 1, OPEC will convene, followed by a meeting with its partners on December 2. Some OPEC+ delegates have warned S&P Global Platts that if the SPR barrels worsen what is likely to be a market excess in the coming months, the alliance could halt its next scheduled rise. With the introduction of the omicron form, OPEC+’s decision has been compounded by a massive sell-off following revived COVID-pandemic worries.
2. New COVID-19 variant rears as India’s jet fuel demand gets ready
What’s happening?
The COVID-19 situation in India has largely stabilised, with the total number of doses provided in the world’s second-largest country surpassing 1 billion. Although India’s DGCA highlighted in its last circular on Oct. 29 that officials may allow international travel on specific routes on a case-by-case basis. Singapore’s Civil Aviation Authority said on Nov. 21 that it had secured an agreement with India’s Ministry of Civil Aviation to resume scheduled commercial passenger flights between the two countries.
What’s next?
India’s jet fuel demand is set to soar as the country prepares to open its doors to international tourists and create more air travel bubbles, while domestic travel is on the rise. According to the latest data issued by the Petroleum Planning and Analysis Cell, or PPAC, India’s jet fuel consumption reached a 19-month high in October. “There is a lot of travel optimism in India due to relaxed restrictions, pent-up leisure demand, and the festive and marriage season,” said Shreyans Baid, Platts Analytics’ South Asia oil market analyst.
3. German coalition plans for 480-540 TWh renewables by 2030
What’s happening?
Germany’s incoming government wants to increase renewable energy to an 80% proportion of the power mix by 2030, eight years earlier than the existing target of 2038. The new government might begin in early December if the SPD, Greens, and FDP approve the treaty. A review of the coal phase-out rule will be pushed ahead from 2026 to the end of 2022 to see whether any shutdown dates may be pushed forward. Furthermore, the coalition intends to set a CO2 floor price of roughly Eur60/mt. On Nov. 25, EUA carbon allowances hit a new high of Eur75/mt after the news, with the German government also asking for a European carbon floor price.
What’s next?
With German lignite plants nearly full, this winter’s gas price hikes, as well as reactor shutdown in Germany, are expected to increase demand for coal.
According to Platts Analytics, German gas-fired power generation will surpass combined coal and lignite generation for the first time in 2025.
It may take time for policy backing for a faster expansion of renewables to flow through, but Platts Analytics predicts that Germany will add a record 46 GW of new wind and solar capacity over the next four years.
This, together with lowering gas costs, will assist to deflate the current record-high electricity prices, allowing CO2 prices to resume their historic role of facilitating a coal-to-gas transition.
According to Platts statistics, rising gas prices have pushed generation costs for a 50% efficient gas-fired power plant to Eur202.90/MWh in Q1 2022, almost double those for coal.
4. Thailand, Vietnam battle for world’s second-largest rice exporter title
What’s happening?
With exports totalling 16.3 million mt from January to September and the country on track to represent about two-fifths of global rice exports in 2021, no country will be able to challenge India’s dominance as the world’s top rice exporter. Thailand and Vietnam, on the other hand, are neck and neck for second place. Thailand’s rice exports totalled 4.59 million mt from January to October 2021, according to the Ministry of Commerce. For the same period, Vietnam’s exports were around 592,000 mt higher than Thailand’s.
What’s next?
Thailand’s revival as a significant rice exporter in recent months has been mostly due to its return to price competitiveness. While Thailand confronts challenges near the end of the year, such as a lack of containers and high freight prices, it appears that the country will be very close to reclaiming its position as the world’s second-largest exporter from Vietnam. According to Platts, one Bangkok-based broker “If the crop is good, Thai export volumes will increase in several nations. Particularly in Africa… that should be enough to beat Vietnam.” The main season rice crop now being harvested, according to the US Department of Agriculture, has climbed to 15.6 million mt, up 5.8% from the five-year average.
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Source: S&P
