Commodity Tracker: 5 charts to watch this week

The US Energy Information Administration raised its Brent crude price forecast due to OPEC+ production cuts and falling oil outputs. Still on falling oil outputs, Ghana is facing an economic crisis because of diminishing foreign exchange reserves and high fuel prices. Meanwhile, S&P Global Commodity Insights editors are focusing on the price hikes for hot-rolled coil amid multiple mill outages.

1. US EIA raises 2024 Brent price outlook to $87/b amid tightening supply

What’s happening? The US Energy Information Administration March 12 raised its 2024 Brent crude price forecast to an average of $87/b, up $4.58 from the February estimate, saying the extension of OPEC+ production cuts and falling oil inventories are expected to tighten oil markets in the second quarter. The EIA in its Short-Term Energy Outlook said it expects global oil inventories to fall by 0.9 million b/d in Q2, after saying in February that it expects “inventories to remain relatively unchanged” this quarter.

What’s next? Increasing inventories when OPEC+ supply cuts are expected to expire start putting slight downward pressure on prices in 2025, EIA said. “We forecast that the Brent crude oil price will decrease from an average of $88/b in January 2025 to an average of $82/b in December 2025, averaging $87/b in 2024 and $85/b in 2025,” EIA said.

2. Falling output, waning investment leave Ghana oil sector at crossroads

What’s happening? Ghana is at a critical juncture, facing challenges such as diminishing oil output, underinvestment, insufficient exploration and the global energy transition. Production began three years after commercial discoveries in 2007 and peaked at around 200,000 b/d in 2019. Ghana is currently producing 130,000 b/d, primarily from Tullow Oil’s Jubilee and TEN fields, energy minister Matthew Opoku Prempeh told S&P Global Commodity Insights at a conference in Accra. Meanwhile, Ghana is enduring its worst economic crisis in a generation, exacerbated by vast infrastructure spending during the short oil boom, foreign exchange reserves shortages and high fuel prices.

What’s next? Prempeh said Ghana’s oil output would be raised by the upcoming 80,000 b/d Pecan field operated by Africa Finance Corp. The Pecan field has faced delays, due in part to Russia’s Lukoil being present in the project, but could come onstream in 2025 with FID expected in Q3 or earlier. Nevertheless, without significant changes in the business environment, the shift of capital away from African hydrocarbons looks set to continue to cost Ghana and its import-dependent economy.

3. European n-butanol and butyl acetate prices at near two-year high on tight supply

What’s happening? European spot n-butanol and downstream butyl acetate prices have risen to a near two-year high amid particularly tight supply in the spot market. Platts assessed the FD NWE butyl acetate price up Eur500/mt week on week at Eur2,200/mt on March 12, a price last seen May 31, 2022, while n-butanol was assessed at Eur2,000/mt on March 14, its highest price since June 16, 2022. OQ chemicals declared force majeure on its n-butanol production in Oberhausen and butyl acetate in Marl, Germany, on March 4, aggravating further an already tight market. The market reaction was immediate, with n-butanol prices soaring and creating a knock-on effect for butyl acetate prices.

What’s next? Market players expect tight supply conditions to persist during April, amid a seasonal pickup in demand for coatings anticipated to last until June, which could create further challenging conditions if the markets were to remain short until then.

4. Flat-rolled steel outlook uncertain amid mill increases, planned maintenance outages

What’s happening? As US domestic mills undergo planned maintenance outages happening March through June, the outlook on prices remains uncertain following multiple mill-enforced price hikes for HRC while demand reports are steady to down. The outages will take roughly 371,290 st of rated capacity out of the market, according to S&P Global data. The mills taking these outages account for the production of just over 22.35 million st/year.

What’s next? Market participants, though hopeful outages could stem slipping spot prices, are uncertain as to whether demand levels are enough to support recently announced price hikes from major domestic steelmakers, pointing to stagnating end-user demand. Still, market participants continue to pass on import offers for Q2 and are starting to feel that scrap prices could stabilize then start to move back up, which could better position domestic mills to garner more orders.

5. Middle East diesel exports to Europe at six-month high

What’s happening? Diesel exports from the Middle East to Europe averaged 461,000 b/d in February, the highest in six months, and more exports gains are anticipated because of increased refinery production. The UAE is again exporting in March after a one-month stoppage said to be related to maintenance at Abu Dhabi National Oil Co.’s Ruwais refinery. Platts, part of S&P Global, assessed the rate to carry a 65,000 mt cargo of refined products on an LR1 tanker from the Persian Gulf to UK Continent at $100/mt March 18. Rates have been volatile since shipping companies started avoiding the Red Sea in earnest in mid-December, and were up from $53.08/mt on Dec. 15 and well-above the five-year average of $39.50/mt.

What’s next? Middle East diesel supply may be diverted to Africa and Latin America after drone attacks by Ukraine on Russian refineries took at least 130,000 b/d of diesel capacity offline in less than a week in mid-March. Middle East refineries will consume 9.056 million b/d of crude oil in the first quarter, surpassing 9 million b/d for the first time, according to S&P Global research.
Source: Platts