There are certain months that have obvious potential for big news, and June looks like one of them. November 2014 was another one, and this month’s iteration of The Oil Big Five follows up on many of the themes that were raised then.
We reached out to Platts oil editors and analysts worldwide to see what they were keeping an eye on in June, and these topics came back as immediate responses. We hope you’re tracking them as well, and be sure to leave us a comment and let us know your thoughts on the issues below or on Twitter, using the hashtag #oilbig5. If you’re not as concerned about these topics, then let us know what you are watching and what we should be watching as well.
1. OPEC’s June meeting
We all remember what OPEC did in November, when it decided to stick by its planned output numbers despite falling crude prices. Now, as one of our top oil editors asked, ‘Will it have the guts to stand by the policy for another six months?’ June 5 will mark the 167th OPEC meeting, and a cadre of Platts editors are in Vienna to cover the meeting, as well as events beforehand. Various national officials have been making statements about the current state of oil – such as lambasting US sanctions against oil-producing countries, orsaying that the second half of the year could bring more balanced markets. Here’s your chance to make a guess: What will OPEC decide about production this time around, and what effects could it have on global markets?
2. Iranian crude oil
June 30 is the target deadline for Iran and six world powers – the US, China, Russia, the UK, France and Germany – to negotiate for a comprehensive deal on nuclear issues that could include lifting sanctions against Tehran that have stifled Iran’s crude landscape. With the decision soon approaching, Iran’s deputy oil minister, Rokneddin Javadi, has said that Asia would likely be a main market for additional crude output after sanctions are lifted, and the country is sending officials to meet with various potential importers. A senior official at refiner Idemitsu Kosan recently said a senior delegation from the National Iranian Oil Co. is expected to visit Japan for crude oil marketing; Iran’s oil minister has had talks with various international oil companies in Vienna, including Total and Lukoil; and Indonesia is seeking crude supplies from Iran (although its imports are not conditional on sanctions getting lifted). Will a deal be met, will sanctions be lifted, and where will the new influx of Iranian crude go? Can an already oversupplied global market handle more?
3. Singapore fuel oil
Big interest in Singapore fuel oil derivatives could have a ripple effect into the physical market later this month. The daily volume of FOB Singapore high sulfur fuel oil cargoes traded during the Platts Market on Close assessment process hit a record high June 2, and the first day of the trading month also saw Asia fuel oil derivative volumes traded during the Platts MOC process hit a record daily high of 750,000 mt. ICE Clear Europe-cleared Singapore HSFO June derivative contracts hit 18.585 million mt on May 20, up from 9.627 million mt on the same day a year ago. In light of the wide interest for June Singapore fuel oil derivatives contracts, traders have said they expect trading activity for physical fuel oil cargoes in June to surge, too. One trader said one of two things have to happen: either paper has to drop, or physical has to rise. What do you think will happen?
4. China’s oil demand
China makes frequent appearances on The Oil Big Five, and this month’s topic is about its crude oil imports, which increased significantly in April. Overall April crude imports rose 8.6% year on year to 7.4 million b/d, marking the first time China passed the US as the world’s biggest importer of crude oil. According to calculations by Platts, apparent oil demand in April grew 5.4% year on year to average 10.48 million b/d – mostly led by strong rises in light ends and jet fuel/kerosene. But the big import and apparent demand numbers come despite a prevailing grim outlook of the country’s economy, with Q1 GDP growth at 7% and looking like there will be a similar pace in Q2. Is there really scope for a strong recovery in Chinese demand, and if so, what’s driving it?
5. Jet fuel along the US West Coast
In mid-May, nearly every refinery in the Los Angeles area was undergoing maintenance, and the extreme supply constraints in the Los Angeles jet fuel market pushed the LA jet differential on May 15 to a record high of NYMEX June ULSD plus 65 cents/gal, the highest since Platts began assessing LA jet fuel in 1987. In a bold move, some market participants even went to the airlines themselves to ask for extra barrels, a buyer at a major airline told Platts. The beginning of June brought swings the other way, though; theLA jet fuel differential was down 10.50 cents to NYMEX July ULSD plus 2.50 cents/gal on June 1. US Energy Information Administration data released June 3 showed West Coast jet fuel stocks fell for the sixth straight week in the reporting week ended May 29, though, with imports failing to overcome overall draws, but ships carrying jet fuel are bound of the West Coast. How will the LA jet market look at the end of June and going into the rest of the summer?
By Elizabeth Bassett from Platts, McGraw Hill Financial