Markets await OPEC+ decision over oil production cut extension - S&P Global

All eyes on OPEC+ meeting as markets await group's decision over oil production cut extension

This week: Uncertainties surround LNG winter demand, metals players to take cue from China's manufacturing data, and toluene term talks for 2021 underway.

But first -- Asia, home to the world's largest crude buyers, will focus on the OPEC+ ministerial meeting on Dec. 1, where discussion will focus on the current market conditions and the group's coordinated action in 2021.

Decision made at this meeting will give direction to crude prices. Brent crude prices have pushed near $50/b in recent days - the highest levels since March.

In mid-November, an advisory panel of delegates recommended delaying the group's supply increase for up to six months, given the strong consensus view that surging COVID-19 cases in many western countries and the revival of Libya's crude production will pressure oil prices through early next year.

At the same time, vaccines in development have demonstrated strong preliminary testing results. This is buoying hopes for an oil demand-boosting end to the pandemic if the injections become widely available in 2021.

So, here's our social media poll question for the week. Will the OPEC+ extend the output cut in the first half of 2021? Share your thoughts on social media with the hashtag PlattsMM.

Still in oil, Beijing is expected to soon release the first batch of 2021 oil import and export quotas.

The crude import quota allocation will give an indication of China's crude appetite in the first few months of next year. The Ministry of Commerce has lifted the import quota limit volume by 20% to 243 million mt for 2021 from this year, setting an upward tone.

But questions surround export quota trends for gasoline, gasoil and jet fuel, as over 10 million metric tons of allocations are unlikely to be used this year due to lower global demand.

Now, a decent report on China's November manufacturing data could spur sentiment and provide more buying confidence in the metals and raw materials space. Seaborne iron ore prices have been getting back to around 130 dollars per metric ton CFR China. Restocking and some supply tightness could further support prices this week.

Tensions between China and Australia around coal imports has heightened, leaving millions of tons of Australian coal are sitting on boats off Chinese ports unable to land.

Australian thermal coal, on the other hand, could see strong demand from India and Japan amid supply woes from other high-CV coal origins such as Russia and Colombia.

In Indonesia, Kalimantan thermal coal prices could maintain its upbeat momentum on the back of a slew of Chinese seaborne procurements with additional import quotas released for the remainder of 2020.

In LNG, winter demand is in focus after spot prices jumped last week due to supply disruptions.

South Korea's LNG demand and imports could get a boost from Seoul's announcement to close of 9 to 16 coal-fired power plants in the country from Dec. 1 to Feb. 28 to reduce pollution during the winter period.

South Korea and Japan expect below-average to average temperatures this winter. Cooler weather traditionally supports LNG consumption but pandemic resurgence in both countries could dampen demand.

In petrochemicals, toluene producers in the Far East vie to ink higher premiums next year. This is mostly a reaction to Taiwan's CPC sealing a premium levels in the 20s per metric ton versus Platts FOB Korea toluene assessment for 2021 term supply. BUT traders were reluctant, and this resulted in a stalemate on the term talks. The FOB Korea toluene physical price rebounded to 446 dollars per metric ton on Nov 26, posting the strongest level in eight months.

And finally in shipping, rates on some East Asia routes are expected to hit fresh one-month high as China is estimated to send one million b/d of refined products to overseas.

At a time when refineries across East Asia are cutting output due to poor margins and sourcing the required products from elsewhere, this implies that those Chinese barrels may find their way to Singapore, Japan and South Korea and support clean tankers freight.

Thanks for kicking off your Monday with us. Stay safe and have a great week ahead!

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