Commodity Tracker: 5 charts to watch this week

OPEC+'s planned production increases provide reassurance for Asian refiners amid rising demand for Middle Eastern crude. Simultaneously, Dutch gas prices are falling due to weak LNG demand, and Middle East LPG prices are at new lows.

1. OPEC+ supply increase reassures Asian refiners

What's happening? Asian refiners are optimistic about meeting monthly requirements due to the OPEC+ supply increase, despite India's rising demand for Middle Eastern sour crude. The recent easing of the Dubai market structure has alleviated concerns about Persian Gulf official selling price hikes. On March 7, the spread between front-month cash Dubai and same-month Dubai swap was assessed at $1.365/b, down from $5.04/b on Jan. 17. Saudi Aramco reduced April OSP differentials for Asia-bound crude by 30-60 cents/b.

What's next? OPEC+ plans to ease production cuts from April, with the Joint Ministerial Monitoring Committee meeting on April 5. This decision is expected to balance supply and demand, accommodating India's increased demand. The reduced Dubai market structure may lead to further cuts in OSPs for May and Q2 Asia-bound cargoes, benefiting Asian refining margins. However, Japanese refiners emphasize the need for diversification beyond Middle Eastern sources due to geopolitical risks. Thailand, Taiwan, and South Korea are increasing US crude imports as alternatives, with significant year-over-year increases in January imports.

2. Dutch gas contract falls

What's happening? The Dutch TTF month-ahead contract dropped to Eur37.645/MWh on March 6, its lowest since September 2024, amid a paper selloff and weak Asia-Pacific LNG demand. This marks a significant decline from Eur58.135/MWh on Feb. 10. European gas traders attribute the decline to hedge fund exits, leading to rapid liquidation in an oversold market. The UK-based trader noted that low competition for LNG is benefiting Europe as LNG continues to flow into the region.

What's next? The market remains volatile, with potential risks of paper traders re-entering. The recent 8.47% drop exemplifies the ongoing instability in European gas markets. The bearish sentiment is mirrored in global gas markets, with the April JKM price for LNG in Northeast Asia falling to $12.302/MMBtu on March 7. China's gas and LNG imports have also decreased, totaling 20.3 million mt in January-February, a 7.7% year-over-year decline. This trend suggests continued low competition for LNG in Europe, possibly stabilizing prices but maintaining volatility.

3. US distillers dried grains prices fall

What's happening? Tariff uncertainty is the primary driver behind current challenges in the US distillers dried grains with solubles market. Barge market prices have declined from a peak of $206/st on Feb. 20 to $185/st by March 4, while the Chicago truck market sees pressure and holds at $162/st. The ongoing tariff concerns have led to limited trade, causing the market to shift towards domestic consumption. In addition to the tariff uncertainty, a surplus of products and weak demand are putting downward pressure on prices. Sources have noted that market activity remains slow as these factors continue to hinder trade. As a result, the market is facing challenges in finding a clear direction.

What's next? Looking ahead, market participants expect further price declines, although potential weather concerns during planting and the upcoming ethanol plant shutdowns could offer some price support.

4. Middle East LPG prices hit new lows

What's happening? Middle East LPG prices have fallen to their lowest in over eight months as of March 6, driven by declining Western crude prices and the anticipation of increased LPG production. This follows OPEC+'s decision to ease production cuts starting April. Platts assessed FOB Arab Gulf propane at $569/mt and butane at $557.50/mt. The front-month May Brent crude futures dropped to $69.51/b. The LPG cargo differential improved to minus $14/mt compared to previous lows.

What's next? OPEC+'s easing of production cuts is expected to increase crude oil and associated gas production, including LPG and NGLs. This could lead to higher supply levels and potential downward pressure on LPG prices. For every 1 million b/d increase in oil production, Saudi Arabia, Kuwait, and the UAE could see LPG production rise by 2 million mt/year, 1.9 million mt/year, and 2.2 million mt/year, respectively. Despite the March CP being lower than February, it remains higher than pre-announcement CP swap levels, indicating potential market volatility.

5. Atlantic LNG market trends amid uncertainties

What's happening? Atlantic LNG prices have risen due to geopolitical tensions, low storage levels, and anticipated colder weather in Europe. On March 10, Platts assessed the DES Northwest Europe Marker for April at $12.506/MMBtu, reflecting a 4% daily increase. The EU imported 15.6 million mt of Russian LNG in 2024, up from 13.1 million mt in 2023. EU gas inventories are at 36.8% of capacity, and Europe is drawing more cargoes from the Pacific to offset reduced Russian gas flows.

What's next? As peace talks in the Russia-Ukraine conflict continue, the EU remains committed to phasing out Russian gas under the REPowerEU initiative. Market opinions differ on the return of Russian gas, with some traders suggesting it might follow new US LNG project contracts. Gas storage levels in Europe are expected to remain below 30% by the end of March 2025, increasing summer LNG demand as EU states aim to fill storage to 90% by November. Cooler weather forecasts for late March could further heighten demand pressures.

Reporting and analysis by Philip Vahn, Nikita Pravilshchikov, Paola Caballeros, Norazlina Juma'at, Angeles Rodriguez, Clio Ho, Megan Gildea, and Sakshi Jalan.