Commodity Tracker: 5 charts to watch this week

Market attention has turned to the implications of recent Trump tariffs on commodities, including the US LNG sector. Meanwhile, OPEC+ has announced an unexpected decision to raise production quotas amid price volatility. In biofuels, the German THG market is facing tightening supply while the European RME-FAME 0 biodiesel spread has reached a six-month low.

1. Trump tariffs hit major US LNG trading partners

What's happening? Sweeping tariffs from the Trump administration have created new risks for the US LNG sector, threatening to drive up costs for new projects and hinder long-term supply talks. The short-term impacts on existing trade flows may be limited and will depend on the response of buyer nations. Virtually all major US LNG trading partners were hit by protectionist measures ranging from 10% to over 50%. LNG spot prices in Europe and Asia plunged after the April 2 tariff announcements. That was part of a broader sell-down in global commodities and equities markets amid concerns that reduced trade would weigh on the global economy. China's April 4 announcement of a 34% retaliatory tariff on all US imports heightened those concerns.

What's next? Significant uncertainties remain, including whether the White House is open to negotiations to reduce or eliminate the tariffs. Market participants are also watching how world leaders will respond to the US tariffs. However, analysts say it is unlikely that Europe -- the main destination for US LNG in recent years -- will slap a retaliatory tariff on US LNG because of its need for the fuel.

Related topic: Trump and Commodities(opens in a new tab)

2. OPEC+ announces surprise May quota increase

What's happening? OPEC+ producers implementing 2.2 million b/d of voluntary crude production cuts announced plans on April 3 to raise quotas by a combined 411,000 b/d in May. The group started gradually easing the cuts from April. May quotas are now at the level previously planned for July. OPEC said that the group, which includes Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, changed policy "in view of the healthy market fundamentals and the positive market outlook." Some delegates and analysts said it was due to growing frustration with countries persistently producing above quota. The decision has compounded a price collapse triggered by announcements of US tariffs on its trading partners and retaliatory measures. Platts assessed Dated Brent at $66.68/b on April 7 -- the lowest level since August 2021.

What's next? Several factors beyond quotas will likely impact actual OPEC+ production volumes in the second quarter. These include supply and demand risks associated with global trade tensions and potential changes to sanctions affecting output in Russia, Iran and Venezuela. The group has also pledged to implement compensation cuts for overproduction since January 2024. Producers are expected to submit revised front-loaded compensation plans to the OPEC Secretariat by April 15. The voluntary cutters will hold monthly meetings to review market conditions, compliance and compensation. The next meeting will be held May 5 to decide on June production levels. A full OPEC+ ministerial meeting is scheduled for May 28.

Related topic: OPEC+ Oil Quotas and Geopolitics(opens in a new tab)

3. US West power forwards fall to record lows as hydro outlook climbs

What's happening? Pacific Northwest power forwards reached record lows in late March as the hydro outlook rose to a four-month high on wetter and warmer weather. On March 25, The Dalles Dam water supply forecast reached 98% of normal for the April-September forecast period, up 13 percentage points month on month. In reaction, Mid-C on-peak June sank to a nearly 8-year package low of $23.30/MWh.

What's next? Forward prices rebounded in early April as The Dalles forecast eased but remained well below year-ago packages. Mid-C on-peak June climbed into the low $30s/MWh, 34% below where the 2024 package was last year. By April 2, The Dalles forecast was at 90% of normal for the April-September forecast period, 8 points higher year on year. The Dalles forecast is expected to be above normal in April before slipping below normal in May and June.

4. German THG supply could tighten on poor physical blending, lack of carryover

What's happening? Platts, part of S&P Global Commodity Insights, assessed THG-Other at Eur130/mtCO2e April 3, representing a 13.3% increase from Feb. 21, amid a slowdown in physical blending due to poor production margins. With THG, or the tickets supply in Germany's greenhouse gas reduction quota, on par or even cheaper than blending HVO, players are purchasing quota rather than blending HVO in Germany. The THG market is being supplied by large volumes from the biomethane sector amid declining manure biomethane prices. Poor downstream demand for physical volumes and a lack of buyers in other markets have caused biomethane suppliers to push volumes to the German market due to its eligibility for double counting in the quota market.

What's next? THG is generated through blending biofuels and obligated parties can fulfill their requirements by either blending biofuels or purchasing THG, meaning the lack of physical blending would limit THG generation and lead to increased demand for THG as parties seek to fulfill their obligations.

5. European RME-FAME 0 biodiesel spread hits six-month low

What's happening? The European RME-FAME 0 FOB ARA spread has reached its lowest point in over six months, with RME and FAME 0 FOB ARA premiums assessed at $640/mt and $630/mt, respectively, on April 1. The spread has decreased dramatically, showing a 58.3% weekly decline and a 72.2% monthly drop. This narrow spread is attributed to limited high CFPP (Cold Filter Plugging Point) content availability and tight rapeseed oil supply. The market is experiencing a shortage of soybean methyl ester (SME) molecules, while the non-GMO rapeseed oil market remains particularly constrained.

What's next? Market sources anticipate the spread could widen to $30-$40/mt with incoming soybean methyl ester vessels. Brazil's 2024-25 soybean harvest, currently at 81.4% completion, suggests increased SME availability in the coming months. Meanwhile, demand for RME could fall as Europe enters the summer season and RME's colder-weather properties become less desirable.

Related topic: Biofuels and Energy(opens in a new tab)

With reporting and analysis from Corey Paul, Rosemary Griffin, Kassia Micek, Rebecca Li and Uzma Gulbahar