Commodity Tracker: 4 charts to watch this week

Gas storage levels in Europe and Asia's appetite for Russian crude oil are in focus this week. S&P Global Commodity Insights editors also keep an eye on the status of Australia's thermal coal and LNG imports.

1. EU gas storage sites on track to meet November filling target

What's happening? EU gas storage sites are now filled to 77% of capacity and are on track to meet the bloc's Nov. 1 filling target of 90% well ahead of time. The EU's overall stock level is expected to hit 95% of capacity by the end of September, according to S&P Global Commodity Insights analysts.

What's next? If storage sites are filled by the end of the summer, traders could look to use spare storage capacity in Ukraine to store surplus gas. This was the case in 2020 after the pandemic saw reduced gas demand and European storage sites top out well before winter. However, there concerns remain about the security of storing gas in Ukraine given the ongoing war.

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2. Asia could see more crude cargoes from Russia

What's happening? The failed military uprising by the Wagner mercenary group in Russia may have shaken President Vladimir Putin's government and raised some concerns over the country's upstream operations, but there are no signs that Russian oil supply is in jeopardy. Russia's energy industry is operating normally and is preparing for the autumn and winter season, accumulating stocks and carrying out necessary maintenance, Russian Deputy Prime Minister Alexander Novak said.

What's next? Asia could witness higher inflows of Russian crude following the aborted military uprising as Moscow could deviate from OPEC's tight supply stance and look to sell more oil to buyers in the region. Traders and officials refineries in India, China, South Korea, Japan and Thailand said that the attempted military coup indicated Russian Putin's political future could be vulnerable. This means he could pay less and less attention to the OPEC+ alliance's collective output and market stability strategies as Kremlin's utmost priority would be to make sure the regime's finances are secure. The share of Russian crude in India's 2023 total refinery feedstock import basket is projected to reach close to 40%, a sharp jump from just under 20% in 2022 and 2% in 2021, according to 12 traders and analysts at multiple refiners and trading companies across Asia surveyed by S&P Global.

3. Australia jostles in glutted thermal coal market to win back buyers

What's happening? Australian thermal coal sellers are gradually clawing back the market share in Asia they lost in 2022, when Russian coal was offered at relatively attractive rates, shuffling trade equations. Australian coal supplies to China have been rising since the latter lifted its unofficial ban on Australian imports in January, although export levels are still lower than in 2019 when China was regularly procuring Australian cargoes. With Europe not buying coal at the moment due to high stockpiles and relatively cheaper LNG, suppliers from all over the world are flocking high consumption regions in Asia, arresting the possibility of any significant increase in Australian coal prices.

What's next? Although rising temperatures and the ensuing power demand in key markets like China and India could boost coal demand, elevated domestic coal output in both countries could prevent buyers from looking for supply in the seaborne market. Muted economic activities have also kept coal import demand in check. In China, higher production and imports have resulted in substantial coal stockpiles in China. If this trend of lower industrial activity in the country continues, the need to import will also come down. Russian coal prices now have limited room to drop from current levels, and this could play in favor of Australian exporters.

4. Japan looks at Qatar, UAE prospects for diversifying LNG supply sources

What's happening? Japan currently sources more than 40% of its LNG from Australia, and has more than 24 million mt/year of long-term Australian LNG supply contracts due to expire by 2039, with more than 8 million mt/year set to expire by 2029 unless they are extended, according to S&P Global's LNG database. Sources and analysts told S&P Global that the reforms to Australia's Safeguard Mechanism that took effect July 1, could affect cost scenarios for investments and could result in a likely increase in LNG import prices.

What's next? Japan is finding an increased need to diversify its LNG import portfolio, given Australia's recent policy change and uncertainty over its role as a stable long-term LNG supplier, and it is exploring LNG supplies in Qatar and the UAE, a source with direct knowledge of the matter told S&P Global. The answers Tokyo gets to its questions about the Safeguard Mechanism reform will be among the factors Japanese companies weigh when considering renewals of long-term contracts with Australian suppliers, the source said.

Reporting by Stuart Elliott, Phil Vahn, Anupam Chatterjee, Pritish Raj