Commodity Tracker: 6 charts to watch this week

Europe is looking at healthy levels of gas stocks ahead of winter, with tanks reaching over 80% of capacity almost two months ahead of schedule. In Asia, anticipation over China's aviation industry comeback is expected to drive jet fuel demand. Meanwhile S&P Global Commodity Insights editors are also monitoring Turkish rebar prices, California's power demand, India's rice export policy, and US aromatics inventories.

1. EU gas storage reaches November target ahead of time

What's happening? EU gas stocks reached above 84 Bcm on Aug. 29 with gas tanks across the region now over 80% full, according to GIE AGSI. The initial target, adopted in the wake of Russia's invasion of Ukraine, called for gas storage sites to be filled to at least 80% capacity by Nov. 1.

What's next? EU gas tanks could be brimming by end-October if EU-wide net gas storage injections continue at the current high rate, and could still reach close to 90% of capacity before November if net storage injections ease closer to the five-year average rates. Sustaining net injections at a high level could prove to be challenging, with key factors to watch including the level of Norwegian gas flows to Europe, LNG arrivals, and any unlikely uptick in Russian gas flows through the Nord Stream pipeline or through the Ukrainian transit route.

2. Asian jet fuel demand expected to rebound strongly in 2023

What's happening? The aviation sector continues to normalize, but the recovery has been uneven across regions. Asia has been lagging behind, particularly in the first half of the year, mainly due to China's intermittent lockdowns as it sticks to its "dynamic zero" COVID-19 policy. Airlines in the region flew a combined total of 11.3 million international passengers in July, according to the Association of Asia Pacific Airlines, surpassing the 10-million mark for the first time since February 2020. Despite this, the passenger count was still 66% lower compared to the corresponding pre-pandemic month.

What's next? Kerosene/jet is set to be the key driver of global oil demand in 2022, contributing to one-third of the growth, as countries open their borders to international visitors. With an H2 comeback, Asia is expected to account for 18% of global kero/jet demand growth this year before jumping to 63% in 2023 with China back in the picture. However, even with this growth, Asia's kero/jet fuel demand in 2023 will still be about 17% lower than 2019's level as full recovery for international and leisure travel takes time.

3. Turkish rebar offers jump following 50% rise in energy cost

What's happening? Turkish rebar producers sharply raised their export offers by $20-$40/mt on Sept. 1 in reaction to recent increases of at least 50% in gas and electricity prices, which in turn drove up the cost of scrap melting to produce steel via the electric arc furnace route. The new export rebar offers were raised to a minimum of $685/mt FOB Turkey. No increase in buying activity was observed following the offer hike. The situation is also pressuring Turkish producers to seek reduction in other input costs.

What's next? With energy costs unlikely to fall anytime soon and scrap prices keeping firm, Turkish mills are expected to stick to their higher rebar offers for some time to avoid severe margins erosion. Export rebar demand, which has been very slow recently, needs to pick up for the higher offers to gain any traction. Without improved finished steel sales and with high input costs, Turkish steelmakers may be forced to implement further production cuts.

Go deeper: Turkish Rebar Export Price Assessment Explained

4. What California's ICE car ban could mean to power demand

What's happening? The California Air Resources Board Aug. 25 voted on the proposed Advanced Clean Cars II, banning the sale of new internal combustion engine passenger vehicles in the state by 2035. The regulation begins with requiring 35% of new vehicle sales to be zero-emissions in MY 2026 with an interim target of 68% in MY 2030. This mandate is mostly consistent with State Gov. Gavin Newsom's September 2020 Executive Order N-79-20, which set a goal of 100% in-state sales of new passenger cars and trucks to be zero-emissions by 2035.

What's next? This decision may reduce the on-road ICE fleet by almost 5 million vehicles and add over 14 million EVs to the state's vehicle fleet if the 100% ZEV sales target is reached. The targets will help to add certainty around previously announced greenhouse gas emissions reductions goals, particularly in the transportation sector, but will raise demand on the California power grid.

5. Indian rice market unnerved as government continues to mull export restrictions

What's happening? Buyers are retreating from India's rice market amid conflicting reports citing anonymous government sources on the country's rice export policy. Speculations have been circulating for months, but a recent report stated that the government was planning to ban broken rice exports. Platts Indian 100% broken white rice closed Sept. 2 assessed unchanged on week at $325/mt FOB.

What's next? Participants will eagerly be watching for updates on the pace of kharif or main season crop planting, which has been affected by sporadic rainfall, thereby fueling ban speculations. As of Aug. 26, planted area totaled 36.8 million hectares, 7.4% below average, according to data from the government.

6. US aromatics prices face further downward pressure

What's happening? US Gulf Coast aromatics producers have been putting up a tough battle against sinking prices due to weakening blending demand that appeared to be equally affecting other octane boosters. Toluene and mixed xylene prices peaked in June, surpassing pre-pandemic levels, but have been falling sharply as the summer driving season is coming to a close. Inventories stood at 196.1 million barrels in the week ended Aug. 26, the lowest level year-to-date, data from the US Energy Information Administration showed.

What's next? Any upward price movement for toluene and mixed xylenes is expected to be limited. Higher reid vapor pressure gasoline production season has started, favoring other blending components. There could be pockets of opportunity to boost aromatics inventories, but prices could tank further if demand does not meet built-up supply.

With reporting and analysis by Nikolaos Aidinis Antonopoulos, JY Lim, Kang Wu, Wojciech Laskowski, Jamie Dorner, Peter Storey and Sue Koh