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Market Movers Europe


Market Movers Europe, June 18-22: China-US trade war takes center stage; OPEC supply cuts hang in balance

With Ahila Karan, Associate Editor, Oil

June 18, 2018 09:28:57 EST (4:08)

In this week's Market Movers: European natural gas storage injections are expected to slow; key details on the future of the biofuels regime in Europe will be revealed; and the fate of Italy’s largest steelmaker should become clearer.


OPEC and non-OPEC ministers will meet in Vienna to tackle the fraught issue of what to do about their landmark deal to cut crude oil production, which was agreed in 2016.


Elsewhere, the market will be watching closely for further developments in the trade war between China and the US.


In the European natural gas market, the recent ramp-up in storage injections in continental northern Europe could slow because of planned outages on the Norwegian Continental Shelf and the IUK interconnector between the UK and Belgium.


Meanwhile, in biofuels, market participants will this week be looking for further official details on the future of the Renewable Energy Directive after 2020.


And finally, in metals, the fate of Italy’s largest steelmaker, Ilva, may become clearer this week. New Italian Deputy Prime Minister Luigi Di Maio is expected to continue a series of meetings with Ilva's three special administrators and all parties involved in ArcelorMittal’s planned acquisition of the mill.


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Video Transcript


In this week’s highlights: European gas storage injections are expected to slow; key details on the future of the biofuels regime in Europe will be revealed; and the fate of Italy’s largest steelmaker should become clearer.


But first, OPEC.


After hosts Russia somewhat undiplomatically thrashed Saudi Arabia 5-0 in the opening match of the World Cup, representatives of the two oil giants will meet again this week, this time on neutral territory and hoping for a less one-sided, more mutually beneficial outcome.


OPEC and non-OPEC ministers will meet in Vienna to tackle the fraught issue of what to do about their landmark deal to cut production, which was agreed in 2016. Back then, oversupply prompted unprecedented cooperation to cut production among countries, but that consensus appears to be falling apart. The pressure is on to find a way forward that satisfies a variety of goals, principally continuing to support prices while incentivizing demand and encouraging long-term investment in oil projects.


Elsewhere, the market will be watching closely for further developments in the trade war between China and the US.


In response to President Donald Trump’s decision to place tariffs on $50 billion worth of its imports, China launched a counterattack Saturday—threatening an additional 25% tariff on $50 billion of US goods, such as energy and agricultural products.


The tariffs are due to hit $34 billion of US agricultural products, cars and marine products from July 6. Additional duties on $16 billion of goods such as crude oil, LPG, gasoline, naphtha, fuel oil and natural gas will be announced at a later date. But LNG, which China is now consuming in large volumes, was not among the products targeted.


In the European gas market, the recent ramp-up in storage injections in continental northern Europe could slow because of planned outages on the Norwegian Continental Shelf and the IUK interconnector between the UK and Belgium.


This chart shows Northwest European inventory levels, with the current gas year appearing in pink. As you can see, injections were high through May. But with the IUK interconnector, which has been sending as much as 30 million cubic meters per day to the continent, offline for two weeks and Norwegian outages taking a 50 million cubic meters per day chunk out of supply this week, the scope for injections will be reduced.


Meanwhile, in biofuels, market participants will this week be looking for further official details on the future of the Renewable Energy Directive after 2020. The future parameters agreed will have a sweeping impact on Europe’s biofuels market.


Member states will be debriefed on Wednesday on the results of last week’s talks between the European Parliament, Council and Commission—with a final discussion due to take place the following week. On the use of palm oil, one of the most controversial topics, the EU institutions opted to freeze palm oil use at current levels and to phase out palm oil in transport entirely by 2030.


In metals, the fate of Italy’s largest steelmaker, Ilva, may become clearer this week.


New Italian Deputy Prime Minister Luigi Di Maio is expected to continue a series of meetings with Ilva's three special administrators and all parties involved in ArcelorMittal’s planned acquisition of the mill.


ArcelorMittal is planning a $2.7 billion investment to boost safety and curb pollution at the plant, while cutting 4,000 from the 14,000 strong workforce. It plans to close on the acquisition by the end of this month. Di Maio’s Five Star Movement is opposed to the ArcelorMittal deal and in the recent general election promised to find a better alternative.


Di Maio is now under pressure to firm up the party's plans. However, with the huge number of jobs at stake, it is unlikely he would seek to close Ilva or drastically reverse the work done by the previous government.


Thanks for kicking off your Monday with us, and have a great week ahead.





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