Energy crisis ripples through Asia-Pacific region

This week: China’s oil product export quotas may be too little to meet rising Asian energy demand, India’s wheat export approval is in focus and spotlight is on S&P Global Commodity Insights’ cross-commodity forums in India.

But first, all eyes will be on Asia-Pacific countries who are grappling with an energy crisis. High energy prices, fuel supply disruptions and growing shortages of oil, gas and coal has posed a challenge for these economies. Market participants expect the situation to worsen in the coming weeks. The widening energy crisis has forced governments to intervene. Australia, Singapore and Pakistan have announced measures to address the energy shortages.

Asian LNG prices are facing unprecedented volatility as the JKM spot price in North Asia rose nearly 35% in a single day on June 16. Tightening supply due to the outage at the Freeport LNG terminal in the US worsened after Russia further cut its pipeline gas supply to Europe.

That brings us to our social media question for the week: Will Asia’s LNG supply continue to worsen in coming months? Share your thoughts on Twitter and LinkedIn. 

Even the addition of more transportation fuel supplies from China are expected to be insufficient to meet rising Asian energy demand. Beijing recently granted additional oil product export quotas, but traders said the new export permit volumes are too little to quench Asia’s thirst for diesel, gasoline and jet fuel. The new export quotas could mean that China would be able to raise gasoline, gasoil and jet fuel exports to over 3 million metric tons in June though export volumes in the month are still expected to be 36% lower than last year.

In coal, export sentiment for low-calorific value Indonesian thermal coal remains bullish amid a pick-up in interest from buyers in China and India. Market participants will keep an eye on the results of the seaborne tenders issued by state-run Coal India. Traders will also wait for the conclusion of the annual contract negotiation between global mining giant Glencore and Japanese utilities to supply coal at a fixed price. The prices of Australian high-ash coal are likely to remain volatile till a contract is agreed upon for supplies to Japan.

Next up in agriculture, grains markets are closely watching India’s decision to approve wheat exports to at least five countries- Indonesia, Bangladesh, the UAE, Yemen, and Oman. If it’s implemented, this would be the third such tranche since India banned wheat shipments last month. Fresh supplies from India could weigh on Australian wheat export prices.

India’s wheat exports are seen to be around 7.5 million metric tons in marketing year 2022-23, slightly down from the previous season.

And finally, spotlight is on S&P Global’s cross-commodity forums this week in India. The Mumbai and New Delhi Forums are expected to see attendance from key decision makers and opinion leaders from the Indian commodity space, besides market experts from S&P Global.

Thank you for kicking off your Monday with us. Have a great week ahead!