Start each workday with our analysis of the most pressing developments affecting markets today, as well as a selection of our latest and most important insights on the global economy.
APPEC clarifies key themes in Asian oil markets
From September 4-6, industry leaders, government officials and the press gathered in Singapore for the 39th annual S&P Global Commodity Insights Asia Pacific Petroleum Conference (APPEC). Discussions at the conference focused on the issues of oil demand recovery in Asia, uneven demand recovery in the region, tightening oil market fundamentals and prospects of global recession. Geopolitics remains a major issue, with discussions over Russian crude and capping oil prices following the invasion of Ukraine remaining points of contention. The evolution of trade flows and the growth of Indian demand were also key topics. In a recent S&P Global Commodity Insights “Oil Markets” podcast, S&P Global Platts experts discussed takeaways from the conference and their thoughts on oil markets in general.
China relatively timid economic growth was on the minds of many conference attendees. China’s real GDP growth forecast fell to 5.2% for 2023 from 5.5% and to 4.8% for 2024 from 5.0%. Although these numbers continue to indicate economic strength, many market participants believe that India will replace China as the center of long-term growth in oil demand.
“China has supported global demand for crude over the past 20 years, but in the next three to five years, Chinese demand will peak and then it will start to decline,” said Fereidun Fesharaki, chairman of China’s energy consultancy FGE, during a press conference. an APPEC panel on China, India and Russia. “The global market must look to India or other countries to check demand resilience. »
India and China have actively purchased Russian crude at discounted prices, driven by Western countries’ oil price caps. Even though the discounts available under the price cap have reduced since 2022, India and China remain buyers. Indian crude oil imports from Russia are expected to account for 35-40% of overall imports in 2023. Growth in Chinese demand for Russian crude is lower. Before the invasion of Ukraine, China imported approximately 1.6 million barrels of Russian oil per day. It now imports around 2.0 million b/d. This reflects a growing trend in Asian markets focus on affordability rather than sustainability or energy security. Eric Van Nostrand, Acting Assistant Secretary for Economic Policy, US Treasury Department, defended the effectiveness of price caps at the conference.
“In the first half of this year, compared to last year, the Kremlin’s oil revenues decreased by 50%,” Nostrand said. “At the same time, in the middle of summer, the supply of Russian oil has decreased very little. (…) We have a somewhat optimal supply and, at the same time, Russian revenues have been reduced.”
Despite the discounts available on Russian oil, refineries in Asia and the Persian Gulf continue to sell their products. depend on Middle Eastern crude. Regardless of overall production cuts, OPEC producers and its allies have made efforts to ensure Asian buyers receive the necessary volumes. About 95% of Japan’s total crude imports in the first seven months of 2023 came from the Middle East. But the continuation of OPEC+ production cuts and their impact on prices have been points of discussion at APPEC.
“The biggest issue that concerns people in the oil sector is this battle over value or volume when it comes to producers in the crude oil market,” said Dave Ernsberger of S&P Global Commodity Insights. “It was a constant refrain about how long Saudi Arabia would continue to restrict production and when the price would be ‘high enough’.”
Today it’s Friday September 22, 2023and here is the essential intelligence of the day.
Written by Nathan Hunt.
Economy
Economic Research: Barometer of the American economic cycle: the risk of recession remains high in a context of uncertain growth prospects
The probability of a recession over the next 12 months has moderated since the start of the year but remains high at between 30 and 35%. Data from key coincident indicators show that the current expansion is at the end of its cycle, indicating that any further short-term cyclical surge in growth is limited by the underlying growth potential of the economy. Major leading indicators give mixed signals about near-term growth prospects, and the current expansion is expected to enter a period of slower-than-trend growth in the coming quarters.
—Read the report S&P Global Ratings
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Capital markets
Banking as a Service still boosts bank deposits, but carries risks
Overall, banking as a service (BaaS) seems like an ideal partnership. Fintech companies have proven their ability to innovate and create modern, user-friendly interfaces, as evidenced by the rapid growth of direct-to-consumer neobank deposits. The banks they partner with have elements that fintechs often lack, including back-end architecture for account management, Federal Deposit Insurance Corp. insurance. and in-depth regulatory knowledge.
—Read the article by S&P Global Market Intelligence
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International trade
Saudi oil policy based solely on supply and demand: crown prince
Saudi Arabia’s oil policy is based solely on supply and demand, Crown Prince Mohammed bin Salman said September 20 in an interview broadcast on Fox News. “We simply monitor supply and demand. If there is a shortage of supply, our role in OPEC+ is to fill the shortage. If there is an oversupply, our role is to measure this for market stability,” he said, when asked about OPEC+. supply reductions benefiting Russia. Saudi Arabia has been criticized for maintaining cooperation with Russia and introducing significant cuts, at a time when Western countries have imposed broad sanctions in response to Russia’s invasion of Ukraine. Production cuts have driven up prices, helping Russia cope with sanctions, soaring war costs and discounts on its crude.
—Read the article by S&P Global Commodities Outlook
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Sustainability
Listen: On the Ground at Climate Week New York: The Challenge of Scope 3 Emissions
This week, the ESG Insider podcast is on the ground at Climate Week NYC for a special series of interviews on the sidelines of the Nest Climate Campus. In this episode, hosts Lindsey Hall and Esther Whieldon sit down with Matt Helgeson. Matt is Head of Sustainability at Siemens USA, the US arm of German conglomerate Siemens AG, a technology company focused on manufacturing, infrastructure, transportation and healthcare. Matt talks about what he’s heard so far at New York Climate Week and the challenges presented by Scope 3 greenhouse gas emissions, i.e. emissions that occur up and down a company’s supply chain as well as when a customer uses the company’s products. He also shares his views on what needs to happen to make Climate Week NYC a success.
—Listen and subscribe to ESG Insider, a podcast from S&P Global Sustainable1
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Energy and raw materials
Listen: How far can he go? Crude market tensions trigger oil price surge
OPEC+ production cuts continue to impact both crude oil and refined products. Dated Brent hit a 10-month high. Prices in the diesel market are also increasing amid supply constraints. Meanwhile, the latest IEA report warns investors of strong demand in the fourth quarter. In this episode of the Platts Oil Markets podcast, London-based oil journalist Robert Perkins and oil price journalists Sam Angell and Sasha Foss join Francesco Di Salvo to discuss the current bullish sentiment supporting prices as market participants react to the latest oil developments. markets.
—Listen and subscribe to Platts Oil Markets, a podcast from S&P Global Commodities Outlook
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Technology and media
AWS, Azure and Google ready to invest in AI infrastructure
Second-quarter financial results show hyperscaler parent companies Amazon.com Inc., Microsoft Corp. and Alphabet Inc. are exploiting the ubiquitous market opportunities brought by the generative AI frenzy. All three are forging synergistic partnerships with AI startups to secure access to intellectual property and provide compute capacity – likely at a discount – for training and tuning models. Meanwhile, Google LLC reaffirms its claim to leadership in AI as the operating margin of its Google Cloud unit moved into positive territory.
—Read the article by S&P Global Market Intelligence
