China's oil appetite in focus as new consumption tax takes effect - S&P Global

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This week: Market awaits China crude data for May, LNG to see sustained demand as Olympics start next month, and Japan's Q3 aluminum premium soars.

But first, China's consumption tax on light cycle oil, bitumen blend and mixed aromatics finally came into effect June 12. The move is likely to make imports of these commodities commercially unviable, and largely reduce inflows. All eyes will be on how buyers in China move to fill the vacuum created by this policy change. Chinese buyers will be actively looking for alternative supplies to overcome the roadblock created by the tax. Which countries are Chinese buyers likely to target for alternative supplies?

For this week's social media question. Which countries are Chinese buyers likely to target for alternative supplies? Share your thoughts on Twitter with the hashtag PlattsMM.

Meanwhile, the market is eagerly waiting for China's crude production and throughput data for May, which Beijing is set to release June 16. Here's China's crude throughput over the last two years. Market participants and analysts will be reading the numbers closely, to see how China's crude supply and consumption might shape up in the coming months.

Staying with oil, Chinese refineries are waiting for the second batch of quota allocations for crude oil imports and oil product exports. The second batch of quotas is expected to be released after the Dragon Boat Festival ends on June 14. These volumes are expected to be limited, which could dampen China's crude imports and oil product exports.

Moving to coal, thermal coal prices have hit near three-year highs. This bullishness has been driven by power and feedstock demand in China, where economic activity remains strong. The Platts Northeast Asian Thermal coal price crossed 100 dollars per metric ton last week, its highest since around mid-2018.

Meanwhile, spot LNG for the summer has not been this strong since the summer of 2018. The Platts JKM price for spot LNG was assessed slightly above 12 dollars per MMBtu, and nearly five times higher on the year. LNG's summer demand will be sustained in the coming weeks from Asia, including Japan, as the Olympics start in July.

And finally, in metals, Japan's Q3 aluminum premium more than doubled on the year, published at 185 dollars per metric ton on June 9. Demand in Japan will remain strong in Q3 from the automotive sector, amid producers selling less volumes to other Asian countries due to the higher premium in the West. But, the market might see the wide backwardation between June and July dampen the premium for prompt cargoes. Also, with China set to release state aluminum reserves into the market later this month, it remains to be seen whether the premium will continue to rally.

For more on the issues affecting commodity markets from wherever you are, make sure to check out Platts LIVE at the address displayed on your screen.

Thanks for kicking off your Monday with us. Have a great week ahead.

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