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Chinese leaders meet to set 2035 vision

  • Market: Coal, Crude oil, Petrochemicals
  • 30/10/20

Clean energy spending is likely to rise to meet China's carbon neutrality goal, while a shift to electric cars threatens fuel demand, write Kevin Foster and Karen Teo

The world's attention may be focused on Washington ahead of next week's US presidential elections, but another high-level political event taking place in Beijing is likely to prove much more significant for global energy markets.

More than 300 members of the Chinese Communist party's central committee met at the fifth plenum session on 26-29 October to chart the country's policy direction. The discussions, led by President Xi Jinping, focused on two key documents — the 14th five-year plan, which covers 2021-25, and a mid-term economic strategy called Vision 2035. The significance of this year's plenum for global energy markets has taken on far greater prominence following Xi's unexpected announcement last month that China is aiming to become carbon neutral by 2060.

Full details of the five-year plan are unlikely to be released until the national people's congress in March 2021. But some major themes are clear. The need to incorporate climate targets into the plan in the wake of Xi's 2060 pledge is likely to lead to a substantial increase in clean energy investments, potentially at the expense of coal. "We must accelerate the promotion of green and low-carbon development," the plenum concluded.

China is transitioning from a phase of rapid growth to one of higher-quality development, Xi says. Economic growth will continue to slow, with analysts expecting GDP targets — if they are set at all — to be around 4.5-5.5pc for 2021-25, down from 6.5pc in the 2016-20 plan. That will weigh on oil demand growth. But the government will also maintain its focus on urbanisation, including the creation of new megacities such as the Xiongan New Area near Beijing and the Greater Bay Area linking Hong Kong with Guangdong — helping to sustain infrastructure spending. China's urban population share is expected to rise by 10 percentage points to 70pc by 2035, equivalent to another 140mn people moving to cities.

This will all unfold under Xi's "dual circulation" strategy, under which China becomes more self-reliant and increases domestic consumption — something that may encourage Beijing to place greater emphasis on expanding domestic reserves and reducing its dependency on imports. Beijing wants to develop its technology base and reduce its reliance on US technology products, such as computer chips.

Balancing growth ambitions, domestic consumption and the carbon neutrality target will be a tough task, and one that could rely heavily on the development of new technologies. Cars running wholly on internal combustion engines may be effectively shut out of the Chinese market by 2035, with electric vehicles and hybrids accounting for all new sales by then, influential industry association the China Society of Automotive Engineers says. This threatens to slash China's 6mn b/d of gasoline and diesel demand, but could boost alternatives such as hydrogen.

Trump this, Washington!

The longer-term focus of this week's plenum discussions will not mask the immediate challenges facing China's leaders. Its external relations are at their most uncertain for decades, beset by US tariffs and increasingly aggressive efforts by Washington to pressure Beijing in the twilight of the Trump administration's first term. But Xi appears to have emerged from the turmoil of 2020 with his authority enhanced, helped by China's success in containing Covid-19. The Vision 2035 plans may further solidify Xi's position and help him maintain power well beyond the formal end of his second term in 2022 — in another contrast to the political uncertainty gripping the US.


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27/06/25

Bonn climate talks leave mountain to climb for Belem

Bonn climate talks leave mountain to climb for Belem

Deepening divisions between developed and developing countries promise to make Cop 30 an arduous summit, writes Rhys Talbot Paris, 27 June (Argus) — Progress in technical discussions at the UN climate conference in Bonn, Germany, still leaves much work for the incoming Brazilian presidency ahead of November's Cop 30 summit in Belem if it is to deliver a strong outcome on emission cuts. After a rocky start in Bonn this month, with a two-day fight over the agenda, negotiators delivered texts across a number of areas relating to emission reductions. The Brazilian Cop takes place 10 years after the Paris agreement, in which states agreed to limit global warming to well below 2°C and preferably 1.5°C, and two years after Cop 28 in Dubai, when they undertook the global stocktake (GST) to measure progress on reaching Paris goals and pledged to phase out fossil fuels. The annual Bonn talks are intended to allow negotiators to prepare the ground for political decisions to be made at Cop. But this year, even those discussions that have advanced well have tended to produce large texts with many mutually exclusive options in brackets, reflecting incompatible positions that will have to be worked out by policy makers between now and the end of the Belem Cop. The main arena for considering fossil fuels, a discussion of the meaning of the GST, has left a heavily divided text to Belem. Developed countries have argued for a longer, more extensive process, while some parties — including China, India and Saudi Arabia — have tried to limit the scope, duration and outputs of the sessions. And the texts do not directly address the elephant in the room — countries are this year delivering their nationally determined contribution (NDC) documents laying out their plans to cut emissions. Those plans are likely to be insufficient to limit global warming to 1.5°C. And the Brazilian presidency will have to grasp the initiative to find a way to ensure advances on the Paris and Dubai goals. The leader's summit to be held immediately before Cop could offer a chance for movement. The release of a keenly awaited synthesis report of NDCs on 24 October could offer a spur to this summit. "People will want a reaction from our leaders" when the report comes out, Cop 30 executive director Ana Toni said. But Brazil rejects the idea of a cover decision at the end of Belem as a home for discussion of fossil fuels. And the presidency has been reluctant to attack fossil fuels head on. "This is not an item of negotiation, the GST is," Toni said. Brazil must wrangle a fractious conference including major fossil fuel producers such as India, Saudi Arabia and Russia which resist any action on the topic, as well as facing criticism over its own plans to increase oil and gas production . Climate finance fight Climate finance permeated the Bonn talks, with developing countries trying to steer various work programmes towards the issue, while developed countries attempted to limit discussion. Developing countries said the finance settlement reached last year at Baku does not meet developed countries' obligations under the Paris agreement, as well as being far short of actual needs. And in parallel, they expressed their frustration with carbon border adjust mechanism (CBAM)-type arrangements planned for the EU and UK, and projected for Canada. Developed countries see these as essential to protecting their domestic industry and preventing carbon leakage, given their high carbon costs, but developing countries say the costs will fall mostly on them. These two issues appear likely to crop up again as stumbling blocks at Belem that the presidency will have to tackle with political engagement beforehand. Brazil has promoted Cop 30 as an "implementation" Cop, with no one particular agenda item dominating. This gives the country the arduous task of having to make concrete progress on many items, rather than focus on one headline target. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Mideast Gulf VLCC rates halve as ceasefire holds


27/06/25
News
27/06/25

Mideast Gulf VLCC rates halve as ceasefire holds

London, 27 June (Argus) — VLCC freight rates on key routes have fallen sharply since a ceasefire between Israel and Iran was announced on 24 June, with the Mideast Gulf to China route dropping 50pc in just three days. Rates on the Mideast Gulf to China route — a bellwether for the VLCC market — surged to a 2.5-year high of WS110 ($25.70/t) on 23 June, following US strikes on three nuclear facilities in Iran the previous day. Charterers remained active during the spike, securing vessels at elevated levels. Kuwait's KPC booked two ships for Asia-Pacific delivery — one at WS110 and another at WS120 — but both deals failed to hold after the ceasefire was announced. Since then, rates on the route have fallen by at least WS10 ($3.50/t) a day, settling at WS55 ($12.85/t) on 26 June. The pace of decline may slow as rates approach pre-conflict levels. With no direct impact on crude supply or infrastructure, freight rates are likely to revert to previous market levels. A similar pattern emerged in October last year, when Iran launched more than 200 missiles at Israel. Rates on the same route rose by over 13pc to $14.10/t within three days, according to Argus assessments, before easing back to just above pre-conflict levels as tensions subsided. Before the latest escalation, the Mideast Gulf to China route was nearing a year-to-date low, weighed down by weaker Chinese crude demand during refinery maintenance season. Higher official formula prices for Saudi crude also curbed buying interest, prompting Chinese refiners to turn to Latin American alternatives — freeing up tonnage in the Mideast Gulf. By Rhys van Dinther Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Forties crude loadings to hit four-year low in August


27/06/25
News
27/06/25

Forties crude loadings to hit four-year low in August

London, 27 June (Argus) — Field maintenance will cut North Sea Forties crude loadings to just 90,000 b/d in August — down 43pc from July and the first time exports of the benchmark grade have fallen below 100,000 b/d since June 2021. The August loading programme contains only four 700,000 bl cargoes, down from the seven shipments that are scheduled for export in July. The decline is driven by maintenance at Buzzard, the largest field contributing to the Forties blend. Operator CNOOC plans a three-week shutdown starting mid-August. The field has already been producing at reduced capacity since last week because of separate maintenance work. Forties often sets North Sea Dated as the cheapest of the benchmark grades, and has done so in more than half of June's trading sessions. Tighter availability could support Forties' value and lift the Dated price. Exports of Brent, another benchmark grade, are set at 45,000 b/d in August across two cargoes — the first time this year that more than one Brent cargo is scheduled in a single month. Only one Brent cargo is due to load in July, and none in May after the sole scheduled shipment was deferred to June. This limited liquidity undermines the reliability of Dated. If prices for light sweet crude rise when no Brent cargoes are within the assessment window, Dated would be set using an outdated Brent price. August loadings of fellow benchmark grade Oseberg are set at three cargoes, or 68,000 b/d, unchanged from July. Outside the Dated basket, the final July shipment of medium sour Norwegian grade Grane has been deferred into August, according to the latest loading programme. As a result, Grane loadings will average 158,000 b/d in both July and August, across seven cargoes. By Lina Bulyk Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Mexico’s trade balance swings to surplus in May


26/06/25
News
26/06/25

Mexico’s trade balance swings to surplus in May

Mexico City, 26 June (Argus) — Mexico's trade balance returned to surplus territory in May, as higher crude export volumes helped to offset drags on manufacturing from US tariffs. Mexico recorded a $1.03bn trade surplus in May, statistics agency Inegi reported Thursday, swinging from a $88mn deficit the previous month. Total exports in May were valued at $55.5bn, while imports reached $54.4bn. The surplus was wider than Mexican bank Banorte's forecast of $279mn. The balance reflects the trade deficit in oil-related products narrowing to $2.11bn in May from $2.87bn in April, as well as a rebounding surplus in non-oil trade to $3.14bn from $2.78bn in April. Mexico ran a $2.04bn trade surplus for the January-May period, including a $10.96bn surplus in non-oil trade and a $8.92bn deficit in oil-related trade. This reflects the longer-term trend of growing non-oil exports set against widening deficits of oil-related goods. Manufacturing exports — especially autos — have been the most affected by US tariffs enacted in March and April. Despite US exemptions tied to trade treaties, Mexico still faces an average effective US tariff rate of 11.9pc — the eighth highest globally and the highest in the western hemisphere, according to Fitch Ratings. The auto industry is also participating in negotiations to soften steel and aluminum tariffs to prevent further supply chain disruptions. Manufacturing exports fell by 0.6pc in May after a 0.7pc drop in April. Auto exports declined by 1.3pc in May, following a 4.8pc fall in April. Inegi reported a 10.3pc annual drop in the value of auto exports to the US in May, after an 8pc decline in April. Exports had surged 6.5pc in March as companies rushed shipments ahead of tariff implementation. Agricultural exports contracted by 2.6pc in May from the previous month after rising 2pc in April, while non-oil mining exports contracted 2.9pc after surging 26pc in April. Oil-related exports totaled $2.06bn in May — $1.33bn in crude and $722mn in refined products — compared with $1.83bn in crude alone in April. This comes despite a stronger peso and lower oil prices. Mexico's crude export mix averaged $57.88/bl in May, down $2.94/bl from April and $16.51/bl below the year-earlier level. Crude export volumes rose to 743,000 b/d from 693,000 b/d in April but remained below the 930,000 b/d exported in May 2024. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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US producers rushed to hedge on Israel-Iran oil spike


26/06/25
News
26/06/25

US producers rushed to hedge on Israel-Iran oil spike

New York, 26 June (Argus) — The short-lived surge in oil prices that followed the start of Israel's air strikes against Iran two weeks ago resulted in a flurry of hedging activity by US producers seeking to lock in higher prices, according to AEGIS Hedging. The Texas-based firm's platform set records in terms of volume, the number of trades and unique entities on 13 June, when WTI futures jumped 7pc following Israel's surprise attack on Iran, which prompted retaliatory strikes and fears of a full-blown conflict. "By any metric you want to look at, it was the busiest day on our platform," said Ryan Alexander, vice president for trading. Moreover, the number of trades was 70pc higher than in early January when the oil market was also in rally mode. "A lot of producers were taking advantage of the rally," said Alexander. "Not all of that trading was associated with oil, but I would say the vast majority of it was." Activity was focused on crude contracts for the second half of the year and 2026, reflecting the "prime hedging window" for most producers looking anywhere from 12-24 months out. "A lot of focus was at the front end of the oil curve, which obviously saw the most price appreciation," Alexander said. "Swaps were still the favored structure, which is pretty typical for the producer community." The week after the initial attack, speculative futures and options traders boosted their long positions of Nymex light sweet crude to a four-month high. Hedging activity has since slowed down, which is only to be expected given companies have hedged their required volumes and the rally subsided since major energy infrastructure was largely spared and a ceasefire appears to be holding. AEGIS carries out hedging for about 350 producers, the majority of which are based in the US. Its client base represents an estimated 25-30pc of US oil and gas production. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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