· Brent prices have traded up by 9% so far in the ongoing quarter, with substantial support to prices coming after the decision from the OPEC+ to reduce its supply by ~2mn bpd—announced earlier in Oct’22. OPEC+’s reduced production levels are envisaged at 41.9mn bpd, which would last up till Dec’23.

· The United States retaliated by releasing its Strategic Petroleum Reserves (SPR) in the market, expected to keep prices in check. According to data from the EIA, the SPR stock held by the United States have dropped by 16.6mn bbls between Sep 30, 2022 and Oct 28, 2022, to 399.8mn bbls—the lowest levels seen since 1984.

· Richard bay coal prices have decreased 27%MoM in Oct’22 to a low of US$215/ton, showing a sustained decline that was quite evident in the last two months. However, coal prices are currently trading at higher levels of US$225/ton while the FYTD average now stands at US$305/ton and CY22 avg. coal prices stand at US$288/ton.

· On the local front, capacity expansion in the North region by LUCK, FCCL, and MLCF is expected to add around 6mn tons of new capacity into the mix. However, recent PBS data showed that the retail prices in the North region have increased by 1.2%WoW basis, suggesting that capacity additions in the region may not necessarily result in a price dilution.

· Going forward, crude oil prices would be dictated by the severity of the winter season, specifically in Europe. As of writing, severe winters have not yet hit the region, hence heightened demand for fossil fuels is yet to be witnessed by the region. However, we expect crude oil prices to remain resilient around current levels for the near-term, with higher prices in the interest of Russia and Saudi Arabia.

Courtesy- AKD Research