Tag: oil

Best in Energy – 30 April 2024

G7 insurers say oil price cap increasingly unenforceable (UK  Parliament)

United Kingdom’s large-scale electricity storage needs (Royal Society)

Vogtle nuclear reactors finally enter commercial service (Reuters)

Ukraine requests help to protect gas storage sites (FT)

U.S. energy-related emissions fell -3% in 2023 (EIA)

CHINA’s manufacturers reported that activity expanded for the second month running in May. The purchasing managers index slipped to 50.4 (52nd percentile for all months since 2011) in May from 50.8 (61st percentile) in April. The consecutive readings were the highest since February and March 2023 when the economy was emerging from the end of lockdowns and the exit wave of the pandemic. The critical question is whether the momentum can be sustained:

U.S. GAS-FIRED combined cycle generators operated at 62.7% of their maximum capacity in January, a record for the time of year. Extreme cold in the middle of the month boosted electricity consumption while ultra-low gas prices encouraged maximum generation from gas at the expense of coal. Gas costs were so low even much less efficient single-cycle gas turbines and steam turbines reported record seasonal utilisation of 14.1% and 16.6% respectively:

Best in Energy – 24 April 2024

South China Sea disputes block oil and gas development (Bloomberg)

South Caucasus – conflict and energy development (Energy Flux)

EU single market reforms and competitiveness (European Council)

China’s electric vehicle manufacturing evolving rapidly (Reuters)

Vietnam wants to boost coal as drought hits hydro (Bloomberg)

Japan’s low-emission generation set to surge in 2024 (Reuters)

South Asia’s LNG buyers start to balk at rising prices (Reuters)

U.S. gas consumption set monthly and annual records in 2023 (EIA)

U.S. INTEREST RATE traders expect the central bank will cut overnight interest rates only once or possibly twice before the end of the year. Fed funds futures imply an expected interest rate of 4.95% in December 2024 compared with a current target range of 5.25-5.50%. Forecasts for earlier and more aggressive rate reductions have evaporated as business activity strengthens and consumer price inflation remains sticky, well above the central bank’s target of a little over 2% per year:

BRENT’s futures contract for June 2024 is being squeezed higher in the run up to expiry, but prices further forward have risen much less, implying the production-consumption balance is not expected to alter significantly over the next 12-18 months.  Prices for cargoes loading in June 2024 have climbed by almost +$12 per barrel (+15%) since December 2023. By contrast, prices for loadings throughout calendar 2025 are up by less than +$6 (+8%) over the same period:

Best in Energy – 23 April 2024

U.S. shale production growth has dampened oil price volatility (FT)

Electric vehicle deployment increasingly reliant on China (IEA)

China’s electric vehicles seize market share on low cost (Reuters)

Electricity prices – hedging strategies and tail risks (Oxford Energy)

United Kingdom’s last coal-fired power station to close (Guardian)

California’s roof top solar depresses daytime power prices (WaPo)

CHINA’s solar generation capacity has more than doubled since the end of 2021. Solar is the fastest growing source of additional generation. Installed capacity reached 660 million kilowatts at the end of March 2024 up from 307 million kilowatts at the end of 2021 and 174 million kilowatts at the end of 2018:

U.S. SOLAR distributed generation with net metering had more than doubled in 2022 compared with 2017, has since grown even further. The number of customers with solar panels and net metering reached 3.9 million in 2022 up from 1.7 million in 2017. The total capacity connected to local distribution systems had reached 38 gigawatts up from 16 gigawatts five years earlier. The massive expansion is depressing electricity prices when generation is maximised and on-site demand is low (midday periods in the spring and autumn shoulder seasons):

Best in Energy – 19 April 2024

Energy transition in an era of higher interest rates (Woodmac)

Iran and Israel signal end to missile therapy sessions (Reuters)

China warns about floods amid heavy spring rains (Xinhua)

China forecasts more rains across southern areas (Xinhua)

China’s urban areas hit by widespread subsidence (Reuters)

Europe solar generation depresses daytime prices (Reuters)

India sources more crude from Russia in 2023/24 (Reuters)

U.S. hydro generation predicted to recover in 2024 (EIA)

Europe’s electric vehicle sales are dwindling (Bloomberg)

Iran recalls intelligence ship from Gulf of Aden (Bloomberg)

SOUTH CHINA is experiencing heavy rainfall with the strongest spring rains since 2022 and before that 2016. The city of Yibin at the confluence of the Min and Yangtze rivers on the border of Sichuan and Yunnan has already received 104 millimetres of rainfall so far in April compared with a full-month seasonal average of 84 millimetres between 2014 and 2023. The spring rains should start to recharge the hydroelectric system after a prolonged drought in 2022/23.

For China’s hydro generation, the location of rainfall is critical, given almost all the major generating stations are located in the south and southwest of the country. What matters is precipitation across the Tibetan plateau; the south and southwest (Yunnan, Sichuan, Guizhou, Hunan, Guangxi and Guangdong); and the lower reaches of the Yangtze, often called Jiangnan (including parts of Anhui and Jiangxi). These are precisely the areas currently being inundated by heavy rainfall:

Best in Energy – 18 April 2024

United States reimposes symbolic sanctions on Venezuela (FT)

United States to apply Venezuela rules case-by-case (Reuters)

Iran’s crude oil exports and U.S. sanctions enforcement (FT)

Amazon’s Big River competitive intelligence operation (WSJ)

U.S. solar manufacturers petition for new tariffs (Reuters)

U.S./Iraq gas capture and generation agreements (Reuters)

BRENT’s calendar spreads have continued to soften as traders downgrade the probability the conflict between Iran and Israel will escalate to the point where it disrupts oil production and exports. The spread from June to December 2024 has fallen to its lowest for more than five weeks. Most of the softening has come in the nearest-to-deliver June-July and July-August spreads where most of the speculative money is concentrated and where the supply-demand balance would be impacted most immediately by any escalation that threatened oil production and exports from the Persian Gulf. Traders have concluded Iran will not risk any disruption of its exports; the United States will not risk higher oil prices in an election year; and the United States will restrain the next round of responses by Israel:

Best in Energy – 17 April 2024

U.S. trucking hit by overcapacity (WSJ)

China’s crude oil imports in 2023 (EIA)

China new power storage rule (Xinhua)

Energy and trade policies (White House)

Butterfly effect: historical review (MIT)

OIL TRADERS anticipate the heightened confrontation between Israel and Iran will not have a significant impact on crude oil supplies, either through a tightening of oil-related sanctions on Iran or disruption of tanker traffic through the Strait of Hormuz. Brent’s calendar spread between June and December 2024 has softened to a backwardation of $4.27 per barrel from a recent high of $5.61 on April 5. The spread is still in the 94th percentile for all overlapping six-month periods since 2000. But it has reverted to month-ago levels before Israel’s attack on Iran’s diplomatic building in Damascus and Iran’s massive missile and drone attack on Israel:

Best in Energy – 16 April 2024

Global gas market review and outlook (Oxford Energy)

Russia repairs war-damaged oil refineries (Reuters)

Hawaii electric grid warns about blackouts (Reuters)

India expands coal generation capacity (Bloomberg)

U.S./Iran oil sanctions enforcement (Reuters)

INDIA’s temperatures are climbing in the pre-monsoon season, increasing air-conditioning and refrigeration electricity demand. So far, however, there has been no repeat of the heatwaves of March and April 2022, which has helped keep the power grid stable:

Best in Energy – 15 April 2024

Iran/Israel missile therapy downplayed by oil traders (Reuters)

ERCOT issues no-touch notice ahead of warm weather (Reuters)

EU energy transition, sanctions and resilience (Oxford Energy)

India orders fossil fuel generators to standby (Reuters)

U.S. residential electricity storage (Woodmac)

Gas-fired generators during the eclipse (EIA)

China’s coal production reserve (Xinhua)

U.S./Russia LNG project sanctions (WSJ)

U.S. warehouse rents level off (WSJ)

NORTHERN HEMISPHERE temperatures were the highest on record during the winter of 2023/24. Land surface temperatures were +2.64°C above the 20th century seasonal average between October and March up from +1.94°C during winter 2022/23 and the previous record of +2.38°C in winter 2015/16. Record warmth contributed to the enormous surplus of gas inventories in North America and Europe and the sharp drop in gas prices:

Best in Energy – 11 April 2024

U.S. electricity consumption by data centres (Reuters)

China’s industrial capacity and global trade (Reuters)

Oil majors and responsibility for emission cuts (Shell)

U.S. oil output and associated gas prices (Energy Flux)

Global coal generation capacity rose in 2023 (GEM)

U.S./Iran nuclear diplomacy and enrichment (WaPo)

EU GAS CONSUMPTION fell slightly between December and February compared with a year earlier. Gas use in the seven largest consuming countries (Germany, Italy, France, Netherlands, Spain, Belgium and Poland) in winter 2023/24 was -15% below the ten-year pre-invasion and pre-pandemic average compared with -13% in winter 2022/23:

U.S. SERVICE SECTOR price rises are accelerating as the economy pulls out of the mid-cycle slowdown in 2022/23. Services prices were rising at an annualised rate of +7.0% over the three months ending in March and +8.7% if rent of shelter is excluded. The service sector is much larger and more labour intensive than manufacturing. Prices are rising much faster than the central bank’s whole-economy target of a little over 2% per year and the overshoot is growing. The positive interpretation is the economy is proving more resilient than expected; the negative one is any interest rate reductions have been postponed until later in the year and may be off the table completely:

Best in Energy – 4 April 2024

OPEC⁺ lifts oil prices up to its sweet spot (Reuters)

U.S./China conflict on industrial capacity (Reuters)

Russia’s refinery repairs hit by sanctions (Reuters)

Russia’s refineries, drones and sanctions (Carnegie)

Russia cuts gasoline exports (Reuters)

U.S./India oil price cap cooperation (Reuters)

U.S. INTEREST RATE traders have scaled back expectations for rate cuts this year in response to stronger than anticipated data on business activity, jobs and inflation. The central bank is now expected to cut rates by just two or three quarter-points by the end of 2024 – with a roughly equal chance of each outcome:

EUROZONE manufacturers are still struggling to emerge from the prolonged downturn caused by the end of the pandemic and the sharp increase in energy prices following Russia’s invasion of Ukraine. The purchasing managers index slipped to just 46.1 (14th percentile for all months since 2006) in March and has been below the 50-point threshold dividing expanding activity from a contraction for 21 months running: