Best in Energy – 5 June 2023

OPEC⁺ extends production cuts into 2024 (Reuters)

Saudi Arabia to cut extra 1 million b/d in July (WSJ)

Saudi Arabia cuts again to boost oil prices (FT)

Saudi Arabia cuts alone to lift oil price (Reuters)

OPEC⁺ to review members’ output capacity (OPEC)

Saudi Arabia wants ‘fair hearing’ on oil policy (FT)

Bangladesh power cuts on fuel shortages (Reuters)

Solar panels eventually need to be recycled (BBC)

U.S. oil and gas drilling down as prices fall (Reuters)

LME tries to make inventories more visible (Reuters)

U.S./Iran diplomats try to restart negotiations (FT)

U.S./China in ‘secret’ diplomatic talks (FT)

China’s gas consumption fell in 2022 (EIA)

U.S. OIL DRILLING activity has fallen again, with the number of active rigs targeting oil-rich formations down by -15 over the seven days ending on June 2. The oil rig count is down by -72 (-11%) from its recent peak at the start of December 2022. The cyclical upturn in drilling that started after the first wave of the coronavirus pandemic is over. Drilling activity is falling in line with lower oil prices since the middle of 2022:

Best in Energy – 2 June 2023

China/India imports of Russia crude at record (Reuters)

UAE campaigns for higher OPEC allocation (Bloomberg)

OPEC⁺ caught by consumption uncertainty (Bloomberg)

Exxon plans to boost shale recovery rates (Reuters)

U.S. GAS INVENTORIES accumulated by +110 billion cubic feet to 2,446 billion over the seven days ending on May 26. Stocks were +280 billion cubic feet (+13% or +0.67 standard deviations) above the prior ten-year seasonal average up from a surplus of +217 billion (+13% or +0.47 standard deviations) at the start of the refill season on April 1:

Best in Energy – 1 June 2023

OPEC bans some journalists from meeting as prices slide (FT)

OPEC has not invited some reporters to next meeting (Reuters)

European insurers balk at loss of business from sanctions (FT)

Europe sells surplus and ageing coal stocks to Asia (Bloomberg)

China ups imports of cheaper coal to record high (Bloomberg)

Nigeria’s fuel hoarding after threat to remove subsidies (FT)

U.S. firms adjust financial statements as economy slows (WSJ)

U.S. residential electricity prices increased +13% in 2022 (EIA)

Wind turbine blades and recycling (Power Technology)

Vaca Muerta oil output forecast to grow (Reuters)

U.K. water pipes and leak detection (Bloomberg)

Zoonotic diseases surveillance and control (GAO)

BRENT calendar spreads between August and September and between September and October have continued to soften and are now trading only in a very narrow backwardation. OPEC⁺’s unexpected output cut announced at the start of April briefly halted the weakening of nearby spreads but it has resumed. Traders now anticipate any significant tightening in the oil market will not occur until the fourth quarter of 2023 at the earliest:

Best in Energy – 31 May 2023

Gatik tankers adjust maritime services (Reuters)

Singapore detains more oil tankers (Bloomberg)

Russia’s ship-to-ship crude transfers (Vortexa)

U.S./UAE diplomatic and security relations (WSJ)

U.S./China manufacturing supply chains (WSJ)

U.S. logistics firms hit by slower demand (WSJ)

U.S. debt deal and energy permitting (Reuters)

U.S. energy insecurity and lower incomes (EIA)

CHINA’s manufacturers reported a widespread decline in business activity in May as the post-coronavirus rebound ran out of momentum. The official NBS purchasing managers’ index slipped to 48.8 (2nd percentile for all months since 2011) down from 49.2 (5th percentile) in April and 51.9 (92nd percentile) in March:

U.K. ROAD FUEL prices have fallen by between -22% (diesel) and -24% (gasoline) from the record peak in July 2022, relieving some of the financial pressure on households as well as freight transportation firms:

Best in Energy – 30 May 2023

China’s economic rebound has lost momentum (WSJ)

China’s dependence on fuel and fuel imports (Guardian)

China’s firms slash costs of silicon wafers (Bloomberg)

U.S./China strategic competition and risk reduction (FT)

Saudi Aramco’s contested equity valuation (Bloomberg)

Saudi Arabia becomes major diesel trading hub (Reuters)

UAE chairmanship of climate conference criticised (FT)

India’s new refineries may be smaller in future (Reuters)

Vietnam cuts street lighting to conserve power (Reuters)

HEDGE FUNDS and other money managers increased short positions in NYMEX WTI by +10 million barrels to 72 million barrels over the seven days ending on May 23. Bearish short positions had increased by a total of +50 million barrels over the five weeks since April 18:

U.S. OIL AND GAS drilling activity continued to slow in response to the fall in prices since the middle of 2022. The number of active rigs fell by -9 over the seven days ending on May 26 and has dropped by a total of -73 (-9%) since the start of December 2022:

Best in Energy – 26 May 2023

Nickel trade flows transformed after price spikes (Reuters)¹

Maritime services firms end contracts with Gatik (Reuters)

U.S. shale slows research and development spend (Reuters)

China puts first commercial airframe into service (Reuters)

India’s coal generation and changing climate (Bloomberg)

Semiconductor firms push back against U.S. controls (WSJ)

U.S./China semiconductor security controls broaden (WSJ)

Norway’s complicated policy on oil and gas emissions (FT)

¹ Spiking commodity prices usually encourage changes in behaviour and innovation that have long-term impacts on production and consumption. In nickel’s case the surge in prices to more than $50,000 per tonne in 2007 has encouraged a long-term shift from cathodes and other highly refined forms of nickel to nickel pig iron (NPI) and other forms of lower-quality metal. At the time, many observers predicted users would never switch wholesale to NPI because of its quality issues. But businesses and markets are good at innovating around bottlenecks if the price incentive is strong enough.

EUROPE’s gas storage reached two-thirds full on May 24, the second earliest date in the last 13 years, and 57 days earlier than the average since 2011:

EUROPE’s gas prices are slumping to encourage more consumption by power generators and industrial users and slow the accumulation of inventories. Front-month futures have fallen to €25 per megawatt-hour down from €77 at the start of 2023 and a peak of almost €340 in August 2022:

Best in Energy – 25 May 2023

U.S. LNG exports and impact on domestic prices (EIA)

OPEC⁺ expected to leave output unchanged (Bloomberg)

Greenhouse effect’s intellectual history (Conversation)

Mining as limiting factor for energy transition (Reuters)

Asia coal imports rebound in 2023 (Reuters)

China/Russia gas pipeline negotiations (FT)

U.S. airlines report more near-misses (WSJ)

U.S./China cyber-espionage (Reuters)

(see also joint statement by Five Eyes)

U.S. PETROLEUM INVENTORIES including the strategic reserve depleted by -12 million barrels in the seven days ending on May 19 to the lowest seasonal level since 2004. There was a major drawdown in commercial crude stocks (-12 million barrels) with smaller draws in gasoline (-2 million) and distillate fuel oil (-0.5 million) but a small build in jet fuel (+1 million). Commercial crude stocks are in line with the prior ten-year seasonal average (+0.01 standard deviations) but there are substantial deficits in gasoline (-1.20 standard deviations) and distillates (-1.45 standard deviations):

Best in Energy – 24 May 2023

China pushes new gas line from Turkmenistan (Reuters)

U.S/EU aluminium smelters call for more aid (Reuters)

Forestry and carbon sequestration (Energy Monitor)

Philippines switches to expensive LNG (Reuters)

U.S./China attempt diplomatic opening (WSJ)

Energy transition investment survey (Bain)

Germany’s exports to China drop (FT)

U.S./China semiconductor conflict (FT)

EUROPE’s gas inventories amounted to 754 TWh on May 22. Stocks were +273 TWh (+57% or +2.00 standard deviations) on May 22 above the prior ten-year seasonal average compared with a surplus of +267 TWh (+51% or +2.72 standard deviations on February 6. Inventories are the second-highest on record for the time of year and the surplus is narrowing very slowly. Stocks are on track to peak at 1,237 TWh at the end of the refill season, exceeding the available storage capacity of around 1,139 TWh. Futures prices for deliveries in June and July continue to fall to encourage more consumption and divert cargoes to Asia:

Best in Energy – 23 May 2023

Germany to subsidise industrial power (Reuters)

Boeing sceptical on sustainable aviation fuel (FT)

U.S. western states in Colorado river deal (WSJ)

Ford’s procurement deals for lithium (FT)

Ocean shipping container production falls (FT)

U.S. retailers near end of destocking cycle (WSJ)

EUROZONE manufacturers have reported another widespread decline in business activity so far in May. Preliminary results show the purchasing managers’ index slipping to 44.6 (6th percentile for all months since 2006) in May down from 45.8 (8th percentile) in April and 54.6 (67th percentile) a year ago. The index is firmly in recession territory at the lowest level since the first wave of the pandemic in March-May 2020 and before that July 2012 and October 2008-June 2009 following the financial crisis:

EUROPE’s gas storage is refilling more slowly than average as a result of a relatively cold start to spring and sharply lower prices encouraging more consumption by industry and power generators. Storage sites across the European Union and United Kingdom (EU28) topped up their fill by +10.3 percentage points between March 31 and May 21 compared with a prior ten-year average top up of +11.3 percentage points. But because storage started from a record high, fill remains exceptionally high. EU28 storage was 65.9% full on May 21, the second highest on record, and compared with a prior ten-year seasonal average fill of just 44.7%:

Best in Energy – 22 May 2023

China’s lithium futures prices rebound (Reuters)

Nigeria starts up major new oil refinery (Reuters)

California approves more transmission (Reuters)

U.S. military to indigenise explosives supply (WSJ)

Asia LNG imports rise following price drop (Reuters)

Argentina oilfield workers strike on safety (Reuters)

Crude oil prices are falling in real terms (Bloomberg)

Russia’s oil output increasingly opaque (Bloomberg)

Russia/Asia energy trade volume rises  (Bloomberg)

EUROPE’s front-month gas futures price has fallen below €30 per megawatt-hour from €77 at the start of January 2023 and a record of almost €340 in August 2022. Gas inventories are plentiful following a mild winter and cuts in industrial consumption. As a result storage is on course to be full well before next winter starts. Prices are declining to stimulate industrial demand and divert LNG to more price-sensitive customers in South and East Asia:

U.S. OIL DRILLING is slowing in response to the fall in prices since the middle of 2022. The cyclical upturn in drilling activity that started after the end of the first wave of the pandemic in August 2020 is likely over. The number of active rigs targeting oil-rich formations fell to 575 over the seven days ending on May 19 down -11 compared with the previous week and by a total of -52 compared with the early December 2022: