Best in Energy – 4 August 2022

OPEC+ raises output  by de minimis amount¹

Electricity transmission links undervalued

Freeport LNG to restart partially in October

Autos/semiconductors relationship

Automakers see weakening demand

¹ Higher oil production by Saudi Arabia and the other Gulf monarchies was briefed as one of the benefits from U.S. President Joe Biden’s visit to the region and “reset” of the relationship with Saudi Arabia last month. The tiny output increase of +100,000 b/d was the smallest that could be announced without appearing to snub the president completely. But it raises the question of what diplomatic benefits the president achieved from the trip – if not higher oil output did he secure some other objectives? Who advised the president to make this trip, within the administration and outside? Does the president ultimately see it as a success or a disappointment?

BRENT spot prices and calendar spreads have weakened consistently in recent weeks, a sign the recent upward price cycle has begun to break down. Prices and spreads are softening in response to the increased probability of a recession dampening oil consumption:

BRENT’s calendar spread from December 2022 to December 2023 has softened to a backwardation of $7.20 per barrel, down from $16.50 in early June, and close to its lowest levels since Russia invaded Ukraine in February. Traders are anticipating an imminent business cycle slowdown will relieve under-production in the oil market and stabilise inventory levels:

IF YOU would like to receive best in energy plus my research notes every day, you can add your email to the circulation list here: https://eepurl.com/dxTcl1

Best in Energy – 28 April 2022

India cuts electricity to industrial users

EU importers to pay for gas in roubles ($FT)

China’s major problem with vaccines ($BBG)

Poland/Bulgaria alternatives to Russian gas

Automakers revert to vertical integration

China’s passenger rail traffic down (trans.)

U.S. gas production areas

INDIA’s electricity consumption climbed to a record of more than 201,000 megawatts at the peak on April 26. But grid stability is deteriorating with average frequency trending lower and prolonged under-frequency excursions pointing to insufficient generation. Frequency is now so low for so much of the day controllers no longer appear to be trying to maintain it close to 50.0 Hz and have instead accepted a lower frequency as normal. States have begun to restrict supplies to industrial users during peak hours to maintain stability and reduce the risk of a cascading failure:

U.S. PETROLEUM inventories fell by -2 million bbl to 1,697 million bbl last week and are now down by -421 million bbl since the start of July 2020:

U.S. DISTILLATE inventories fell -1 million bbl to just 107 million bbl last week, the lowest seasonal level since 2008:

IF YOU would like to receive best in energy and my research notes via email every day, you can add your email to the circulation list here: https://eepurl.com/dxTcl1