Best in Energy – 24 January 2023

Freeport LNG requests approval to restart some operations

Pakistan restores power transmission system after blackout

North Sea seabed conflicts between wind farms and CCUS

U.S. official denies easing sanctions on Iran oil ($BBG)

Investors bet on rapid inflation slowdown ($WSJ)

U.K. explores tariff to protect steelmakers ($FT)

Nuclear reactor life extensions to 80 years ($BBG)

CHINA imported 508 million tonnes of crude oil in 2022, down from 513 million in 2021 and 542 million in 2020, according to preliminary data from the General Administration of Customs. Slower imports as the country grappled with intermittent  lockdowns eased pressure on global petroleum supplies. But the economy’s re-opening is likely to boost crude imports and tighten the market in 2023:

Best in Energy – 12 January 2023

PJM says 46 GW of generators failed to respond ¹

U.S. says price cap is cutting Russia’s oil earnings

Global LNG import volumes hit record high

Freeport LNG outage extended to February

French aluminium smelter begins restart

South Africa hit by worst ever power cuts

Freight forwarder cuts employment ($WSJ)

Australia/China coal trade restarts ($WSJ)

Saudi Arabia plans full nuclear fuel cycle

LME’s nickel-market breakdown inquiry

¹ PJM’s post-event study for winter storm Elliot on December 24 is worth reading in full and confirms the major problem was the failure of many generators to respond to instructions from the grid because of a failure to start up or secure enough fuel (principally gas). Generators were unavailable even though they had been given repeated warnings of an extreme weather event for several days beforehand and told to prepare for a plunge in temperatures. In many cases, generators provided less than 1 hour of notice they would not be available. If generators cannot be depended upon to respond to instructions they cannot be considered firm dispatchable power for reliability purposes.

In response, PJM was forced to initiate a series of relatively extreme emergency measures to protect the transmission system, including voltage reductions and an order for flat-out maximum generation from units that were available.

U.S. PETROLEUM INVENTORIES including the strategic reserve totalled 1,599 million barrels on January 6, the lowest seasonal level since 2004. Stocks have fallen by -185 million barrels over the last 12 months and are down by -518 million barrels from their peak in mid-2020 as production has persistently fallen below consumption:

Best in Energy – 7 December 2022

G7/Russia oil price cap evolution

China relaxes epidemic controls

India to purchase more gas for power generation

North Carolina’s 3rd day of blackouts after sabotage

Russia/China gas pipeline enters service (trans.)

Russian oil tanker spoofs position signal ($FT)

Russian oil tanker spoofs AIS maritime signals

London’s last great killer smog this week in 1952

BRENT calendar spreads slipped into contango yesterday through May 2023. The combined six-month spread moved into contango for the first time (outside the month-end expiry process when prices and spreads are unrepresentative) for the first time since November 2020, before the first successful coronavirus vaccines were announced:

LONDON is experiencing a period of unusually low temperatures this week, exactly 70 years after similar conditions between December 5 and December 9, 1952, caused the “Great Smog” resulting in 4,000 excess deaths. As temperatures dropped to freezing, domestic and commercial coal combustion surged, sending thousands of tonnes of particulates into the air over the city. A temperature inversion trapped smoke in low-lying areas along the Thames, between the hills surrounding the metropolitan area. For four days and nights, the metropolitan area was blanketed with a suffocating mixture of fog and smoke. The map below shows areas with the worst pollution, which were also the areas with the highest excess mortality:

Best in Energy – 20 October 2022

Ukraine faces blackouts after Russia targets grid

EU gas storage and government controls ($BBG)

European Commission’s energy price plans

U.S. official says price cap not aimed at OPEC

Russia’s looming tanker crisis

CCS tries to make projects profitable ($FT)

EU states withdraw from energy pact ($FT)

Plague – natural selection and your DNA

U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -6 million bbl last week. Petroleum inventories have depleted in 88 of the last 120 weeks by a total of -486 million bbl since the start of July 2020:

U.S. DISTILLATE FUEL OIL inventories have fallen in 70 of the last 120 weeks by a total of -71 million bbl since July 2020. Stocks are at the lowest seasonal level since the U.S. Energy Information Administration began publishing weekly data in 1982:

Best in Energy – 5 October 2022

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[MUST READ] Critical infrastructure protection ($BBG)

Germany plans more financial help for gas importers

Nord Stream sites off limits as authorities investigate

U.S. trade oil groups warn against banning exports

Europe accelerates deployment of electric vehicles

Bangladesh hit by widespread electricity blackout

U.S./Saudi relations strained by oil policy ($FT)

Iran’s social unrest is broadening ($WSJ)

EU28 GAS STOCKS were +158 TWh (+19%) higher on October 3 than on the same date in 2021, after one of the largest inventory accumulations on record this summer:

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Best in Energy – 11 July 2022

Saudi Arabia’s oil production capacity scrutinised

Canada to return Nord Stream impounded turbine

Ocean carriers likely to revert to slow steaming

India rejects US/EU calls to boycott Russian oil

France plans for complete loss of Russian gas

France prepares to switch from gas to fuel oil

Freight rates start to soften as volume falls ($WSJ)

U.S. central bank tries to avoid stop-go policy ($WSJ)

U.K. businesses prepare for onset of recession ($FT)

China boosts coal by rail deliveries by +9% (trans.)

Texas appeals for electricity conservation on July 11

U.S. BUSINESS inventory ratios have started to climb as sales slow and firms struggle to shift extra items ordered on a precautionary basis at the height of the supply-chain crisis. Manufacturers, wholesalers and retailers held inventories equivalent to 1.29 months worth of sales in April up from a cyclical low of 1.26 months in November. Excess stocks are concentrated at the retail level where the ratio has climbed to 1.18 months up from 1.09 months in October 2021.

U.S. inventory ratios remain low by pre-pandemic standards but will climb quickly if sales slow further in response to rapid inflation and a business cycle downturn. Inventory reduction is likely to weigh on economic growth over the next six months as businesses to limit or reverse overstocking:

TEXAS temperatures have climbed well above the long-term seasonal average since the start of July increasing the strain on the state’s isolated electric grid. Cumulative cooling degree days since the start of the year have been almost +30% higher than the 1981-2010 average:

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Best in Energy – 14 June 2022

Pakistan hit by long blackouts as EU diverts LNG ($BBG)

Northeast Asia’s tepid LNG imports offset Freeport blast

U.S. shale producers opt not to accelerate drilling

U.S. finances construction of rare earths plant

Yang/Sullivan hold another round of talks (trans.)

(see also far briefer statement from White House)

U.S. INTEREST RATE traders expect the federal funds rate to reach 3.50-3.75% by January 2023 up from 0.75-1.00% at present as the central bank attempts to bring inflation under control. If they prove necessary, increases on this scale would result in a significant slowdown in the business cycle:

DATED BRENT calendar spreads are signalling exceptional tightness over the next two months. The extreme backwardation is consistent with the disruption of Russia’s exports and the maintenance season for platforms, pipelines and fields in the North Sea. But it could also be a sign the market is being squeezed. Strong fundamentals create ideal conditions for a squeeze. “Always squeeze with the grain of the market not against it,” as a veteran trader told me over lunch many years ago:

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Best in Energy – 19 May 2022

India’s grid is struggling to supply record demand

(see also background article on power shortages)

U.S. grid faces reliability challenges this summer

Indonesia boosts energy subsidies by $24 billion

EU elects to turn from Russia gas back to coal ($FT)

Bloomberg’s plan to shake up UK journalism ($BBG)

U.S. PETROLEUM inventories including the strategic petroleum reserve depleted by another 8 million bbl to 1,691 million bbl last week. Inventories have depleted in 72 of the last 98 weeks by a total of 426 million bbl since the start of July 2020. The persistent shortage of oil is putting intense upward pressure on prices:

U.S. GASOLINE stocks fell by 5 million bbl to 220 million bbl in the week to May 13. Inventories have fallen for 14 of the last 15 weeks by a total of 30 million bbl and are now at the lowest for the time of year since 2014:

U.S S&P 500 equity index has fallen by 7% compared with the same period a year ago, and is down by 15% in real terms, as investors anticipate an imminent business cycle slowdown:

U.K. INFLATION has accelerated to 9%, the fastest rate since 1982 and one of the most significant price shocks since the Second World War:

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Best in Energy – 16 May 2022

China’s coal output rises sharply in Jan-Apr

China utilities to rebuild coal stocks ($BBG)

U.K. gasoline and diesel sales start to fall

EU hurries to rebuild depleted gas inventories

EU explores emergency price cap on gas ($BBG)

Climate pressure tempered by energy security

EU/Ukraine steel trade disrupted by war ($FT)

Texas grid appeals for electricity conservation

South Africa increases load-shedding blackouts

EU backs down on rouble gas payments ($BBG)

Remote workers balk at return to office ($WSJ)

CHINA’s coal production climbed by almost +12% in the first four months of the year compared with the same period in 2021, as the government ordered miners to maximise output to reduce the risk of electricity shortages and cut dependence on imports from Australia:

U.S. TRANSPORTATION SERVICES (freight, post and passengers) prices increased at an annualised rate of almost +47% in the three months from January to April – as the supply chain remained under pressure and fuel costs surged after Russia’s invasion of Ukraine and sanctions imposed in response:

U.S. CONSUMER SENTIMENT has weakened sharply this month and has fallen to levels consistent with a recession in the past:

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