Tag: diesel

Best in Energy – 1 July 2022

Shipping lines cancel more ocean sailings as demand falls

Friendshoring starts to reshape minerals supply chains

OPEC+ tries to maintain unity despite U.S. pressure

Baltic grid operators ready for rapid re-synchronisation

Russia plans for nationalisation of Sakhalin-2 gas project

U.S. Supreme Court curbs authority of regulatory agencies

Japan faces power shortages throughout summer ($WSJ)

China starts west-east electricity transmission line (trans.)

Coal’s resurgence sends prices soaring ($FT)

U.S. DISTILLATE FUEL OIL supplied to the domestic market averaged 3.68 million b/d in the four weeks ending on June 24 down from 3.88 million b/d in the same period last year. The volume supplied is an estimate subject to considerable short-term errors and volatility so it should be interpreted with extreme caution. But the reduction of -0.2 million b/d is relatively large and would be consistent with the onset of an economic slowdown:

EUROZONE MANUFACTURERS reported a much narrower increase in business activity this month as inflation and sanctions push the region’s economy towards recession. The purchasing managers’ index slid to 52.1 in June (47th percentile for all months since 2006) down from 54.6 in May (65th percentile) and 63.4 in June 2021 (a record):

U.S. REAL PERSONAL INCOMES less transfer payments (PILT) were up by just +1.8% in May compared with the same month a year earlier. PILT is one of the indicators monitored by the National Bureau of Economic Research’s Business Cycle Dating Committee to determine peaks and troughs in the cycle. PILT growth has been slowing since the start of the year and is now in only the 30th percentile for all months since 1980, implying the economy is losing momentum as inflation outstrips earnings:

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Best in Energy – 17 June 2022

White House mulls export gasoline and diesel controls ($BBG)

Australia threatens export controls on coal ($FT)

U.S. energy secretary to talk with oil refiners

Australia’s power generation shortage eases

Qatar/China negotiate joint ventures in LNG

U.S. power prices forecast to rise

U.S. GASOLINE prices at retail level and adjusted for wages are now at the highest since 2013. Wage-adjusted gasoline prices are in the 94th percentile for all months since 1994, up from the 60th percentile at the end of 2021. At this level, demand destruction should be evident within the next few months:

FREEPORT LNG’s prolonged disruption is expected to reduce exports from the United States to Europe significantly and tighten the European gas market. Reduced pipeline flows from Russia are likely to worsen the shortfall.

The premium for gas delivered in Northwest Europe rather than at Louisiana’s Henry Hub next month has more than doubled to €109/MWh up from €50 on June 7.

Europe’s summer-winter calendar spread from July 2022 to January 2023 has reverted to a backwardation of almost €3/MWh from a contango of more than €14 on June 8 as traders anticipate the market will be tighter:

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Best in Energy – 16 June 2022

U.S. central bank raises interest rate by +0.75%

US/EU concern about insurance sanctions ($FT)

White House complains about refining margins

U.S. refiners respond to president’s letter

EU/Russia gas flows fall sharply

Australia’s electricity market suspension

Australia appeals for power conservation

China to centralise iron ore buying ($FT)

Biden team divided over economy ($WSJ)

U.S. FEDERAL RESERVE increased its target range for the federal funds rate by +75 basis points to 1.50-1.75%, the largest increase since 1994. In real terms, monetary policy has become increasingly stimulative because inflation has risen faster than rates. The real interest rate had fallen to -5.25% in May 2022 compared with -3.75% in May 2021 and +0.38% in May 2019. The large rise was designed to signal the central bank’s determination to bring inflation under control as well as to start making real interest rates less stimulative:

U.S. PETROLEUM INVENTORIES including the strategic reserve depleted by -3 million bbl to 1,682 million bbl last week. Inventories have fallen in 75 of the last 102 weeks by a total of -435 million bbl since the start of July 2020. Stocks are at the lowest seasonal level since 2008:

U.S. DISTILLATE INVENTORIES rose by +0.7 million bbl to 110 million bbl last week. East Coast stocks increased by +1.2 million bbl to 27 million bbl. But total stocks remain -27 million bbl (-19%) below the pre-pandemic five-year seasonal average. Although inventories have started to accumulate seasonally the deficit is not narrowing because refineries cannot make enough fuel to rebuild stocks:

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Best in Energy – 13 June 2022

Reuters has launched a new twice-weekly newsletter called Power Up curated by my talented colleague David Gaffen. It covers all Reuters’ top energy stories. If you would like to receive it, you can add your email to the distribution list here: https://www.reuters.com/newsletters/reuters-power-up/

Oil price shock to persist into 2023 ($BBG)

Oil prices expected to rise further ($FT)

U.K. government orders fuel price inquiry

U.S. refinery processing likely to accelerate

U.S. Midwest at risk of blackouts for years

Food versus biofuel – land competition ($FT)

U.S. TREASURY yield curve between two-year and ten-year notes has flattened again in response to faster inflation. Traders anticipate the central bank will have to engineer a harder landing for the economy to bring price increases under control:

BRITAIN’s economy has started to contract as surging inflation hits household and business spending. Real output fell or was flat in four of the five months between December and April. The other major European economies, which publish data with longer delays and less frequency, are probably also on the leading edge of a recession:

Best in Energy – 8 June 2022

U.S. president invokes defense production act to accelerate energy transition

(see also official statements on insulation, heat pumps and fuel cells)

Governments rethink intervention in energy markets

La Niña threatens to disrupt U.S. energy and agriculture

China’s leaders focus on transport and logistics (trans.)

U.S./Venezuela relations start to thaw ($BBG)

U.S. RETAIL GASOLINE prices have climbed to an average of almost $5 per gallon, the highest after adjusting for wages since June 2014, when Islamic State fighters were threatening to capture the giant oilfields of northern Iraq. Wage-adjusted pump prices are in the 92nd percentile for all months since 1994, up from the 60th percentile in December 2021 and the 53rd percentile in June 2021:

U.S. ROAD FUEL prices are rising even faster than crude benchmarks, resulting in an increasing premium first for diesel and now gasoline, as refineries prove unable to keep pace with demand from freight hauliers and private motorists:

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Best in Energy – 1 June 2022

The United Kingdom has a two-day public holiday on Thursday and Friday to celebrate the sovereign’s platinum jubilee, so Best in Energy will resume on Monday.

OPEC ⁺ explores suspending Russia allocation ($WSJ)

Russia prepares to re-route oil from Europe to Asia

India’s private refiners benefit from cheap Russian oil

India’s record renewables output eases coal shortage

Africa pushes back against emissions hypocrisy ($FT)

U.S. retailers attempt to resist price increases ($WSJ)

Global diesel and gasoline shortage raises prices ($FT)

U.S. residential use of air-conditioning reaches 88%

OPEC’s spare capacity and market stabilisation

EUROZONE manufacturers reported a further slowdown in growth last month as rapid inflation and the war between Russia and Ukraine took their toll. The manufacturing purchasing managers’ index slipped to 54.6 in May (65th percentile) from 55.5 in April (74th percentile) and 63.1 in the same month last year (100th percentile):

EUROPE’s gas futures summer-winter calendar spread from July 2022 to January 2023 is moving deeper into contango as inventories rise at the fastest rate on record alleviating some concerns about filling storage sites:

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Best in Energy – 27 May 2022

White House articulates strategy towards China

U.K. announces windfall tax on oil and gas firms

Europe protects households from energy prices

EU runs into problems negotiating Russia oil ban

Offshore drilling experiences cyclical recovery

U.S. hot economy has unwanted side effects ($FT)

Thailand/Vietnam explore rice cartel ($BBG)

Space-based solar power – how realistic is it?

BRENT’s six-month calendar spread is moving into an increasingly steep backwardation again as traders anticipate a growing shortage of crude. High margins for diesel and gasoline are encouraging refineries to maximise crude processing which is intensifying the downward pressure on already-depleted crude inventories:

U.K. DIESEL and gasoline inventories depleted further in March as late-cycle tightness was intensified by the impact of Russia’s invasion of Ukraine and some panic-buying by consumers and road haulage firms. Diesel/gas oil stocks were at the lowest seasonal level since 2014 and before that 2006:

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Best in Energy – 24 May 2022

U.S. president’s statements on Taiwan

Biden insists no change in Taiwan policy

U.S. Northeast distillate fuel oil shortage

U.S. Northeast home heating oil reserve

White House examines diesel release

Russia’s crude oil increasingly stuck at sea

LNG flows set to shift from Europe to Asia

Russia’s oil production declines ($BBG)

Amazon to sublet excess storage ($WSJ)

Sri Lanka raises fuel prices sharply

Iran/Venezuela increase oil cooperation

U.S. household finances strong at end 2021

U.S. EAST COAST distillate fuel oil inventories have fallen to just 22 million bbl compared with a pre-pandemic five-year seasonal average of 43 million bbl. Regional inventories have depleted to the lowest level since records began in 1990, leading to intense upward pressure on regional fuel prices:

U.S. DISTILLATE prices have been at a record premium to crude but the shortage is increasingly bleeding into gasoline inventories and prices as well as refiners try to boost output of diesel and jet fuel:

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Best in Energy – 23 May 2022

U.S. president ends strategic ambiguity on Taiwan

India cuts fuel taxes and boosts subsidies

Russia ends gas deliveries to Finland on pay dispute

Global refiners in dilemma whether to boost capacity

Electricity supplies are stretched worldwide ($BBG)

Saudi Arabia reiterates commitment to OPEC+ ($FT)

Fuel tax cuts are poor response to high prices ($BBG)

BRENT’s six-month calendar spread has increased to a backwardation of more than $13 per barrel, up from just $3 in early April, as traders anticipate planned EU sanctions on Russia’s petroleum exports will intensify the global shortage of crude oil and refined products:

U.S. RIG COUNT rose by +14 to 728 last week, with the addition of +13 rigs targeting oil-rich rock formations and +1 rig targeting predominantly gas-rich rock. The number of rigs drilling for oil has risen by +404 from its cyclical low in August 2020 but is still -107 below the pre-pandemic level:

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Best in Energy – 17 May 2022

China’s coal futures liquidity dries up

Texas generators tripped and strained grid

Iraq tries to retain Western oil investment

New traders handle Russian exports ($BBG)

Central bank emergency liquidity provision

FOOD PRICES and famine in ancient Rome:

“The price of grain is linked essentially with the concept of ‘famine’. As in the modern world, so in the ancient, ‘famine’ is a concept with class and financial connotations. The lowly and the poor in society had no reserves either of food or money and therefore suffered immediately as a result of a rise in the cost of basic essentials. The rich and upper classes on the contrary rarely experienced actual hunger during a famine because of their financial resources and even private grain reserves. If the shortage of grain persisted, the rich might suffer economically by having to use more of their wealth, or their own grain, but they did not starve. The poor did, not necessarily because there was a total lack of grain available, but rather because the current price of grain had risen beyond what they could normally afford to pay, whether because of crop failure, hoarding or speculation by dealers.” ― The Corn Supply of Ancient Rome, Rickman, 1980

U.S. GASOLINE and diesel prices are much higher than would be expected based on the price of crude alone, reflecting the shortage of refining capacity. Once increases in wages are taken into account, however, the average gasoline pump price of $4.44 per gallon this month is well below the peak of $6.17 per gallon in June 2008. In real terms, prices are only in the 81st percentile for all months since 1994: