Best in Energy – 18 November 2022

India’s coal-fired generation rises over 10%

China solar installers hit by lockdowns ($BBG)

China food and energy security focus (trans.)

Hess chief marks the end of shale revolution

U.S. heating oil prices up 65% from year ago

Australia’s changing defence strategy ($FT)

Qatar Energy – company profile and ($FT)

BRENT’s six-month calendar spread has fallen to a backwardation of $4.90 per barrel (95th percentile for all trading days since 1990) down from $7.60 (98th percentile) a month ago and a record over $15-20 in the first months after Russia’s invasion of Ukraine. The softening spread is consistent with a recession in Europe and China, possibly spreading across the rest of the world, easing pressure on oil supplies in 2023:

U.S. TREASURY yield curve is now more inverted between two-year and ten-year maturities than at any time since September 1981 at the start of the second instalment of the double-dip recession. U.S. interest rate traders anticipate an exceptionally rapid turn around in monetary policy. Such a rapid pivot is consistent with a soft-landing allowing the central bank to unwind rate rises quickly, or because a hard-landing eliminates inflation and requires it to support growth and employment instead:

Best in Energy – 17 November 2022

U.S. hydrogen – funding and technology deployment

Aramco plans downstream investment in South Korea

U.S. diesel inventories at 70-year seasonal low ($FT)

Texas tries to prepare better for extreme winter cold

U.K. inflation accelerates to 11.1% in October

France’s nuclear generation starts to recover

China/Taiwan bilateral communications cease

U.S. PETROLEUM INVENTORIES depleted by -11 million barrels in the week to November 11. Large drawdowns in commercial crude (-5 million bbl), crude in the strategic petroleum reserve (-4 million) and other oils (-3 million) were partially offset by increased stocks of gasoline (+2 million), distillate fuel oil (+1 million) and jet fuel (+0.3 million). Total inventories have depleted by -509 million barrels since early July 2020, the largest drawdown on record and a symptom of persistent under-supply:

Best in Energy – 11 November 2022

China’s leaders reiterate and adapt covid strategy (trans.) ¹

China trims coronavirus quarantine and contact tracing

China’s commentators question covid strategy ($BBG)

Pakistan to ration gas supplies as EU absorbs more LNG

U.S. diesel prices climb as inventories dwindle ($NYT)

U.S. diesel prices rise with stocks low ahead of winter

Global insurers press for more details on oil price cap

¹ The Politburo Standing Committee special study session on epidemic control is top news across all government-controlled media. Reverse engineering the official commentary, top leaders seem anxious to counter political and social fatigue with repeated lockdowns, reinforcing the current zero-covid strategy in the short term despite its rising costs, while also searching for a way out via improved vaccination rates and the development of new vaccines and therapeutic drugs.

U.S. SERVICE SECTOR prices increased at an annualised rate of +7.8% in the three months to October, more than three times faster than the central bank’s target, ensuring that interest rates are likely to continue rising:

BRITAIN’s economy entered a recession during the third quarter with real gross domestic product declining in three out of four months between June and September. So far the downturn has been led by manufacturing but is likely to spread to construction and services:

Best in Energy – 1 November 2022

U.S. distillate shortages – a useful market primer

U.S. workforce and the impact from faster inflation

(more information about the distribution of losses)

United States narrows semiconductor embargo ($BBG)

Japan appeals for winter electricity conservation ($BBG)

U.S. EAST COAST distillate fuel oil inventories were just 24 million barrels on October 21, compared with a pre-pandemic five-year seasonal average of 50 million barrels. The East Coast deficit (-26 million bbl) accounted for nearly all the nationwide deficit (-29 million bbl): 

WESTERN EUROPE’s gas consumptionwas down in August and September by 14-15% compared with the pre-pandemic seasonal average for 2015-2019, as a result of high prices, industrial closures, a slowing economy, and energy conservation measures:

Best in Energy – 31 October 2022

EU LNG offshore queue is depressing gas prices

EU diesel prices at record relative to jet and crude

U.S. road freight faces ‘muted’ peak season ($WSJ)

U.S. gas prices fall as inventories swell ($WSJ)

Copper production is falling short of consumption

Copper shortage threatens energy transition ($FT)

EU/Russia gas conflict, inventory and prices ($FT)

Europe’s consumers cut discretionary spend ($FT)

China builds coal-fired back to renewables ($BBG)

China’s internal news reporting system

China’s ever-normal granaries ($JSTOR)

CHINA’s manufacturers reported a decline in activity last month as the economy struggled with repeated lockdowns. The official purchasing managers’ index slipped to 49.2 in October (4th percentile for all months since 2011) from 50.1 in September (24th percentile). Manufacturing activity has contracted in seven of ten months so far in 2022:

SOUTHERN CALIFORNIA’s ports handled the lowest volume of containers in the month of September since 2009, as spending on merchandise slowed and retailers struggled to reduce excess inventories:

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 – 17 October 2022

[MUST READ] U.S./China relations in Xi Jinping era ($WSJ)

[MUST READ] Nuclear war lessons from past crises ($WSJ)

[MUST READ] China prioritises energy security ($BBG)

Europe’s gas supply still at risk from cold winter weather

EU tries to reach internal consensus on capping gas prices

OPEC+ officials defend Saudi Arabia after U.S. criticism

NOPEC law would escalate U.S./Saudi tensions ($BBG)

California drought drains Lake Shasta ($WSJ)

China plans to boost coal and oil inventories

China to stop LNG resales to Europe ($BBG)

Retailers accelerate sales as inflation rises ($BBG)

Diesel shortage threatens global economy ($BBG)

EUROPE’s gas futures prices for November and December have continued to fall as regional storage facilities near maximum capacity. There is enough gas in stock to ensure supplies through the first half of the winter. But the risk to supplies in the second half and during next year’s refill season is keeping prices for 2023 high:

Best in Energy – 14 October 2022

U.S./Saudi relationship strained but not broken

U.S./Saudi recriminations over OPEC+ cut ($FT)

EU explores possible gas market interventions

U.S. electric vehicles stimulate battery boom

China tests electric-powered freighter (trans.)

U.S. winter fuels outlook (EIA)

U.S. SERVICES PRICES were rising at an annualised rate of +10.1% between August and September and were +7.4% higher than a year earlier, a sign inflation is proving persistent even as some energy and commodity prices have eased:

U.S. INTEREST RATE traders expect the central bank to increase its target federal funds rate to 4.75-5.00% by April 2023 up from just 3.00-3.25% at present as they try to bring inflation back under control:

U.S. DISTILLATE fuel oil shortages are worsening. Inventories fell -5 million bbl to just 106 million bbl last week and are now at the lowest level for the time of year for more than 40 years:

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

Best in Energy – 13 September 2022

EU frames energy windfall tax as “solidarity contribution”

EU explores electricity demand reduction at peak hours

Diesel additives are in short supply in Germany ($BBG)

Europe needs more diesel fuel exports from China

Renewable energy jobs set to increase rapidly

U.S. railroads prepare for imminent strike ($WSJ)

China reports cyberattack by United States (trans.)

U.S. Northeast distillate inventories very low

NORTHWEST EUROPE’s benchmark gas futures contract for deliveries in January 2023, the heart of next winter, has fallen to less than €200 per megawatt-hour from a peak of €345 in late August. Higher inventories in seasonal storage have reduced the probability about stocks running out. Plans for significant voluntary and mandatory reductions in gas and electricity consumption and the increasing probability of a region-wide recession will also lessen the pressure on stocks in the event gas supplies from Russia are disrupted:

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

Best in Energy – 11 August 2022

Physical oil prices soften in recent weeks

Chile’s troubled lithium industry ($WSJ)

Yield curve inversion slows bank lending

EIA’s weekly petroleum reporting system

INDIA’s coal-fired power plants have 11 days of fuel on hand, an improvement on just 7 days at the end of August 2021, but still slightly below the 13 days at the same point in 2019. The central government has prioritised replenishing fuel stocks to avert a repeat of the power shortages and blackouts that hit the country in October 2021:

U.S. FREIGHT SHIPMENTS accelerated in June after slowing slightly in May. Freight volumes were up +4.6% in June compared with the same month a year earlier. Volumes advanced at the same annualised rate of +4.6% in the most recent three months from March to June. The strong growth was surprising since other manufacturing indicators pointed to a slowdown in activity during the second quarter:

U.S. PETROLEUM INVENTORIES including the strategic reserve rose by +8 million bbl last week, one of the largest weekly increases in the last two years. There were increases in stocks of commercial crude (+5 million bbl), distillate fuel oil (+2 million), propane (+2 million) and other oils (+8 million) partially offset by reductions in jet fuel (-1 million), gasoline (-5 million) and strategic crude stocks (-5 million):

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