Best in Energy – 15 September 2022

[MUST READ] China focuses on self-reliance ($FT)

Remote work likely to persist after pandemic ($WSJ)

U.S. shale firms won’t boost oil and gas output ($FT)

U.S. SPR’s role in the oil market is changing ($BBG)

U.S. gas consumption forecast to hit record in 2022

Germany warns about energy risk from cold winter

China planner warns against yin-yang coal prices

China’s continued drought in Yangtze basin (trans.)

U.S. Northeast fears fuel shortages in event of rail strike

LVMH to turn off store lighting overnight to save power

Eiffel Tower to turn off lights earlier to save power ($WSJ)

U.K. GAS AND ELECTRICITY consumption has not shown a significant decline so far in response to higher prices. I spent a large part of yesterday trying to find a price response in the available official consumption statistics without success. The charts are below. But there are some important limitations:  

  • Electricity consumption data is only available through June and gas data is only available through March owing to publication delays.
  • Most of the rise in prices has occurred since April with another big increase scheduled to take effect from October.
  • Heating demand and bills are lower in the summer months reducing consumers’ sensitivity to prices.
  • Domestic and commercial consumption patterns have been distorted by the lockdowns in 2020/21 and then re-opening in 2022.
  • Electricity and gas consumption has been on a long-term downtrend as a result of improvements in insulation and efficiency.
  • Electricity and gas consumption shows significant annual variation depending on winter temperatures.

Once these factors are taken into account, there is no evidence of a significant reduction in gas and electricity use by households, offices and commercial premises so far. If reductions are going to occur, it will be later this year and into 2023:

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 – 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 – 9 September 2022

China’s lockdowns are cutting oil consumption

U.S. officials indicate Russia oil cap around $60

Hungary warns against capping Russia gas price

U.S. digital assets boosting energy consumption

India alert as generators’ coal stocks fall ($BBG)

California text messages conserve power ($WSJ)

INDIA’s power producers hold coal stocks equivalent to 10 days of consumption compared with just 4 days at the end of September 2021 and 11 days in September 2019. In recent years, September has marked the low-point in the annual inventory cycle. At the moment stocks appear sufficient to avoid widespread generator closures but the government is monitoring levels closely:

U.S. PETROLEUM INVENTORIES including the strategic reserve increased by +4 million barrels last week.  But inventories have declined in 84 of the last 114 weeks by a total of -450 million barrels since the start of July 2020 illustrating the persistent shortage of oil available to the market. Stocks are at the lowest seasonal level since 2004 and are still trending lower:

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 – 7 September 2022

California warns of possible power cuts

European smelters call for emergency help

(see letter from Eurometeaux trade group)

EU banks prepare to cut electricity demand

EU reverts to coal generation in crisis ($FT)

U.S. LNG export capacity

CALIFORNIA’s power grid is running short of capacity in the early evening when consumption, driven by air-conditioning, is past its late afternoon peak but still high and solar generation is rapidly fading. The load curve below for September 6 shows the strain on dispatchable generating capacity between around 1600 and 2100 hrs local time. The California Independent System Operator (CAISO)’s forecast curve shows the same problem is expected today on September 7:

BRENT spot prices and calendar spreads are consistent with a market that is still tight but past its cyclical peak. The six-month calendar spread has softened to a backwardation of $5.60 per barrel (97th percentile) from a record of more than $21 in the immediate aftermath of Russia’s invasion of Ukraine in early March. The spread from December 2022 to December 2023 has softened to a backwardation of under $10 from a peak of $16 in early June. Softening spreads reflect an increased probability that a cyclical slowdown in the major economies will cut consumption and lead to an accumulation of inventories over the next year:

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 – 6 September 2022

Nuclear generators and service extensions

California calls for electricity conservation

U.S. gas-fired generation hits record high

Economic warfare and energy bills ($FT)

Energy crisis myths dispelled by IEA ($FT)

EU smelters close on high energy costs ($FT)

EU/UK POLICYMAKERS are considering how to protect households and businesses from surging gas and electricity prices. History suggests there are four basic options that can be employed singly or in combination. Multiple refinements are possible with each option – but the four basic responses have been the same since at least 400 BCE:

EUROZONE manufacturers reported business activity declined for the second month running in August. The composite purchasing managers’ index slipped to 49.6 in August from 49.8 in July and 52.1 in June as the conflict between Russia and Ukraine, record gas and power prices, broader inflation, and falling household and business confidence tipped the regional economy towards recession:

HEDGE FUND and other money manager positions in the six major petroleum futures and options contracts on August 30:

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 – 12 August 2022

Australia presses producers to reserve gas for local market

Crypto-mining and electricity demand response

U.S. solar generation installations delayed

U.S./China try to manage Taiwan tensions ($WSJ)

U.S./Iran attempt to finalise nuclear accord ($WSJ)

EUROPE’s GAS INVENTORIES are well above the seasonal average and accumulating at a record or near-record rate as the region attempts to maximise its seasonal storage ahead of the winter and a possible disruption to gas imports from Russia.

  • EU28 gas inventories have risen to 823 TWh up from a post-winter low of 291 TWh on March 19.
  • Stocks are +62 TWh above the prior ten-year seasonal average (+8% or +0.48 standard deviations).
  • The increase in inventories to date from the post-winter low (+532 TWh) is the largest for at least ten years.
  • Inventories accumulated at an average rate of 6 TWh per day over the seven days to August 10, among the fastest seasonal increases in the last decade.
  • Inventories are on course to reach 995 TWh by the end of the refill season (with a likely range of 915-1069 TWh).
  • Expected post-summer stocks are significantly higher than the 878 TWh anticipated at the start of the refill season on April 1 (710-1066 TWh).
  • Expected post-summer inventories have steadily risen as operators have filled storage irrespective of prices.

Expected post-summer stocks are +63 TWh (+7%) above the prior ten-year average (932 TWh).

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 – 22 March 2022

EU divided over response to high gas and power prices

Japan calls for electricity saving after earlier earthquake

Japan’s power supplies stretched after earthquake ($BBG)

Australia/Russia alumina embargo boosts end metal prices

China orders coal stocks replenished immediately ($BBG)

Vitol warns of volatility and margining challenges ($FT)

Jilin hit by widespread coronavirus outbreak (trans.)

Russia’s role as a uranium fuel exporter ($WSJ)

Global uranium supply dominated by Russia

U.S. energy-related CO2  projections through 2050

JAPAN called for electricity conservation as temperatures plunged and stretched power supplies after an earthquake damaged generation last week:

EU+UK GAS inventories are on course to an expected post-winter low of 272 TWh with a likely range of 238-292 TWh. Mild temperatures and ultra-high prices have reduced gas consumption while the region has continued to attract imports. As a result, the post-winter projection has improved significantly from just 215 TWh on Dec. 26. The region still needs to accumulate much higher-than-normal inventories over the next six months but every TWh saved now is one TWh of inventory that will not be needed later:

EU GAS prices have fallen as the inventory outlook has become more comfortable and the likelihood of an immediate cessation of pipeline imports from Russia has appeared to recede. Front-month futures prices have fallen to €96/MWh from a record €227 on March 7. The summer July 2022 to winter January 2023 calendar spread has shrunk to a backwardation of less than €9 from almost €72 on March 7. The market is still signalling the need for a large and urgent refill of inventories but is no longer trading at the crisis levels of two weeks ago:

To receive best in energy and my research notes via email every day, add your email to the circulation list here: https://eepurl.com/dxTcl1