U.S. GAS front-month futures prices have slumped to less than $3.80 per million British thermal units (34th percentile for all months since 1990) from more than $9.10 (86th percentile) at the end of August. Figures have been adjusted for inflation using the core consumer price index for all items excluding food and energy:
U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -4 million barrels in the week to November 4. There were only minor changes in stocks of distillate fuel oil (-1 million barrels), jet fuel (+1 million barrels) and gasoline (-1 million barrels). Total inventories have depleted by -498 million barrels since the start of July 2020 and are at the lowest seasonal level since 2004:
LONDON’s temperatures have been higher than the long-term seasonal average consistently since the middle of October, reducing heating demand and gas consumption. The number of heating degree days so far this winter has reached just 117 compared with a long-term average of 153. But the city-region is only 10% of the way through the expected heating season. The half-way point doesn’t normally arrive until January 23 as a result of seasonal lag:
Fusion firms target commercial models by 2030s ($FT)
China explores gradual retreat from lockdowns ($WSJ)
ATMOSPHERIC concentrations of carbon dioxide (CO2) at the Mauna Loa observatory on Hawaii rose to 415 parts per million (ppm) in October 2022 up from 404 ppm in October 2017 and 391 ppm in October 2012. CO2 concentrations have increased at a compound annual rate of +0.57% per year between 2017 and 2022. On the current trajectory, concentrations are likely to reach 430 ppm, the maximum scientists say is consistent with +1.5°C of average global warming, in 2027:
EUROZONE manufacturers report the sector has entered recession, based on preliminary results from the monthly purchasing managers survey. Partial results show the manufacturing activity index slipped to just 46.6 in October (14th percentile for all months since 2006) from 48.4 in September (24th percentile):
EUROPE’s temperatures are expected to be at or above the long-term seasonal average during the three months from November to January, according to the European Centre for Medium-Range Weather Forecasting. Mild temperatures through October and the relatively warm outlook for the first part of the winter have contributed to downward pressure on the region’s gas futures prices:
U.S. TREASURY securities with ten year maturity are yielding 3.53%, the highest since 2010, as traders anticipate the central bank will have to keep interest rates higher for longer to bring down inflation. Yields are rising at the fastest year-over-year rate since 1999. The increase is testing the downward trend in place since the mid-1980s. If the increase is sustained it will force a widespread re-pricing of most other assets:
HEDGE FUNDS and other money managers made few changes to their positions in the six most important petroleum futures and options contracts in the week to September 13. There were total net purchases of +4 million barrels with buying in NYMEX and ICE WTI (+10 million) and Brent (+3 million) but sales of U.S. gasoline (-5 million), U.S. diesel (-3 million) and European gas oil (-1 million):
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
U.S. INTEREST RATE traders expect the central bank to boost its target federal funds rate to 4.25-4.50% by April 2023 up from 2.25-2.50% at present as officials try to bring inflation back towards their long term target. Inflation has proved faster and more persistent than anticipated implying higher interest rates and a greater probability of a hard-landing for the economy:
U.S. SERVICES prices increased at an annualised rate of +7.7% in the three months to August. Services inflation is a proxy for underlying price pressures in the economy because services account for more than 60% of consumer spending and are labour-intensive rather than energy or commodity-intensive. Service sector inflation has decelerated from a peak of +9.9% in the three months to June but remains more than three times faster than the central bank’s long-term target of a little over 2% per 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
U.S. COOLING DEMAND since the start of the year has been around +11% higher than the long-term seasonal average (1981-2010) and +2% higher than the prior seven-year average (2015-2021). Higher-than-usual temperatures have contributed to pressure on electricity networks and put gas consumption by power generators on course for a record high this 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
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)
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:
SIGN UP to receive best in energy and my research notes every day by adding your email to the circulation list here: https://eepurl.com/dxTcl1
U.S. MANUFACTURING output in the three months Feb-Apr was almost 6% higher than in the same period a year earlier, showing momentum in the business cycle but also why supply chains are struggling to cope and prices are escalating rapidly. Rapid growth in manufacturing explains why diesel is short supply and prices are escalating:
SIGN UP to receive best in energy and my research notes by email every day by adding your email address to the circulation list here: https://eepurl.com/dxTcl1
JKempEnergy.com 