Tag: energy security

Best in Energy – 10 March 2023

U.S. Treasury reassures traders on sanctions ($FT)

Russia’s missiles target Ukraine’s energy networks

India to boost LNG imports for generators ($BBG)

U.S. central bank discovers r* is unreliable indicator

U.S. yield curve inversion and equity values ($WSJ)

U.S. economy and supply-driven inflation ($WSJ)

U.S. inflation fuelled by margin expansion ($BBG)

U.S./EU downplay race on energy subsidies ($FT)

EU eases state aid rules to match U.S. subsidies

(see also European Commission press release)

U.S. railroad safety and trackside sensors ($WSJ)

Yemen’s decaying oil storage tanker to be unloaded

U.S. TREAURY YIELD curve between two-year and ten-year maturities has inverted to around 100 basis points, the most extreme since August 1981, when the economy was entering the second part of the double-dip recession of the early 1980s. The inversion is signalling a sharp fall in interest rates, resulting from a rapid deceleration of inflation, a downturn  in the business cycle, or a combination of both:

U.S. GAS INVENTORIES are moving into an increasing surplus, keeping downward pressure on prices. Stocks were +240 billion cubic feet (+13% or +0.58 standard deviations) above the prior ten-year seasonal average on March 3, up from a deficit of -263 billion cubic feet (-8% or -0.98 standard deviations) on January 1, 2023, and a deficit of -427 billion cubic feet (-13% or -1.52 standard deviations) on September 9, 2022:

Best in Energy – 6 March 2023

Automakers want to secure EV supply chain

China focuses on coal’s role in energy security

EIA blames oil blending for adjustment factor

EU firms relaxed about U.S. climate subsidies

U.S. downturn confined to tech sector? ($WSJ)

India’s loss-making Mundra power plant ($BBG)

EUROPE’s gas futures prices continue to slide despite a blast of colder weather across the northwest this week reflecting the high level of inventories. Front-month futures prices closed below €45 per megawatt-hour on March 3 for the first time since August 2021:

U.S. NON-MANUFACTURING firms reported a solid increase in activity in February. The ISM non-manufacturing index stood at 55.1 (40th percentile for all months since 1997) in February, little changed from January, but up from 49.2 (7th percentile) in December. The low December reading is starting to look like an anomaly. Service providers and other non-manufacturing businesses are reporting healthier conditions than their counterparts in manufacturing and freight:

U.S. OIL DRILLING activity continued to decelerate with the number of active rigs down -8 to 592 over the week ending on March 3. The oil-directed rig count has fallen in 10 of the last 13 weeks by a total of 35 rigs (-6%):

Best in Energy – 23 February 2023

Chesapeake to reduce gas drilling and completions

Auto firms split on electrification timeline ($WSJ)

Commodity markets adapt to Russia/Ukraine war

Europe’s gas storage and refill for winter 2023/24

U.K. government to cut costs for big energy users

U.K. steelmaker plans to close coking ovens

U.S./Russia/China armaments supply ($WSJ)

IEA chief warns EU about complacency ($FT)

BRENT’s six-month calendar spread is trading in a backwardation of $1.80 (71st percentile for all days since 1990). The spread has tightened from a contango of $0.65 (34th percentile) since December 9 as expectations for a soft-landing in the global economy have increased. But it is well below levels before Russia’s invasion of Ukraine, implying the market is comfortably supplied despite sanctions on Russia and output restraint by OPEC⁺ and U.S. shale firms:

Best in Energy – 3 January 2023

Europe’s energy crisis eased by mild weather ($BBG)

U.S./Venezuela crude oil trade set to resume

Russia/China struggle to bridge gaps on Ukraine

France energy security improves on mild weather

U.S. shale oil production growth slows in 2022/23

U.S. winter storm reveals energy fragility ($BBG)

U.S. regional indicators point to future recession

Semiconductor market moves into surplus ($WSJ)

Global supply chains starting to normalise ($WSJ)

Tesla discounts to clear excess inventories ($WSJ)

United Kingdom explores more steel subsidies ($FT)

CHINA’s manufacturers reported a severe contraction in business activity in December as coronavirus infections surged following the end of the government’s suppression policy. “The epidemic has had a great impact on the production and demand of enterprises, the arrival of personnel, and logistics and distribution,” according to the National Bureau of Statistics. The purchasing managers index fell to 47.0 (1st percentile for all months since 2011) in December down from 48.0 in November (2nd percentile) and 50.1 (26th percentile) in September:

NORTHWEST EUROPE’s temperatures ended 2022 much higher than normal, sharply reducing gas consumption and pulling down prices. On December 31, the average temperature at Frankfurt in Germany was almost +14°C higher than the long-term seasonal average. Frankfurt has experienced 764 cumulative heating degree days so far in winter 2022/23 compared with a seasonal average of 901, a deficit of -15%:

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 – 16 November 2022

India’s refiners prepare for price cap from early December

China’s refiners request state aid on Russian crude ($BBG)

Europe’s energy crisis and supply security lessons ($BBG)

U.K. households and the increase in energy debts ($BBG) ¹

California ports report drop in container volumes ($WSJ)

Freeport LNG – root cause report on explosion

¹ Food and energy shortages have always been about prices and affordability rather than physical supplies and availability. Higher-income and wealthier households will always find ways to put food on the table and heat their homes, it is lower-income and poorer households that lack financial resources that are unable to cope and hit hardest (“Corn supply of ancient Rome”, Rickman, 1980).

SOUTHERN CALIFORNIA’s ports are experiencing a sharp drop in container traffic reflecting contentious labour negotiations and the threat of a strike as well as the slowdown in global merchandise trade and efforts by U.S. manufacturers and distributors to cut excess inventories. Combined container traffic through the neighbouring ports of Los Angeles and Long Beach was just 0.84 million twenty-foot equivalent units (TEUs) in October, down from 1.07 million TEUs in the same month in 2021, and the lowest for the time of year since the recession of 2009:

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 – 20 September 2022

Germany’s auto sector emissions remain high

China boosts imports of coal from Russia

EU/Africa tensions over gas investment ($FT)

La Niña to boost winter heating in Japan ($BBG)

U.S. shale producers hit drilling limits ($WSJ)

U.S. central bank refocuses on inflation ($WSJ)

Stranded asset story and the energy crisis ($FT)

Renewables and domestic energy security ($FT)

California relies on nuclear for 10% of electricity

United States is shifting policy on Taiwan ($BBG)

Coal boom leads to expansion of marginal mines

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):

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Best in Energy – 2 August 2022

India starts rationing gas to industrial users

Australia grapples with pricing for domestic gas

Baker Hughes plan to sell Russia unit to insiders

Rosatom tightens grip on nuclear energy ($BBG)

China focuses on energy indigenisation (trans.)

U.S./Saudi visit: what did Biden achieve? ($BBG)

United Kingdom closes nuclear power generator

EU struggles to balance energy security and transition ($WSJ)

U.S./EU responses to energy security and transition challenges

U.S. MANUFACTURERS reported a further slight deceleration in growth last month, with the ISM purchasing managers’ index slipping to 52.8 in July (50th percentile for all months since 1980) from 53.0 in June (53rd percentile). New orders fell for the second month running, slightly faster in July (48.0, 14th percentile) than June (49.2, 17th percentile), implying business activity will slow further over the next few months:

U.S. DISTILLATE CONSUMPTION has begun to fall in line with the deceleration in manufacturing activity. The volume of distillate supplied was down -0.4% in March-May compared with the same period a year earlier. Distillates are the most cyclically sensitive part of the oil market, so the business cycle slowdown is filtering through into lower fuel use, part of the market rebalancing process:

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Best in Energy – 9 May 2022

China prioritises energy and food security (trans.)

California forecasts power shortages to 2025

U.S. grids warn of electricity shortfalls ($WSJ)

IEA sidelined by White House on oil release

India’s prolonged electricity blackouts

India’s fuel distributors trim volumes

Japan to phase out Russian oil imports

U.S. fuel prices rise faster than crude

Global refining margins widen ($BBG)

U.S. refiners run out of capacity ($FT)

CO2 removal becomes focus for policy

Pandemic results in 15 million deaths

U.S./Ukraine intelligence sharing ($WSJ)

INDIA’s temperatures have fallen over the last week and are closer to the seasonal average, reducing electricity consumption slightly and easing stress on the power grid. The grid’s frequency has moved closer to the 50 Hz target and periods of under-frequency have become shorter and less severe, showing a closer balance between generation and demand:

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