EUROZONE manufacturers have reported another widespread decline in business activity so far in May. Preliminary results show the purchasing managers’ index slipping to 44.6 (6th percentile for all months since 2006) in May down from 45.8 (8th percentile) in April and 54.6 (67th percentile) a year ago. The index is firmly in recession territory at the lowest level since the first wave of the pandemic in March-May 2020 and before that July 2012 and October 2008-June 2009 following the financial crisis:
EUROPE’s gas storage is refilling more slowly than average as a result of a relatively cold start to spring and sharply lower prices encouraging more consumption by industry and power generators. Storage sites across the European Union and United Kingdom (EU28) topped up their fill by +10.3 percentage points between March 31 and May 21 compared with a prior ten-year average top up of +11.3 percentage points. But because storage started from a record high, fill remains exceptionally high. EU28 storage was 65.9% full on May 21, the second highest on record, and compared with a prior ten-year seasonal average fill of just 44.7%:
EUROZONE manufacturers have reported a widespread decline in business activity this month. Preliminary results from the purchasing managers survey show the composite activity indicator slipping to 45.5 (8th percentile for all months since 2006) in April down from 47.1 (17th percentile) in March and 55.5 (76th percentile) a year ago. Eurozone manufacturers are now unambiguously in recession as they struggle with high energy prices, rising interest rates, excess inventories and heightened caution from household and business buyers:
NORTHEAST ASIA’s LNG prices continue to fall amid plentiful inventories in both North Asia and Europe after a mild winter at both ends of Eurasia. Futures prices for LNG to be delivered in July 2023 have fallen below $13 per million British thermal units, the lowest for 15 months since January 2022, before Russia’s invasion of Ukraine:
EUROZONE manufacturers reported a fall in business activity in March for the ninth month running. The final reading for the purchasing managers’ index was 47.3 (17th percentile since 2006), little changed from the preliminary reading of 47.1 published just over a week earlier, and well below the 50-point threshold dividing expanding activity from a contraction. Energy prices have retreated from record highs in the third quarter of 2022 but remain far above the long-term average. Excess inventories continue to weigh on orders and production. Manufacturers now have to deal with increased fears about a recession and increased caution from household and business purchasers:
NORTHWEST EUROPE is now more than 90% of the way through the heating demand season. The accumulated number of heating degree days at Frankfurt in Germany (a proxy for the densely populated macro-region of Northwest Europe) in winter 2022/23 was just 1,621 on March 31 compared with a long-term average of 1,966 (-18%). Temperatures were above the long-term average on 124 out of 182 days between October 1 and March 31 compared with only 58 days at or below normal:
EUROZONE manufacturers reported business activity fell in February for the eighth consecutive month. Preliminary estimates from partial survey data put the purchasing managers’ index at 48.5 (25th percentile for all months since 2006) in February compared with 48.8 (26th percentile) in January:
EU EMISSIONS allowance prices have hit a record €100 per tonne of CO2 equivalent for the compliance period ending in December 2023:
¹ Gas has been transported and stored in bags or balloons by poorer, often rural, customers without connection to grid supplies across Asia for some time. Specialised gas containers are relatively expensive. Photo agency Alamy has a photograph of a cyclist trailing a gas-filled “balloon” in China’s Shandong province in 2014. Don’t try this at home!
EUROZONE MANUFACTURERS reported business activity declined for the sixth month running in December but the deterioration was less widespread than in November and October. The eurozone manufacturing purchasing managers’ index was at 47.8 (21st percentile for all months since 2006). The index remained well below the 50-point threshold dividing expanding activity from a contraction. But declines were less widespread than November when the index was at 47.1 (17th percentile) and October at 46.4 (13th percentile):
U.S. CRUDE PRODUCTION including field condensates rose by +69,000 b/d to 12.381 million b/d in October 2022. The increase came entirely from onshore production in the Lower 48 states, most of which is from shale. Production has been up year-on-year by an average of around +630,000 b/d (+5.7%) in the last 12 months:
¹ This article seems to be merging the related but separate concepts of rotating power cuts to cope with possible electricity shortages caused by insufficient gas-fired and renewable generation this winter with restarting the grid after a total failure such as might be caused by an accident or sabotage.
“Yarrow” sounds like a plan for a “black start” of generation, transmission and distribution systems following complete failure. Electricity network managers in the United Kingdom and other countries have planned for a black start for decades. It is one of those remote “high impact low probability” risks commonly used in scenario planning.
The United Kingdom has never had to undertake a nationwide black start though a regional one was necessary in parts of the southeast following damage caused by the Great Storm of October 1987.
Black starts involve a complicated series of steps and would take several days to complete. Designated generating units would have to be started up autonomously, following by limited energisation of the transmission grid, first regionally and then nationally.
Black start sites often have auxiliary diesel-fired generators maintained at a high state of readiness that can restart without external power. The auxiliary generator is then used to start one or more main generators (usually oil, coal or gas-fired) on the same site which are then reconnected to the grid.
Progressively more generators would be started up and synchronised to the network, which would start to provide limited power to the local distribution systems. Protected sites would start to receive power and then more customers as sufficient power becomes available.
The process could take up to 5-7 days in the event of total failure. In the meantime most customers would receive no power or be subject to rotating power cuts to limit demand while generation is restored gradually.
The complexity and time needed for a full black start explains why grid managers attempt to avoid them at all costs. Temporary but controlled load-shedding directed by grid managers is preferable to uncontrolled cascading failure of the power grid leading to collapse and forcing a black start.
Black start should be a very remote risk in a well-run grid. But the sabotage of the Nord Stream pipelines has focused attention on the risks of deliberate attacks on energy infrastructure and will make black start a higher priority for emergency planners.
EUROZONE manufacturers reported an accelerating decline in activity last month as the region’s economy was hit by inflation, soaring energy prices, supply chain problems, Russia’s invasion of Ukraine and the EU sanctions imposed in response. The composite purchasing managers’ index slipped to 46.2 in October (12th percentile for all months since 2006) from 48.4 in September (24th percentile) and 58.3 in October 2021 (92nd percentile). The composite index has been below the 50-point threshold dividing expanding activity from a contraction for four months running, confirming the zone’s economy is entering a recession:
EUROZONE manufacturers reported a further deterioration in business activity this month according to preliminary results from the purchasing managers’ survey. The composite activity index fell to 48.5 in September (24th percentile) down 49.6 in August (28th percentile) and 49.8 in July (29th percentile). The region’s economy is sliding into recession – even before expected energy shortages this winter:
U.S. INITIAL CLAIMS for unemployment benefits are still running at very low rates, with just 213,000 new claims filed last week on a seasonally adjusted basis. Core inflation is unlikely to fall to the Federal Reserve’s target of a little over 2% per year with the labour market this tight – which explains the central bank’s aggressiveness in raising interest rates:
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RHINE RIVER water levels measured at Kaub are the lowest for the time of year for more than a quarter of a century and indicative of drought conditions across northwest Europe. Low rainfall is restricting river borne freight and is an indicator of the stress for thermal and nuclear power plants that rely on river water for their cooling systems. For coal and gas combustion plants, efficiency and maximum output is reduced. For nuclear plants, insufficient cooling capacity can force output limits or a precautionary safety shutdown:
EUROZONE manufacturers reported a decline in activity this month for the first time since the first wave of the pandemic in 2020. Preliminary data show the manufacturing sector purchasing managers index fell to 49.6 in July (28th percentile) down from 52.1 in June (47th percentile) and 54.6 in May (65th percentile). Russia’s invasion of Ukraine and the sanctions the EU has imposed in response have pushed the region’s economy into recession:
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BRENT spot prices and calendar spreads have softened significantly since the White House announced the release of up to 180 million barrels from the U.S. strategic petroleum reserve. The six-month spread has narrowed to a backwardation of $9 per barrel, the lowest since before Russia’s invasion of Ukraine, down from $18 a week ago and a record $21 earlier in March:
U.S. SPR crude inventories will fall to less than 400 million barrels, the lowest since 1984, if 180 million are released over the next six months as briefed by the White House:
EUROZONE manufacturers reported a less widespread expansion in business activity this month. The purchasing managers’ index fell to 56.5 in March from 58.2 in February. The composite index is still well above the 50-point threshold dividing expanding activity from a contraction. But the index is at the lowest level for 14 months and in the 79th percentile since 2006 down from the 92nd percentile in December:
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