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 – 7 October 2022

U.K. electricity winter reliability forecast

U.S./Saudi standoff over oil policy ($FT)

White House fury with oil output cut ($BBG)

France outlines plan for “energy sobriety”

Nord Stream inquiry confirms sabotage

Texas electricity market and volatility

Houston and energy system transition

Luck more important than talent ($WSJ)¹

¹ Luck plays a more important role in determining individual success than talent, according to the study authors. But individuals have to be ready and open to grasp opportunities. The best strategy to maximise the probability of success is therefore “expose, explore, exploit,” which seems sound advice.

GERMANY’s industrial production was down -4.5% in the three months from June to August compared with the same period in 2019 before the coronavirus epidemic. The economy is struggling with multiple shocks stemming from Russia’s invasion of Ukraine, sanctions, gas shortages, higher energy and raw materials prices, and persistently sluggish growth in China:

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 – 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 – 12 September 2022

German households stock up on electric heaters¹

Germany’s north benefits from wind resources

France appeals for grid-to-grid support ($FT)

Droughts and hydropower reliability ($WSJ)

Boreal forests and a warming climate ($FT)

HEDGE FUNDS and other money managers increased short positions in NYMEX WTI futures and options by +2 million bbl to 44 million bbl in the week to September 6, among the largest number of short positions since Russia’s invasion of Ukraine in late February. Bearish sentiment has been gradually building since the start of June as the economy slows under the combined impact of supply chain problems, inflation and rising interest rates:

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 – 3 August 2022

G7 statement reaffirms exploration of Russia oil-price cap

France plans to fill gas storage completely by end of October

France cuts nuclear output as heatwave warms rivers ($BBG)

Rhine water levels close to forcing transport closure ($BBG)

U.S. retailers seek warehouses for excess inventories ($WSJ)

Global refinery capacity expansions

RIVER RHINE water levels at Kaub had dropped to just 61 centimetres on August 2, the lowest since December 2018, and the lowest for the time of year for more than 25 years, as prolonged drought causes river levels to fall across Northwest Europe, threatening power generation and transport of bulk commodities:

CHINA’s hydroelectric power stations generated a record 583 billion kWh in the first six months of the year, an increase of +100 billion kWh or more than +20% compared with the same period in 2021. China’s hydro generation was more than three times the entire electrical output of the United Kingdom:

CHINA’s thermal power generation, nearly all of it from coal, dipped to 2,728 billion kWh in January-June, a decrease of 98 billion kWh (-4%) compared with the same period in 2021, helping improve the coal inventory situation:

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

Best in Energy – 11 July 2022

Saudi Arabia’s oil production capacity scrutinised

Canada to return Nord Stream impounded turbine

Ocean carriers likely to revert to slow steaming

India rejects US/EU calls to boycott Russian oil

France plans for complete loss of Russian gas

France prepares to switch from gas to fuel oil

Freight rates start to soften as volume falls ($WSJ)

U.S. central bank tries to avoid stop-go policy ($WSJ)

U.K. businesses prepare for onset of recession ($FT)

China boosts coal by rail deliveries by +9% (trans.)

Texas appeals for electricity conservation on July 11

U.S. BUSINESS inventory ratios have started to climb as sales slow and firms struggle to shift extra items ordered on a precautionary basis at the height of the supply-chain crisis. Manufacturers, wholesalers and retailers held inventories equivalent to 1.29 months worth of sales in April up from a cyclical low of 1.26 months in November. Excess stocks are concentrated at the retail level where the ratio has climbed to 1.18 months up from 1.09 months in October 2021.

U.S. inventory ratios remain low by pre-pandemic standards but will climb quickly if sales slow further in response to rapid inflation and a business cycle downturn. Inventory reduction is likely to weigh on economic growth over the next six months as businesses to limit or reverse overstocking:

TEXAS temperatures have climbed well above the long-term seasonal average since the start of July increasing the strain on the state’s isolated electric grid. Cumulative cooling degree days since the start of the year have been almost +30% higher than the 1981-2010 average:

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 July 2022

EU parliament adds gas and nuclear to green energy list

France to renationalise nuclear power generator EdF

Aramco raises official selling prices as oil futures fall

Oil price falls not yet justified by recession risk ($BBG)

China tax reductions hit $385 billion in Jan-June (trans.)

China plans to boost car sales after lockdown hit ($BBG)

United States intensifies sanctions enforcement on Iran

PRIOR to this week’s sharp drop in oil prices, hedge fund positioning was not showing the congestion that often signals an imminent reversal in the price trend:

HEDGE FUND positions in crude were below average in both Brent and WTI (36-37th percentile). The ratio of long to short positions showed a bullish bias but not excessively so (65-66th percentile):

HEDGE FUND managers showed no sign of preparing for a sharp fall in oil prices – with the number of short positions close to multi-year lows:

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 – 28 June 2022

France calls for easing sanctions on Iran, Venezuela

Australia’s coal miners seek higher contract prices

G7 summit defers price capping of Russia oil

OPEC production close to maximum capacity

China’s northern grid regions hit record load

China probes coal price manipulation (trans.)

Triple La Niña event possible in 2022 (trans.)

EU28 GAS INVENTORIES are accumulating at a relatively rapid rate of +5.2 TWh per day, notwithstanding the recent interruptions of pipeline supplies from Russia, compared with an average rate of +4.8 TWh per day over the previous ten years: 

CHINA’s central-northern region stretching from Ningxia and Gansu in the west to Henan and Shandong in the east, but not including Beijing and the wider Jīng-Jīn-Jì metropolitan region, has been experiencing temperatures well above normal, leading to record electricity consumption in recent weeks. The map also shows below normal temperatures in the south where the monsoon rains have been unusually heavy:

JAPAN has called for electricity conservation especially in Tokyo as temperatures have risen more than +6°C above the long-term seasonal average in recent days and the strong air-conditioning and refrigeration demand has strained the availability of power supplies:

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 – 27 June 2022

Russia/EU clash over routine gas pipeline maintenance

EdF/Engie/Total call for immediate energy conservation

U.S. shale producers turn to refracturing existing oil wells

Germany’s chemicals firms contemplate shutdown ($WSJ)

Bank for International Settlements annual economy review

Southwest Airlines’ fuel hedging ($FT)

U.S. OIL AND GAS rig count rose +13 to 753 last week as higher prices spur exploration and production companies to contract more drilling teams. The number of active rigs has climbed by +509 from the cyclical low in August 2020 and is only -40 below the pre-pandemic level in March 2020. The number of active oil rigs is still -88 below the pre-pandemic level but gas rigs are already +48 above the March 2020 level.

Oil and gas drilling is exhibiting a fairly normal cyclical recovery, though it is unfolding slower than other recent recoveries because some of the larger exploration and production companies have been constraining drilling and production programmes to keep prices high and boost returns to shareholders:

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