Best in Energy – 19 January 2023

Energy conservation and excess mortality ($BBG)

J.B. Hunt earnings confirm freight decline ($WSJ)

U.S. refiners schedule more maintenance in 2023

U.S. gas prices forecast to fall in 2023/24 by EIA

Russia’s oil revenues predicted to decline ($FT)

Iran hit by winter gas shortages ($BBG)

Nuclear weapons and decision-making ($FT)

U.S. MANUFACTURERS are raising prices more slowly as input costs for raw materials and energy ease and demand for goods falls. Producer selling prices for finished products other than energy and food increased at an annualised rate of +4.2% in the three months to December 2022 down from an annualised +11.5% increase in the three months to April 2022. But selling prices are still rising twice as fast as the central bank’s target of a little over 2% per year for overall inflation, keeping upward pressure on interest rates:

Best in Energy – 12 January 2023

PJM says 46 GW of generators failed to respond ¹

U.S. says price cap is cutting Russia’s oil earnings

Global LNG import volumes hit record high

Freeport LNG outage extended to February

French aluminium smelter begins restart

South Africa hit by worst ever power cuts

Freight forwarder cuts employment ($WSJ)

Australia/China coal trade restarts ($WSJ)

Saudi Arabia plans full nuclear fuel cycle

LME’s nickel-market breakdown inquiry

¹ PJM’s post-event study for winter storm Elliot on December 24 is worth reading in full and confirms the major problem was the failure of many generators to respond to instructions from the grid because of a failure to start up or secure enough fuel (principally gas). Generators were unavailable even though they had been given repeated warnings of an extreme weather event for several days beforehand and told to prepare for a plunge in temperatures. In many cases, generators provided less than 1 hour of notice they would not be available. If generators cannot be depended upon to respond to instructions they cannot be considered firm dispatchable power for reliability purposes.

In response, PJM was forced to initiate a series of relatively extreme emergency measures to protect the transmission system, including voltage reductions and an order for flat-out maximum generation from units that were available.

U.S. PETROLEUM INVENTORIES including the strategic reserve totalled 1,599 million barrels on January 6, the lowest seasonal level since 2004. Stocks have fallen by -185 million barrels over the last 12 months and are down by -518 million barrels from their peak in mid-2020 as production has persistently fallen below consumption:

Best in Energy – 9 November 2022

G7 sanctions will raise tanker ton-miles ($BBG)

U.S. coal mining firms plan for gradual phase out

U.S. coal mining regional productivity variations

New Zealand to increase strategic oil inventories

EU agrees distribution of emissions targets

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:

Best in Energy – 31 October 2022

EU LNG offshore queue is depressing gas prices

EU diesel prices at record relative to jet and crude

U.S. road freight faces ‘muted’ peak season ($WSJ)

U.S. gas prices fall as inventories swell ($WSJ)

Copper production is falling short of consumption

Copper shortage threatens energy transition ($FT)

EU/Russia gas conflict, inventory and prices ($FT)

Europe’s consumers cut discretionary spend ($FT)

China builds coal-fired back to renewables ($BBG)

China’s internal news reporting system

China’s ever-normal granaries ($JSTOR)

CHINA’s manufacturers reported a decline in activity last month as the economy struggled with repeated lockdowns. The official purchasing managers’ index slipped to 49.2 in October (4th percentile for all months since 2011) from 50.1 in September (24th percentile). Manufacturing activity has contracted in seven of ten months so far in 2022:

SOUTHERN CALIFORNIA’s ports handled the lowest volume of containers in the month of September since 2009, as spending on merchandise slowed and retailers struggled to reduce excess inventories:

Best in Energy – 27 October 2022

LNG stocks in floating storage off coast of Spain ¹

U.S. trucking firms report mixed demand ($BBG)

U.S. officials try to finalise Russia oil price cap

U.S. officials water down price cap plan ($BBG)

U.S. uranium indigenisation strategy  planned

U.S. uncompleted oil wells at lowest since 2013

¹ Floating storage is more expensive than storing on land. Storing LNG is especially expensive because it needs to be kept super-chilled. But the extreme contango in European futures for nearby delivery months has made relatively long duration floating storage commercially viable. As a result, Europe’s available inventories are even higher than shown in the daily storage reports from Gas Infrastructure Europe.

U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -5 million bbl in the week to October 21. Stocks have depleted by a total of -491 million bbl since the start of July 2020 and are at the lowest seasonal level since 2004. Oil inventories are on an unsustainable trajectory. “If something cannot go on forever, it will stop,” according to the aphorism popularised by Herbert Stein, chief economic adviser to U.S. President Richard Nixon. Global production must grow faster. Consumption must grow more slowly. Or both:

Best in Energy – 25 October 2022

Freight season on course to be very weak

U.S./Saudi strains between leaders ($WSJ)

Nord Stream blasts and insurance claims

U.S. fertilizer exports surge

U.K. plan for warming centres ($BBG)

EUROPE’s maturing benchmark gas futures contract for November is falling rapidly as storage becomes full and the weather is forecast to remain mild. Prices for November delivery slipped to €99 per megawatt-hour (MWh) on October 24 down from €200 a month earlier. Mid-winter prices for January have remained higher at €143 compared with €200 a month ago. The extreme contango is symptomatic of storage becoming nearly full and the need to encourage more consumption by power generators and consumers in the short term, while concerns persist about availability in the middle and later stages of winter:

Best in Energy –  24 October 2022

Russia oil exports will be able to evade price cap

Russia’s nuclear forces – command and control

China boosts diesel and jet exports in September

U.S. shale producers disregard SPR refill offer

U.S. oil firms reluctant to increase output ($WSJ)

Southern California’s port backlog clears ($WSJ)

Schlumberger rebrands itself as SLB

U.S. SPR used more actively ($FT)

U.S. gas flows in 2021 (Sankey diagram)

Venezuela’s opposition seeks deal ($FT)

UN climate talks lose momentum ($BBG)

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:

Best in Energy – 19 October 2022

Global freight’s peak season is fizzling out ($WSJ)

EU industry at risk from high energy costs ($FT)

OPEC⁺ and the U.S./Saudi diplomatic relationship

EU explores multiple price caps for imported gas

U.S. SPR will buy oil if futures prices fall to $67-72

(see also text of final rule)

MIDDLE DISTILLATES (focusing here on diesel and gas oil but excluding kerosene and jet fuel) are the most cyclically sensitive part of the oil market. If there is a global economic slowdown in 2023 it will hit distillate consumption hardest. Conversely, if distillate shortages ease it must come about through a slowdown in global growth:

EUROPEAN GAS PRICES are softening throughout the remainder of 2022 and 2023 in response to a near-record refill season, high gas inventories, warmer than average weather forecasts for the first part of winter, and the prospect of reduced consumption from energy-intensive industries:

Best in Energy – 23 September 2022

U.S. central bank signals a hard landing ($WSJ)

U.S. trucking – possible decarbonisation pathway

China’s refiners anticipate higher exports ($BBG)

India plans more coal generation by 2030 ($BBG)

Asia LNG sales stall as prices hit resistance ($BBG)

ADNOC chief sees little room to manoeuvre in oil

Taiwan says blockade would be act of war

FedEx to cut costs and raise parcel prices ($WSJ)

U.S./China relations –Asia Society speech (trans)

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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Best in Energy – 21 September 2022

European energy trading hit by falling liquidity

Small modular reactors – deployment challenges

U.K. government caps energy prices for businesses

Coal miners seek ways to stay in future energy mix

Germany nationalises gas importer Uniper

Hertz orders 175,000 more electric vehicles ($WSJ)

CHINA’s railway hauled a record volume of freight in the first seven months of the year. Freight tonne-kilometres were up +9% compared with the same period in 2021 and +22% compared with before the pandemic in 2019. Coal is by far the largest item on the network. The system is moving record quantities of coal from the northern mining areas in Shanxi, Shaanxi and Inner Mongolia to the major consuming centres in the eastern, central and southern provinces:

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