Best in Energy – 5 June 2023

OPEC⁺ extends production cuts into 2024 (Reuters)

Saudi Arabia to cut extra 1 million b/d in July (WSJ)

Saudi Arabia cuts again to boost oil prices (FT)

Saudi Arabia cuts alone to lift oil price (Reuters)

OPEC⁺ to review members’ output capacity (OPEC)

Saudi Arabia wants ‘fair hearing’ on oil policy (FT)

Bangladesh power cuts on fuel shortages (Reuters)

Solar panels eventually need to be recycled (BBC)

U.S. oil and gas drilling down as prices fall (Reuters)

LME tries to make inventories more visible (Reuters)

U.S./Iran diplomats try to restart negotiations (FT)

U.S./China in ‘secret’ diplomatic talks (FT)

China’s gas consumption fell in 2022 (EIA)

U.S. OIL DRILLING activity has fallen again, with the number of active rigs targeting oil-rich formations down by -15 over the seven days ending on June 2. The oil rig count is down by -72 (-11%) from its recent peak at the start of December 2022. The cyclical upturn in drilling that started after the first wave of the coronavirus pandemic is over. Drilling activity is falling in line with lower oil prices since the middle of 2022:

Best in Energy – 2 June 2023

China/India imports of Russia crude at record (Reuters)

UAE campaigns for higher OPEC allocation (Bloomberg)

OPEC⁺ caught by consumption uncertainty (Bloomberg)

Exxon plans to boost shale recovery rates (Reuters)

U.S. GAS INVENTORIES accumulated by +110 billion cubic feet to 2,446 billion over the seven days ending on May 26. Stocks were +280 billion cubic feet (+13% or +0.67 standard deviations) above the prior ten-year seasonal average up from a surplus of +217 billion (+13% or +0.47 standard deviations) at the start of the refill season on April 1:

Best in Energy – 26 May 2023

Nickel trade flows transformed after price spikes (Reuters

Maritime services firms end contracts with Gatik (Reuters)

U.S. shale slows research and development spend (Reuters)

China puts first commercial airframe into service (Reuters)

India’s coal generation and changing climate (Bloomberg)

Semiconductor firms push back against U.S. controls (WSJ)

U.S./China semiconductor security controls broaden (WSJ)

Norway’s complicated policy on oil and gas emissions (FT)

¹ Spiking commodity prices usually encourage changes in behaviour and innovation that have long-term impacts on production and consumption. In nickel’s case the surge in prices to more than $50,000 per tonne in 2007 has encouraged a long-term shift from cathodes and other highly refined forms of nickel to nickel pig iron (NPI) and other forms of lower-quality metal. At the time, many observers predicted users would never switch wholesale to NPI because of its quality issues. But businesses and markets are good at innovating around bottlenecks if the price incentive is strong enough.

EUROPE’s gas storage reached two-thirds full on May 24, the second earliest date in the last 13 years, and 57 days earlier than the average since 2011:

EUROPE’s gas prices are slumping to encourage more consumption by power generators and industrial users and slow the accumulation of inventories. Front-month futures have fallen to €25 per megawatt-hour down from €77 at the start of 2023 and a peak of almost €340 in August 2022:

Best in Energy – 25 May 2023

U.S. LNG exports and impact on domestic prices (EIA)

OPEC⁺ expected to leave output unchanged (Bloomberg)

Greenhouse effect’s intellectual history (Conversation)

Mining as limiting factor for energy transition (Reuters)

Asia coal imports rebound in 2023 (Reuters)

China/Russia gas pipeline negotiations (FT)

U.S. airlines report more near-misses (WSJ)

U.S./China cyber-espionage (Reuters)

(see also joint statement by Five Eyes)

U.S. PETROLEUM INVENTORIES including the strategic reserve depleted by -12 million barrels in the seven days ending on May 19 to the lowest seasonal level since 2004. There was a major drawdown in commercial crude stocks (-12 million barrels) with smaller draws in gasoline (-2 million) and distillate fuel oil (-0.5 million) but a small build in jet fuel (+1 million). Commercial crude stocks are in line with the prior ten-year seasonal average (+0.01 standard deviations) but there are substantial deficits in gasoline (-1.20 standard deviations) and distillates (-1.45 standard deviations):

Best in Energy – 24 May 2023

China pushes new gas line from Turkmenistan (Reuters)

U.S/EU aluminium smelters call for more aid (Reuters)

Forestry and carbon sequestration (Energy Monitor)

Philippines switches to expensive LNG (Reuters)

U.S./China attempt diplomatic opening (WSJ)

Energy transition investment survey (Bain)

Germany’s exports to China drop (FT)

U.S./China semiconductor conflict (FT)

EUROPE’s gas inventories amounted to 754 TWh on May 22. Stocks were +273 TWh (+57% or +2.00 standard deviations) on May 22 above the prior ten-year seasonal average compared with a surplus of +267 TWh (+51% or +2.72 standard deviations on February 6. Inventories are the second-highest on record for the time of year and the surplus is narrowing very slowly. Stocks are on track to peak at 1,237 TWh at the end of the refill season, exceeding the available storage capacity of around 1,139 TWh. Futures prices for deliveries in June and July continue to fall to encourage more consumption and divert cargoes to Asia:

Best in Energy – 23 May 2023

Germany to subsidise industrial power (Reuters)

Boeing sceptical on sustainable aviation fuel (FT)

U.S. western states in Colorado river deal (WSJ)

Ford’s procurement deals for lithium (FT)

Ocean shipping container production falls (FT)

U.S. retailers near end of destocking cycle (WSJ)

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%:

Best in Energy – 22 May 2023

China’s lithium futures prices rebound (Reuters)

Nigeria starts up major new oil refinery (Reuters)

California approves more transmission (Reuters)

U.S. military to indigenise explosives supply (WSJ)

Asia LNG imports rise following price drop (Reuters)

Argentina oilfield workers strike on safety (Reuters)

Crude oil prices are falling in real terms (Bloomberg)

Russia’s oil output increasingly opaque (Bloomberg)

Russia/Asia energy trade volume rises  (Bloomberg)

EUROPE’s front-month gas futures price has fallen below €30 per megawatt-hour from €77 at the start of January 2023 and a record of almost €340 in August 2022. Gas inventories are plentiful following a mild winter and cuts in industrial consumption. As a result storage is on course to be full well before next winter starts. Prices are declining to stimulate industrial demand and divert LNG to more price-sensitive customers in South and East Asia:

U.S. OIL DRILLING is slowing in response to the fall in prices since the middle of 2022. The cyclical upturn in drilling activity that started after the end of the first wave of the pandemic in August 2020 is likely over. The number of active rigs targeting oil-rich formations fell to 575 over the seven days ending on May 19 down -11 compared with the previous week and by a total of -52 compared with the early December 2022:

Best in Energy – 19 May 2023

China’s outreach to Central Asia (Reuters)

Europe’s gas prices are normalising (FT)

Russia oil price cap is working (U.S. Treasury)

New Mexico’s oil production boom (Reuters)

U.S. residential energy consumption (Reuters)

BRENT calendar spreads have softened as crude supplies have remained plentiful despite Russia’s invasion of Ukraine and the U.S./EU sanctions imposed in response, while the cyclical slowdown in industrial and freight activity has weighed on petroleum consumption:

SINGAPORE’s port container throughput reached a seasonal record 3.26 million twenty-foot equivalent units (TEUs) in April 2023 up from 3.04 million in the same month a year earlier. Container freight through the port has shown signs of starting to recover since the end of the first quarter:

Best in Energy – 17 May 2023

[MUST READ] U.S./China diplomatic rivalry (Bloomberg)

Oil price decline driven by porous sanctions (Bloomberg)

Vehicle tyres, electric vehicles and air pollution (Reuters)

India to complain to WTO over EU carbon tariff (Reuters)

China to accelerate rural rollout of electric cars (Xinhua)

Russia/NATO economic warfare and asset seizures (FT)

India’s surging air-conditioning demand (Bloomberg)

Indonesia wants cheaper transition funds (Bloomberg)

Australia’s LNG exports and energy transition (Reuters)

U.S. office occupancy flat as return-to-office stalls (WSJ)

U.S. office sale prices slump (WSJ)

U.S. gas price forecast to rise (EIA)

U.S. rural electric subsidies (Reuters)

Nuclear fusion supply chain (Reuters)

U.S. oilfield services see sharp slowdown (FT)

U.S. MANUFACTURING production excluding volatile output of vehicles and parts was down -1.6% in April 2023 compared with April 2022. Production for the three months from February to April was down -1.5% compared with the same period a year earlier:

U.S. BUSINESS INVENTORIES remain elevated despite efforts to reduce them which implies the softness in industrial and freight activity is likely to be prolonged for several more months. Manufacturers, distributors and retailers held inventories equivalent to 1.39 months of sales in March 2023, unchanged from December 2022, and up from just 1.30 months in March 2022. Excess inventories are particularly high at distributors and retailers which will remain a drag on new orders:

Best in Energy – 15 May 2023

Argentina set to reverse gas pipeline (Reuters)

G7 plans tighter sanctions on Russia (Reuters)

EU LNG import capacity surges (Bloomberg)

U.S./Iran tanker seizures (Bloomberg)

Nuclear decommissioning (Bloomberg)

Sour crude market tightens (Reuters)

EUROPE’s middle distillate inventories rose +2 million barrels in April and are up +28 million barrels from their cyclical low in June 2022. Stocks are still -35 million barrels (-8% or -1.15 standard deviations)  below the prior ten-year seasonal average but the deficit has narrowed from -63 million barrels (-13% or -2.05 standard deviations) in June 2022:

U.S. OIL AND GAS drilling activity is slowing sharply in response to the fall in prices since the middle of 2022. The total number of active rigs fell by -17 over the seven days ending on May 12 with a particularly large decline in rigs targeting primarily gas-rich formations (-16). The decline in gas rigs was the largest for more than seven years since February 2016. Exploration and production firms are scaling back in response to prices that have fallen close to their lowest levels in real terms for three decades. Lower drilling conserves cash as well as signalling to investors and futures traders the sector’s determination to act quickly to avert prolonged over-production: