Best in Energy – 28 March 2022

Commodity traders keep Russian exports flowing

OPEC+ officials call for increased understanding

EU carbon market operations – regulator review

IEA defers decision on energy data subscriptions

Germany’s dependence on Russian oil ($BBG)

Japan nuclear restarts win more support ($BBG)

Russia sanctions threaten LNG ship orders ($FT)

U.S. shale output limited by supply chain ($FT)

Freight costs rise in response to diesel ($WSJ)

Middle East diplomatic negotiations ($WSJ)

Shanghai financial district in lockdown (trans.)

Shenzhen relaxes coronavirus controls (trans.)

Battery storage: grid-service and load-shifting

Hedge funds position for yield curve inversion

RECESSION signals are intensifying with the two-to-ten year segment of the U.S. Treasury yield curve within 12 basis points of inverting and in the 88th percentile for all months since 1990. The U.S. economy has been in a formal end-of-cycle recession as defined by the National Bureau for Economic Research for just over 9% of the time since 1990:

U.S. OIL producers have added drilling rigs at a rate of just over 4 per week since the start of the year, essentially the same rate since August 2020, but slower than during the previous recoveries after price slumps in 2015/16 and 2008/09:

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Best in Energy – 25 March 2022

Brent futures margin requirements raised further

Europe’s diesel shortage threatens output growth

U.S. refiners source more fuel oil from Middle East

EU diesel supply vulnerable to Russia ban ($BBG)

EU faces high costs for filling gas storage ($BBG)

China economy disrupted by new epidemic ($BBG)

Russia/Ukraine war cuts fertiliser supply ($WSJ)

Mexico follows Fed in raising interest rates

UAE/Saudi seek to reset U.S. relationship ($FT)

EUROPEAN gas oil and Brent twelve-month calendar spreads are both trading in the 99.9th percentile for all trading days since 2000 as traders anticipate possible severe shortages of both crude and products stemming from Russia’s invasion of Ukraine and U.S./EU sanctions imposed in response:

EUROZONE manufacturers reported a less widespread expansion this month as war in Ukraine and inflation pushes the region’s economy towards a cyclical slowdown. Preliminary readings put the purchasing managers’ index at 57.0, down from 58.2 in February, and the lowest since January 2021, when economy was still gripped by pandemic:

GERMANY’s IFO business expectations index fell to 85.1 in March from 98.4 in February, a level only normally seen during a recession, as employers prepare for the impact of the war and sanctions to be felt on the domestic economy:

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Best in Energy –  24 March 2022

[MUST READ] U.S. shale firms and production limits

Germany warns against immediate oil embargo ($FT)

Russia’s oil flows redirected to China and India ($BBG)

Oil shocks and impact on equity valuations

Australia’s domestic gas industry and higher prices

China port congestion worsens amid lockdowns ($BBG)

U.S. PETROLEUM inventories outside the strategic petroleum reserve fell last week by another -7 million bbl to 1,137 million bbl. Commercial stocks have declined in 65 of the last 90 weeks by a total of 325 million bbl since the start of July 2020. Inventories are at the lowest level for the time of year since 2014:

U.S. SHALE firms cite pressure from investors to return cash to shareholders as the main reason for not increasing output, with almost 30% of respondents to the Dallas Fed survey saying they would not increase output faster at any price:

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Best in Energy – 22 March 2022

EU divided over response to high gas and power prices

Japan calls for electricity saving after earlier earthquake

Japan’s power supplies stretched after earthquake ($BBG)

Australia/Russia alumina embargo boosts end metal prices

China orders coal stocks replenished immediately ($BBG)

Vitol warns of volatility and margining challenges ($FT)

Jilin hit by widespread coronavirus outbreak (trans.)

Russia’s role as a uranium fuel exporter ($WSJ)

Global uranium supply dominated by Russia

U.S. energy-related CO2  projections through 2050

JAPAN called for electricity conservation as temperatures plunged and stretched power supplies after an earthquake damaged generation last week:

EU+UK GAS inventories are on course to an expected post-winter low of 272 TWh with a likely range of 238-292 TWh. Mild temperatures and ultra-high prices have reduced gas consumption while the region has continued to attract imports. As a result, the post-winter projection has improved significantly from just 215 TWh on Dec. 26. The region still needs to accumulate much higher-than-normal inventories over the next six months but every TWh saved now is one TWh of inventory that will not be needed later:

EU GAS prices have fallen as the inventory outlook has become more comfortable and the likelihood of an immediate cessation of pipeline imports from Russia has appeared to recede. Front-month futures prices have fallen to €96/MWh from a record €227 on March 7. The summer July 2022 to winter January 2023 calendar spread has shrunk to a backwardation of less than €9 from almost €72 on March 7. The market is still signalling the need for a large and urgent refill of inventories but is no longer trading at the crisis levels of two weeks ago:

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Best in Energy – 21 March 2022

EU divided on whether to embargo Russian oil

India experiences run on retail diesel outlets

EU’s plan to refill gas storage risks price surge

EU’s short-term reliance on Russian gas ($FT)

Saudi Aramco says global oil market is very tight

U.K./Saudi summit and wider political relations

China civilian aircraft crashes with 132 on board

Economic sanctions – measuring effectiveness

Russia/Ukraine war enters attrition phase ($FT)

Russia/Ukraine war enters attrition phase ($WSJ)

China’s epidemic control in rural areas (trans.)

Sri Lanka’s rising energy bill risks default ($BBG)

BRENT futures open interest fell by a record 352 million barrels over the three weeks spanning Russia’s invasion of Ukraine from February 22 to March 15, tumbling to the lowest level since August 2015, as prices spiked higher, volatility increased, margins rose and liquidity dried up:

COAL went from a marginal fuel used in a handful of local areas to become an essential part of England’s pre-industrial economy between 1500 and 1700 – well before the commonly accepted start of the industrial revolution in the later 18th century. By 1700, coal had replaced wood as the dominant fuel for domestic heating in London and most urban centres, and was the main fuel for all manufacturing, including glass-making, salt production, brewing, dyeing, and nonferrous smelting, with the notable exception of iron making:

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