Tag: gas

Best in Energy – 23 February 2023

Chesapeake to reduce gas drilling and completions

Auto firms split on electrification timeline ($WSJ)

Commodity markets adapt to Russia/Ukraine war

Europe’s gas storage and refill for winter 2023/24

U.K. government to cut costs for big energy users

U.K. steelmaker plans to close coking ovens

U.S./Russia/China armaments supply ($WSJ)

IEA chief warns EU about complacency ($FT)

BRENT’s six-month calendar spread is trading in a backwardation of $1.80 (71st percentile for all days since 1990). The spread has tightened from a contango of $0.65 (34th percentile) since December 9 as expectations for a soft-landing in the global economy have increased. But it is well below levels before Russia’s invasion of Ukraine, implying the market is comfortably supplied despite sanctions on Russia and output restraint by OPEC⁺ and U.S. shale firms:

Best in Energy – 22 February 2023

EU gas consumption fell 19% in Aug-Jan period

U.S. Treasury outlines Russia sanctions strategy

China’s renewable energy deployment (trans.)

Iberia’s gas and power markets remain isolated

Kazakhstan plan to export oil via Russia ($BBG)

Freeport LNG obtains approval for partial restart

Derivatives go dark after cyber-attack ($BBG)

U.S. commercial property in recession ($WSJ)

Lithium prices retreat from record high ($FT)

Australia/China coal shipments resume

BRENT’s front-month futures price has fallen to $82 per barrel down from a high of $127 at the end of May 2022, after adjusting for inflation. But is that still fairly high or already below the long-term average? It depends whether or not the comparison includes the long period of low prices in the 1990s. In real terms, $82 is in the 65th percentile for all months since 1990, still fairly high. But if the 1990s are excluded, prices are in the 42nd percentile for all months since 2000 and the 48th percentile for all months since 2010, already in the lower half of the distribution:

Best in Energy – 20 February 2023

Freeport LNG’s poor safety culture ($FT) ¹

Asia’s diesel margins fall to 11-month low

IEA chief warns of gas shortage next winter

Pakistan/Bangladesh hit by expensive LNG

China becomes major LNG reseller ($BBG)

CFTC reports still disrupted by cyber attack

U.S. construction worker shortages ($FT)

Semiconductor prices fall by a third ($BBG)

China/Russia diplomatic ties deepen ($WSJ)

U.S./China espionage history review ($FT)

¹ Freeport LNG suffered a catastrophic failure after multiple safety systems failed and personnel ignored warning signs and lost situational awareness about the state of the plant. The resulting explosion is a classic example of what James Reason called an “organisational accident” – multiple systems should have prevented an incident but they were allowed to erode because of a poor internal safety culture leading to a rapid increase in risk (“Managing the risks of organisational accidents”, Reason, 1997).

Reason’s book is one of the best I have read on any topic, offering powerful insights in an engaging and accessible way. He provides a general framework for understanding why many catastrophic industrial and transportation failures happen. Everyone operating critical systems and machinery should be required to read it as part of their training. I can strongly recommend it to everyone else who is interested in safety, reliability and resilience systems.

U.S. OIL AND GAS drilling rates have stalled in response to the slump in prices since the third quarter of 2022. There has been no net increase in the number of active rigs (760) for the last 31 weeks:

Best in Energy – 17 February 2023

Europe’s steel producers and decarbonisation

Steel and potential decarbonisation pathways

U.S. SPR sales and purchasers

Germany’s last nuclear power generators

GAIL wants to buy equity in LNG exporter

EUROPE’s gas futures prices for deliveries in March 2023 have fallen below €50 per megawatt-hour for the first time since December 2021, before Russia’s invasion of Ukraine. Prices have fallen from €177 at the beginning of the winter heating season at the start of October and a record €338 in late August. Energy-intensive industrial closures, conservation measures, the impact of previous high prices, reduced LNG purchasing from China and South Asia, and a mild winter in northwest Europe all combined to avert feared shortages or a price spike during winter 2022/23:

Best in Energy – 16 February 2023

China plans record solar deployment

Shell’s LNG market outlook for 2023

Sri Lanka hikes power prices by 66%

U.S. gas prices drop in warm January

U.S. energy transition subsidies ($FT)

Truck-makers explore hydrogen fuel cells

Norway examines restricting power exports

U.S. economic data and nonresponse ($BBG)

U.S. PETROLEUM INVENTORIES including the strategic reserve surged by +19 million barrels in the seven days ending on February 10. There was a huge accumulation in reported stocks of crude (+16 million barrels) with smaller increases in gasoline (+2 million) and jet fuel (+1 million) partly offset by a drawdown in distillate fuel oil (-1 million).

Total inventories were still -243 million barrels (-13% or -2.26 standard deviations) below the prior ten-year seasonal average. But stocks have been trending higher since late December and the deficit to the seasonal average is staring to narrow:

Best in Energy – 14 February 2023

[MUST READ] U.S./China sanctions lessons

Russia’s crude is likely selling above quoted prices

Russia’s oil output unaffected by sanctions ($BBG)

U.S. SPR to sell 26 million barrels in second quarter

U.S. coal-fired generator retirements to accelerate

Russia’s gas exports in search of new markets

Global freight rates fall on excess capacity ($BBG)

High-altitude balloon monitoring systems ($WSJ)

Pakistan plans to shift from costly gas back to coal

Hedge funds cash in on coal investments ($FT)

Singapore slows new investment into China ($FT)

U.S. DURABLE GOODS orders for nondefense capital equipment excluding aircraft (a proxy for business investment) were up by +5 % in December 2022 compared with December 2021. Orders are reported in cash terms; with inflation running faster than 5%, the volume of new business was down in real terms. Even in nominal terms, however, orders have been flat since the middle of 2022, confirming the merchandise side of the economy has run out of momentum:

Best in Energy – 13 February 2023

Cyber-attack disabled futures reporting system

China/Qatar negotiating LNG buying agreement

U.S. shale producers plan more mergers ($FT)

U.S. gas futures price volatility is rising ($WSJ)

Freeport LNG had systemic safety failures ($BBG)

Global petroleum supply and inflation risk ($BBG)

NORTHEAST ASIA has experienced an unusually cold winter, in contrast to milder than normal temperatures at the other end of the Eurasian continent. Heating demand in Beijing, the heart of the Beijing-Tianjin-Hebei (Jīng-Jīn-Jì) mega-region, with a combined population of 113 million, has been +8% higher than the long-term average so far this winter. Beijing’s daily temperatures were below the seasonal average on 43 of 62 days in December and January:

Best in Energy – 10 February 2023

Russia plans to cut oil production by 0.5 million b/d in March

Indonesia’s coal-fired generation and “just energy transition”

U.S. gas production growth set to slow as futures prices slump

Germany’s storage firms to “refine” gas purchasing strategy

U.K. energy inefficient homes and heritage preservation ($FT)

U.S. heating oil prices ease from record high in early November

CFTC/ICE commitment of traders suspended for second week

NORTHWEST EUROPE is now roughly two-thirds of the way through the winter heating season. In an average year, two-thirds of all heating degree days at Frankfurt in Germany occur on or before February 10. Cumulative heating demand has been the lowest since the winter of 2015/16 and before that 2006/07. With the 2022/23 heating season now winding down, traders’ attention has already turned to the summer refill season and winter 2023/24:

U.S. INTEREST RATE traders anticipate a major reduction in inflationary pressure – with or without a significant slowdown in the business cycle – which has been reflected in a sharp reduction in forward interest rate forecasts. Market forecasts for interest rates at the end of 2024 fell by more than a full percentage point between the start of November and the start of February:

Best in Energy – 7 February 2023

Bangladesh will buy more LNG if prices fall further

Russia’s oil and gas export earnings have slumped

U.K. mild winter cuts cost of energy bills support

U.K. considers locational pricing for electricity

U.S. aircraft in near collision at Austin ($WSJ)

Shadow tanker fleet is growing rapidly ($FT)

Remote work and commute time saved ($BBG)

U.K. homes hesitate to install heat pumps ($FT)

Best in Energy – 3 February 2023

China imports Russian fuel oil

Iraq hit by severe dollar shortage

U.S. refiners prepare to cut output

U.S. renewable diesel expansion

Freeport LNG requests restart

U.K. experiences no major storms

EU/Russia energy flows ($WSJ)

CIA chief on U.S./China relationships

U.S./China balloon overflight  ($BBG)

U.S. GAS PRICES have fallen less than $2.60 per million British thermal units from more than $9 six months ago. In real terms, prices have fallen to just the 3rd percentile for all months since 1990 down from the 86th percentile in August 2022: