Tag: interest rates

Best in Energy – 19 April 2024

Energy transition in an era of higher interest rates (Woodmac)

Iran and Israel signal end to missile therapy sessions (Reuters)

China warns about floods amid heavy spring rains (Xinhua)

China forecasts more rains across southern areas (Xinhua)

China’s urban areas hit by widespread subsidence (Reuters)

Europe solar generation depresses daytime prices (Reuters)

India sources more crude from Russia in 2023/24 (Reuters)

U.S. hydro generation predicted to recover in 2024 (EIA)

Europe’s electric vehicle sales are dwindling (Bloomberg)

Iran recalls intelligence ship from Gulf of Aden (Bloomberg)

SOUTH CHINA is experiencing heavy rainfall with the strongest spring rains since 2022 and before that 2016. The city of Yibin at the confluence of the Min and Yangtze rivers on the border of Sichuan and Yunnan has already received 104 millimetres of rainfall so far in April compared with a full-month seasonal average of 84 millimetres between 2014 and 2023. The spring rains should start to recharge the hydroelectric system after a prolonged drought in 2022/23.

For China’s hydro generation, the location of rainfall is critical, given almost all the major generating stations are located in the south and southwest of the country. What matters is precipitation across the Tibetan plateau; the south and southwest (Yunnan, Sichuan, Guizhou, Hunan, Guangxi and Guangdong); and the lower reaches of the Yangtze, often called Jiangnan (including parts of Anhui and Jiangxi). These are precisely the areas currently being inundated by heavy rainfall:

Best in Energy – 12 April 2024

China’s plan for strategic coal reserve (Reuters)

China’s plan for strategic coal reserve (NDRC)

U.S. gas inventories and price forecasts (EIA)

U.S. interest rates and housing costs (Reuters)

Russia destroys Ukraine power plant (FT)

SOUTH CHINA’s spring rains have arrived and should soon boost hydroelectric generation. Yibin, a city on the Sichuan-Yunnan border at the confluence of the Min and Yangtze rivers, has experienced total precipitation in the first 11 days of April of 79 millimetres, almost as much as the full-month average of 84 millimetres over the previous ten years. Plentiful rainfall during the spring rains and especially during the wet phase of the East Asian Monsoon between June and September is critical to a recovery in hydro generation and a reduction in coal combustion after the drought in 2022/23:

Best in Energy – 4 April 2024

OPEC⁺ lifts oil prices up to its sweet spot (Reuters)

U.S./China conflict on industrial capacity (Reuters)

Russia’s refinery repairs hit by sanctions (Reuters)

Russia’s refineries, drones and sanctions (Carnegie)

Russia cuts gasoline exports (Reuters)

U.S./India oil price cap cooperation (Reuters)

U.S. INTEREST RATE traders have scaled back expectations for rate cuts this year in response to stronger than anticipated data on business activity, jobs and inflation. The central bank is now expected to cut rates by just two or three quarter-points by the end of 2024 – with a roughly equal chance of each outcome:

EUROZONE manufacturers are still struggling to emerge from the prolonged downturn caused by the end of the pandemic and the sharp increase in energy prices following Russia’s invasion of Ukraine. The purchasing managers index slipped to just 46.1 (14th percentile for all months since 2006) in March and has been below the 50-point threshold dividing expanding activity from a contraction for 21 months running:

Best in Energy – 5 March 2024

Services inflation could leave interest rates higher for longer (BIS)

Saudi Arabia defers difficult decision on raising oil production (FT)

NEOM’s line in the desert as seen from the air (New Civil Engineer)

Saudi Arabia seeks investment in tourism development (Bloomberg)

Russia’s economic adjustment to war and sanctions (Oxford Energy)

Global supply chains – resilience and policy responses (Bruegel)

China toughens energy efficiency goal for 2024 (Reuters)

India’s private power generators plan more coal units (Reuters)

U.S. electricity consumption boosted by data centres (Woodmac)

Netherlands accelerates deployment of solar generation (Reuters)

India plans more city-gas distribution in northern areas (Reuters)

India’s central bank wants to pay for some oil in rupees (Bloomberg)

China’s crude oil processing accelerated to record high in 2023 (EIA)

LONDON and southeast England are almost three-quarters of the way through the heating season. Total heating demand so far has been -14% below the long-term seasonal average. The month of February was especially mild with temperatures +3.32°C above the long-term average, slashing gas consumption by generators, commercial users and households:

Best in Energy – 7 February 2024

Wind turbines: technology and profitability (Woodmac)

Ørsted’s emergency measures to stabilise business (FT)

EU solar installations and manufacturing (Bruegel)

India as biggest incremental oil consumer (Reuters)

Guyana crude oil production surges higher (Reuters)

U.S. central bank tries to discern neutral rate (Reuters)

U.S. gas consumption hit daily record in January (EIA)

GERMANY’s energy-intensive manufacturing output fell sharply at the end of 2023 despite the drop in gas futures prices. After seasonal adjustments, production was down by almost -6% in December 2023 compared with November 2023 and -21% compared with before Russia’s invasion of Ukraine:

U.S. GAS futures end-of-winter calendar spread between March and April 2024 is trading flat down from an average backwardation of 31 cents per million British thermal units in August 2023. Traders anticipate a large carryover of inventories at the end of winter 2023/24 as a result of relatively mild weather and continued growth in production:

Best in Energy – 26 January 2024

Climate policies and their electoral costs (Bruegel)

Renewable capacity surged in 2023 (Energy Monitor)

EU renewables hit by rising interest rate (Woodmac)

China’s renewable power and energy storage (NEA)

China silicon makers hit by overcapacity (Bloomberg)

U.S./China/Iran talks about Red Sea conflict (Reuters)

Aramco still sending tankers via Red Sea (Bloomberg)

U.S. president pauses new LNG approvals (Reuters)

China’s domestic aircraft in regular service (Xinhua)

U.S. electricity disruptions in from 2013 to 2022 (EIA)

INDIA’s electricity generators had coal inventories equivalent to 13.4 days of requirement on January 24 up from 12.0 days at the end of January 2023 and 9.2 days at the end of January 2022. Comfortable stocks should reduce reliability risks during the shoulder season between March and April when rising temperatures boost electricity demand but before the arrival of the monsoon increases hydro and wind generation:

U.S. REAL FINAL SALES to private domestic purchasers (FSPDP), a measure of economic activity that strips out short-term volatility from inventories, trade and government spending, advanced at an annualised rate of +2.6% in the fourth quarter of 2023 a slight deceleration from +3.0% in the third quarter. Real final sales to private domestic purchasers provides the most useful indicator of underlying momentum in the economy. The rate of increase in the fourth quarter was very close the long-term average since the start of the century at +2.5%:

Best in Energy – 4 January 2024

OPEC statement tries to support oil price (OPEC)

Venture Global complaint by Shell (Bloomberg)

China oil import quotas frontloaded (Bloomberg)

China energy security and transformation (NEA)

U.S. SPR bids for 3 million barrels more (Reuters)

Russia/Ukraine and sovereign asset seizures (FT)

U.S. INTEREST RATE traders anticipate the central bank will cut rates earlier and faster in 2024 in response to signs inflation is decelerating. The first quarter-point reduction is expected to come at the policy meeting on March 19-20 followed by five more quarter-point cuts over the rest of the year.  By the end of 2024, overnight rates are forecast to be 3.75-4.00% compared with a forecast of 4.75-5.00% as recently as the start of October 2023:

EL NIÑO conditions remained very strong at the end of 2023. Sea surface temperatures in the central and eastern equatorial Pacific averaged +1.98°C above the long-term seasonal average during December. It was the highest positive temperature anomaly since December 2015 and before that December 1997. In North America, the strong El Niño resulted in much warmer than average temperatures, especially across the northern United States, between October and December, suppressing heating demand and gas consumption:

Best in Energy – 14 December 2023

[MUST READ] Pakistan’s LNG import contract crisis (Bloomberg)

India coal miners, generators outperform share market (Reuters)

China as a price-sensitive commodities importer (Reuters)

Saudi Arabia’s research reactor almost complete (Reuters)

Central banks, inflation and scenario-based forecasts (FT)

OPEC blames demand pessimism for oil price falls (Reuters)

Japan closes refineries as petroleum consumption falls (EIA)

China solar manufacturing costs drop 42% in year (Woodmac)

U.S./China conflict scenarios and oil tanker blockade (Reuters)

Data sharing and competition policy (WSJ)

BRENT calendar spreads moved into contango throughout the first half of 2024 at the close of trading on December 13. Traders anticipate oil supplies will remain comfortable in a marked shift from expected shortages at the end of September:

U.S. CRUDE oil inventories depleted by a total of -9 million barrels over the two weeks ending on December 8 after accumulating by +36 million barrels over the previous eight weeks. Inventories were still +9 million barrels (+2% or +0.18 standard deviations) about the prior ten-year seasonal average but the surplus had narrowed from +15 million barrels (+3% or +0.32 standard deviations) on November 24:

Best in Energy – 4 December 2023

Brazil clarifies it only wants observer status with OPEC⁺ (Reuters)

United States promotes rules reducing methane leakage (Reuters)

China’s renewables account for 50% of generation capacity (NEA)

United States accelerates refill of petroleum reserve (Reuters)

U.S. durable goods prices are falling (WSJ)

U.S. INTEREST RATE traders have sharply reduced their expectations for overnight interest rates in 2024 and 2025 in response to signs inflation is decelerating. Traders expect the central bank’s overnight rate to be just 4.00-4.25% by the end of 2024, compared with a forecast of 4.75-5.00% at the start of October. Traders expect the central bank to implement five quarter-point cuts (or equivalent) by the end of next year compared with just two at the start of October as both growth and inflation slow:

Best in Energy – 29 November 2023

Renewable energy hit by rising interest rates (Bloomberg)

China coal supply comfortable ahead of winter (Xinhua)

Cambodia scraps coal plant in favour of gas (Reuters)

China installs record renewable capacity (Woodmac)

Service sector inflation expected to prove sticky (FT)

Carbon capture– is there a commercial case? (WSJ)

EU to put limits on methane leaks (Energy Monitor)

EU solar generators push back against tariffs (Reuters)

Ukraine/Europe power grid synchronisation (Reuters)

NORTHWEST EUROPE is experiencing its second cold spell of the winter with temperatures averaging only just above 0°C at Frankfurt in Germany on November 28. With limited solar generation and wind generation temporarily suppressed by a high-pressure system over the region, grids are entering a period of maximum demand for gas-fired and coal-fired generation: