Tag: LME

Best in Energy – 8 July 2022

[MUST READ] EU still vulnerable to Russian gas cuts this winter

German landlord cuts heating to limit bills and gas consumption

U.S. manufacturers start to idle on higher energy costs ($BBG)

U.K. transmission operator’s investment pathway to 2030

Africa’s governments face fuel price protests ($BBG)*

South Asia hit by Europe’s rush for LNG ($WSJ)

Big nickel short position broke the LME ($BBG)

U.S. gasoline consumption fell in second quarter

* Sharp increases in the cost of food and fuel have often acted as the trigger for unrest. In eighteenth century England, increases in grain prices as a result of bad harvests or war frequently led to local disturbances, usually targeting bakers, grain merchants and government storehouses, with magistrates often calling in soldiers to restore order. Fuel riots were less common but a sharp rise in the price of coal would normally trigger a parliamentary inquiry to investigate monopolistic practices and hoarding. Food and fuel price rises were always seen as politically sensitive and a potential threat to public order (“The Coal Industry of the Eighteenth Century”, Ashton and Sykes, 1929).

U.S. PETROLEUM INVENTORIES including the strategic petroleum reserve fell -1 million bbl to 1,678 million bbl last week. Stocks have fallen in 78 out of the last 105 weeks by a total of -440 million bbl since the start of July 2020. The most recent week saw an increase in crude inventories (+2 million bbl) but depletion of gasoline (-2 million), distillate fuel oil (-1 million) and jet fuel (-1 million).

The drawdown in fuel stocks in the week ending July 1 is likely associated with the impending public holiday on July 4, which will have seen inventories pulled forward from the primary distribution system of refineries, pipelines and bulk terminals (where they are recorded) into the secondary system of retailers and local fuel suppliers as well as end-users’ own storage tanks (where they are not recorded). It largely reversed a big build in gasoline, distillate and jet fuel the week before as stocks were pre-positioned ahead of the holiday demand:

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Best in Energy – 8 April 2022

China struggles to suppress outbreak (trans.)*

China manufacturers hit by outbreak ($WSJ)

EU bans Russia coal imports from August 2022

Japan plans to wind down Russia coal imports

Russia’s oil and diesel export blending ($BBG)

LME stocks fall to multi-decade low ($BBG)

LME zinc inventories set to deplete rapidly

Shell’s hedging related outflows of $7 billion

Russia/Ukraine war and removing sanctions

White House invokes defence production law

Coal buyers scramble for Russia replacements

* Xinhua’s lead article on the coronavirus outbreak in Shanghai illustrates the scale of the challenge, with more than 100,000 cases in the latest outbreak in the megacity, as well as the government’s decision to stick with the “dynamic clearing” zero-coronavirus suppression strategy.

BRENT’s six-month calendar spread has fallen to a backwardation of less than $5 per barrel from a record high of more than $21 a month ago, as the pledge by IEA members to offer 240 million barrels of oil from government-controlled strategic reserves over the next six months has eased traders’ concerns about short-term availability:

U.S. MANUFACTURERS reported new orders for nondefense capital equipment excluding aircraft were up +11% in cash terms in the three months from December to February compared with the same period a year earlier. But growth has decelerated significantly with nominal orders advancing at an annualised rate of only +6.48% in the latest three months, the slowest increase since July 2020, when the economy was emerging from the first wave of the pandemic and lockdowns:

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Best in Energy – 6 April 2022

EU/Russia coal ban would strain supply ($BBG)

U.S. central bank signals rapid move to neutral

U.S. Treasury warns of economic shock ($BBG)

Europe’s economy faces energy shock ($BBG)

India’s coal imports to rise in 2022/23

Argentina’s gasoil consumption rises

Crude physical benchmarks weaken

LME sees sharp reduction in positions

California’s emissions price increases

Reuters has created new web pages where you can find all the columns by our commodities experts in one place:

* Industrial metals www.reuters.com/authors/andy-home

* Asian markets www.reuters.com/authors/clyde-russell

* Agriculture www.reuters.com/authors/karen-braun

* Energy markets www.reuters.com/authors/john-kemp

EUROPE’s midsummer-midwinter gas futures calendar spread from July 2022 to January 2023 has narrowed sharply to a backwardation of less than €4/MWh down from a record €72 in early March. To ensure inventories can be accumulated over the next six months for use next winter, without incurring large losses, the spread needs to move into contango to cover storage costs. The July 2022 futures price must fall, the January 2023 price must rise, or both. So far, both prices appear to be adjusting in the expected direction:

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