Best in Energy – 2 August 2022

India starts rationing gas to industrial users

Australia grapples with pricing for domestic gas

Baker Hughes plan to sell Russia unit to insiders

Rosatom tightens grip on nuclear energy ($BBG)

China focuses on energy indigenisation (trans.)

U.S./Saudi visit: what did Biden achieve? ($BBG)

United Kingdom closes nuclear power generator

EU struggles to balance energy security and transition ($WSJ)

U.S./EU responses to energy security and transition challenges

U.S. MANUFACTURERS reported a further slight deceleration in growth last month, with the ISM purchasing managers’ index slipping to 52.8 in July (50th percentile for all months since 1980) from 53.0 in June (53rd percentile). New orders fell for the second month running, slightly faster in July (48.0, 14th percentile) than June (49.2, 17th percentile), implying business activity will slow further over the next few months:

U.S. DISTILLATE CONSUMPTION has begun to fall in line with the deceleration in manufacturing activity. The volume of distillate supplied was down -0.4% in March-May compared with the same period a year earlier. Distillates are the most cyclically sensitive part of the oil market, so the business cycle slowdown is filtering through into lower fuel use, part of the market rebalancing process:

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Best in Energy – 1 August 2022

OPEC says Russia is essential to success of OPEC+

Lyondell plans to repurpose Houston oil refinery

New England solar reshapes electricity load curve

EU/UK ease sanctions on Russian oil trade ($FT)

U.S. threatens to sanction Iran oil trading ($WSJ)

Bangladesh sees LNG shortage until 2026 ($BBG)

China’s leaders recommit to zero-covid (trans.)

Australia explores controls on LNG exports

U.S. energy systems hit by shortages ($WSJ)

Iraq’s political crisis is intensifying ($WSJ)

CHINA’s manufacturers reported a significant contraction in activity last month with the composite purchasing managers’ index falling to 49.0 in July (2nd percentile for all months since 2011) down from 50.2 in June (33rd percentile). Repeated lockdowns are disrupting supply chains and economic activity:

U.S. GAS production was up +4.2% in May compared with the same month a year earlier, and up +3.1% in the three months March-May compared with the same period in 2021:

U.S. CRUDE OIL production fell -57,000 b/d in May compared with April as lower output from the Gulf of Mexico (-157,000  b/d) more than offset increases from the onshore Lower 48 (+95,000 b/d) and Alaska (+5,000 b/d). Onshore L48 output was up by just +468,000 b/d in March-May compared with the same period a year earlier:

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Best in Energy – 1 June 2022

The United Kingdom has a two-day public holiday on Thursday and Friday to celebrate the sovereign’s platinum jubilee, so Best in Energy will resume on Monday.

OPEC ⁺ explores suspending Russia allocation ($WSJ)

Russia prepares to re-route oil from Europe to Asia

India’s private refiners benefit from cheap Russian oil

India’s record renewables output eases coal shortage

Africa pushes back against emissions hypocrisy ($FT)

U.S. retailers attempt to resist price increases ($WSJ)

Global diesel and gasoline shortage raises prices ($FT)

U.S. residential use of air-conditioning reaches 88%

OPEC’s spare capacity and market stabilisation

EUROZONE manufacturers reported a further slowdown in growth last month as rapid inflation and the war between Russia and Ukraine took their toll. The manufacturing purchasing managers’ index slipped to 54.6 in May (65th percentile) from 55.5 in April (74th percentile) and 63.1 in the same month last year (100th percentile):

EUROPE’s gas futures summer-winter calendar spread from July 2022 to January 2023 is moving deeper into contango as inventories rise at the fastest rate on record alleviating some concerns about filling storage sites:

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Best in Energy – 18 May 2022

EU cannot be a green island in a dirty world ($FT)

Oil consumption and moderate recessions ($BBG)

U.S./EU examine Russia oil embargo + tariff plan

U.K. inflation accelerates to 9% fastest since 1982

China’s LNG imports set to rise from August ($BBG)

U.K. explores extensions for coal and nuclear ($BBG)

Texas electricity supply hit by congestion on grid

German refinery at risk from Russian oil ban ($BBG)

Austria tries to encourage industry to store gas

U.K. orders competition probe into fuel retailing

U.S. MANUFACTURING output in the three months Feb-Apr was almost 6% higher than in the same period a year earlier, showing momentum in the business cycle but also why supply chains are struggling to cope and prices are escalating rapidly. Rapid growth in manufacturing explains why diesel is short supply and prices are escalating:

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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 – 1 April 2022

White House statement on oil release

IEA holds emergency meeting on oil

EU/Russia stand off over gas payments

U.S. homes transition to LED lighting

BRENT spot prices and calendar spreads have softened significantly since the White House announced the release of up to 180 million barrels from the U.S. strategic petroleum reserve. The six-month spread has narrowed to a backwardation of $9 per barrel, the lowest since before Russia’s invasion of Ukraine, down from $18 a week ago and a record $21 earlier in March:

U.S. SPR crude inventories will fall to less than 400 million barrels, the lowest since 1984, if 180 million are released over the next six months as briefed by the White House:

EUROZONE manufacturers reported a less widespread expansion in business activity this month. The purchasing managers’ index fell to 56.5 in March from 58.2 in February. The composite index is still well above the 50-point threshold dividing expanding activity from a contraction. But the index is at the lowest level for 14 months and in the 79th percentile since 2006 down from the 92nd percentile in December:

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