Best in Energy – 1 December 2022

China set to announce easing of quarantine controls

China scales back epidemic quarantine control (trans.)

China considers another round of vaccinations ($BBG)

U.S. Treasury signals concern about too low price cap

Asia’s crude oil imports hit record high in November

China modernises and expands strategic nuclear force

United States eases oil sanctions on Venezuela ($FT)

U.S. wind farms and seasonal variations in generation

CHINA’s manufacturers reported a steep decline in activity last month as the economy buckled under pressure from city-level lockdowns. The official purchasing managers’ index slipped to 48.0 in November (1st percentile for all months since 2011), the lowest since April 2022, and before that the first wave of the pandemic in February 2020:

U.S. DISTILLATE inventories rose +4 million bbl to 113 million bbl last week. Stocks are still -20 million bbl (-15%, -1.04 standard deviations) below the pre-pandemic five-year average but the deficit has narrowed from -34 million bbl (-24%, -2.05 standard deviations) on October 7:

Best in Energy – 11 November 2022

China’s leaders reiterate and adapt covid strategy (trans.) ¹

China trims coronavirus quarantine and contact tracing

China’s commentators question covid strategy ($BBG)

Pakistan to ration gas supplies as EU absorbs more LNG

U.S. diesel prices climb as inventories dwindle ($NYT)

U.S. diesel prices rise with stocks low ahead of winter

Global insurers press for more details on oil price cap

¹ The Politburo Standing Committee special study session on epidemic control is top news across all government-controlled media. Reverse engineering the official commentary, top leaders seem anxious to counter political and social fatigue with repeated lockdowns, reinforcing the current zero-covid strategy in the short term despite its rising costs, while also searching for a way out via improved vaccination rates and the development of new vaccines and therapeutic drugs.

U.S. SERVICE SECTOR prices increased at an annualised rate of +7.8% in the three months to October, more than three times faster than the central bank’s target, ensuring that interest rates are likely to continue rising:

BRITAIN’s economy entered a recession during the third quarter with real gross domestic product declining in three out of four months between June and September. So far the downturn has been led by manufacturing but is likely to spread to construction and services:

Best in Energy – 2 November 2022

[MUST READ] South Africa’s transition from coal ($FT)

Maersk predicts container volume down 2-4% in 2022

UAE advised against cutting OPEC⁺ output target ($WSJ)

Russia oil exports predicted to fall by 0.5-1.0m b/d ($FT)

Europe’s industrial base at risk from high energy prices

U.S./Europe compete to attract investment ($FT)

United Kingdom tests plan to restart power grid ¹

Black start – planning for a complete grid failure

China’s coal production situation (trans.)

China’s updated city classification list (trans.)

California plans to repurpose gas network ($WSJ)

¹ This article seems to be merging the related but separate concepts of rotating power cuts to cope with possible electricity shortages caused by insufficient gas-fired and renewable generation this winter with restarting the grid after a total failure such as might be caused by an accident or sabotage.

“Yarrow” sounds like a plan for a “black start” of generation, transmission and distribution systems following complete failure. Electricity network managers in the United Kingdom and other countries have planned for a black start for decades. It is one of those remote “high impact low probability” risks commonly used in scenario planning.

The United Kingdom has never had to undertake a nationwide black start though a regional one was necessary in parts of the southeast following damage caused by the Great Storm of October 1987.

Black starts involve a complicated series of steps and would take several days to complete. Designated generating units would have to be started up autonomously, following by limited energisation of the transmission grid, first regionally and then nationally.

Black start sites often have auxiliary diesel-fired generators maintained at a high state of readiness that can restart without external power. The auxiliary generator is then used to start one or more main generators (usually oil, coal or gas-fired) on the same site which are then reconnected to the grid.

Progressively more generators would be started up and synchronised to the network, which would start to provide limited power to the local distribution systems. Protected sites would start to receive power and then more customers as sufficient power becomes available.

The process could take up to 5-7 days in the event of total failure. In the meantime most customers would receive no power or be subject to rotating power cuts to limit demand while generation is restored gradually.

The complexity and time needed for a full black start explains why grid managers attempt to avoid them at all costs. Temporary but controlled load-shedding directed by grid managers is preferable to uncontrolled cascading failure of the power grid leading to collapse and forcing a black start.

Black start should be a very remote risk in a well-run grid. But the sabotage of the Nord Stream pipelines has focused attention on the risks of deliberate attacks on energy infrastructure and will make black start a higher priority for emergency planners.

EUROZONE manufacturers reported an accelerating decline in activity last month as the region’s economy was hit by inflation, soaring energy prices, supply chain problems, Russia’s invasion of Ukraine and the EU sanctions imposed in response. The composite purchasing managers’ index slipped to 46.2 in October (12th percentile for all months since 2006) from 48.4 in September (24th percentile) and 58.3 in October 2021 (92nd percentile). The composite index has been below the 50-point threshold dividing expanding activity from a contraction for four months running, confirming the zone’s economy is entering a recession:

Best in Energy – 31 October 2022

EU LNG offshore queue is depressing gas prices

EU diesel prices at record relative to jet and crude

U.S. road freight faces ‘muted’ peak season ($WSJ)

U.S. gas prices fall as inventories swell ($WSJ)

Copper production is falling short of consumption

Copper shortage threatens energy transition ($FT)

EU/Russia gas conflict, inventory and prices ($FT)

Europe’s consumers cut discretionary spend ($FT)

China builds coal-fired back to renewables ($BBG)

China’s internal news reporting system

China’s ever-normal granaries ($JSTOR)

CHINA’s manufacturers reported a decline in activity last month as the economy struggled with repeated lockdowns. The official purchasing managers’ index slipped to 49.2 in October (4th percentile for all months since 2011) from 50.1 in September (24th percentile). Manufacturing activity has contracted in seven of ten months so far in 2022:

SOUTHERN CALIFORNIA’s ports handled the lowest volume of containers in the month of September since 2009, as spending on merchandise slowed and retailers struggled to reduce excess inventories:

Best in Energy –  24 October 2022

Russia oil exports will be able to evade price cap

Russia’s nuclear forces – command and control

China boosts diesel and jet exports in September

U.S. shale producers disregard SPR refill offer

U.S. oil firms reluctant to increase output ($WSJ)

Southern California’s port backlog clears ($WSJ)

Schlumberger rebrands itself as SLB

U.S. SPR used more actively ($FT)

U.S. gas flows in 2021 (Sankey diagram)

Venezuela’s opposition seeks deal ($FT)

UN climate talks lose momentum ($BBG)

EUROZONE manufacturers report the sector has entered recession, based on preliminary results from the monthly purchasing managers survey. Partial results show the manufacturing activity index slipped to just 46.6 in October (14th percentile for all months since 2006) from 48.4 in September (24th percentile):

EUROPE’s temperatures are expected to be at or above the long-term seasonal average during the three months from November to January, according to the European Centre for Medium-Range Weather Forecasting. Mild temperatures through October and the relatively warm outlook for the first part of the winter have contributed to downward pressure on the region’s gas futures prices:

Best in Energy – 23 September 2022

U.S. central bank signals a hard landing ($WSJ)

U.S. trucking – possible decarbonisation pathway

China’s refiners anticipate higher exports ($BBG)

India plans more coal generation by 2030 ($BBG)

Asia LNG sales stall as prices hit resistance ($BBG)

ADNOC chief sees little room to manoeuvre in oil

Taiwan says blockade would be act of war

FedEx to cut costs and raise parcel prices ($WSJ)

U.S./China relations –Asia Society speech (trans)

EUROZONE manufacturers reported a further deterioration in business activity this month according to preliminary results from the purchasing managers’ survey. The composite activity index fell to 48.5 in September (24th percentile) down 49.6 in August (28th percentile) and 49.8 in July (29th percentile). The region’s economy is sliding into recession – even before expected energy shortages this winter:

U.S. INITIAL CLAIMS for unemployment benefits are still running at very low rates, with just 213,000 new claims filed last week on a seasonally adjusted basis. Core inflation is unlikely to fall to the Federal Reserve’s target of a little over 2% per year with the labour market this tight – which explains the central bank’s aggressiveness in raising interest rates:

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Best in Energy – 6 September 2022

Nuclear generators and service extensions

California calls for electricity conservation

U.S. gas-fired generation hits record high

Economic warfare and energy bills ($FT)

Energy crisis myths dispelled by IEA ($FT)

EU smelters close on high energy costs ($FT)

EU/UK POLICYMAKERS are considering how to protect households and businesses from surging gas and electricity prices. History suggests there are four basic options that can be employed singly or in combination. Multiple refinements are possible with each option – but the four basic responses have been the same since at least 400 BCE:

EUROZONE manufacturers reported business activity declined for the second month running in August. The composite purchasing managers’ index slipped to 49.6 in August from 49.8 in July and 52.1 in June as the conflict between Russia and Ukraine, record gas and power prices, broader inflation, and falling household and business confidence tipped the regional economy towards recession:

HEDGE FUND and other money manager positions in the six major petroleum futures and options contracts on August 30:

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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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