Tag: NATO

Best in Energy – 17 May 2023

[MUST READ] U.S./China diplomatic rivalry (Bloomberg)

Oil price decline driven by porous sanctions (Bloomberg)

Vehicle tyres, electric vehicles and air pollution (Reuters)

India to complain to WTO over EU carbon tariff (Reuters)

China to accelerate rural rollout of electric cars (Xinhua)

Russia/NATO economic warfare and asset seizures (FT)

India’s surging air-conditioning demand (Bloomberg)

Indonesia wants cheaper transition funds (Bloomberg)

Australia’s LNG exports and energy transition (Reuters)

U.S. office occupancy flat as return-to-office stalls (WSJ)

U.S. office sale prices slump (WSJ)

U.S. gas price forecast to rise (EIA)

U.S. rural electric subsidies (Reuters)

Nuclear fusion supply chain (Reuters)

U.S. oilfield services see sharp slowdown (FT)

U.S. MANUFACTURING production excluding volatile output of vehicles and parts was down -1.6% in April 2023 compared with April 2022. Production for the three months from February to April was down -1.5% compared with the same period a year earlier:

U.S. BUSINESS INVENTORIES remain elevated despite efforts to reduce them which implies the softness in industrial and freight activity is likely to be prolonged for several more months. Manufacturers, distributors and retailers held inventories equivalent to 1.39 months of sales in March 2023, unchanged from December 2022, and up from just 1.30 months in March 2022. Excess inventories are particularly high at distributors and retailers which will remain a drag on new orders:

Best in Energy – 9 March 2023

Tesla plans to eliminate dependence on rare earths

U.S. energy secretary address to Houston CERAWeek

U.S. oil well initial productivity is declining ($WSJ)

Keystone ordered to trim pipeline pressure ($BBG)

U.S./EU embark on race for energy subsidies ($BBG)

U.S. LNG exports projected to grow in 2023 and 2024

Nord Stream sabotaged by pro-Ukraine team ($WSJ)

Russia/NATO energy war enters attrition phase ($FT)

U.K. workforce remains smaller than before pandemic

India tries to improve electric reliability in April/May

(see also formal press release by the power ministry)

China’s refined petroleum exports set to slow

U.S. solar installers forecast to rebound in 2023

U.S. oil firms embrace hydrogen production idea

U.S./Australia submarine sales agreement ($WSJ)

U.S. PETROLEUM INVENTORIES including the strategic reserve increased by +2 million barrels over the seven days ending on March 3. Stocks have increased in 10 of the last 14 weeks by a total of +31 million barrels from their recent low on November 25, 2022, arresting the previous downward trend. Inventories are still -231 million barrels (-12% or -2.15 standard deviations) below the prior ten-year seasonal average. But the deficit has narrowed from -278 million barrels (-15% or -3.05 standard deviations) in November:

Best in Energy – 27 February 2023

Indonesia’s production of lower-grade nickel surges

India boosts imports of low-grade coal to up generation

China accelerated approval for coal generators in 2022

(see also underlying report from CREA/GEM)

WTI to be included in Brent benchmark from June 2023

EU explores cautious electricity market reform ($BBG)

Russia’s semiconductor imports and sanctions ($WSJ)

NATO explores options to end war in Ukraine ($WSJ)

China’s diplomatic intervention in Ukraine ($BBG)

NATO and Russia at war in Ukraine ($WSJ)

U.S. OIL AND GAS drilling rigs fell by -7 last week to 753. The number of active rigs has fallen in five of the last eight weeks and is at the lowest since the start of July 2022. The upturn that started in August 2020 after the first wave of the pandemic has at least paused and possibly ended as drilling rates slide in response to lower oil and gas prices:

Best in Energy – 28 September 2022

U.S. Treasury 10-yr yields surge to 4% (%WSJ)

Russia/NATO nuclear escalation calculations¹

Nord Stream pipelines sabotaged says EU

Nord Stream pipelines sabotaged ($BBG)

Nord Stream pipelines sabotaged ($FT)

Nord Stream pipelines sabotaged (trans.)

Solar generation – global deployment

Iran morality police pulled off streets ($FT)

¹ “On Escalation: Metaphors and Scenarios” (Kahn, 1965 and 2010) remains the best guide to escalation strategies (escalation ladders, escalate-to-negotiate, escalation pauses and escalation dominance) including the role of tactical and strategic nuclear weapons in conflict. I can highly recommend it as a guide to the current Russia/NATO conflict over Ukraine but also the U.S./Iran conflict in the Persian Gulf and the U.S./China conflict centred on Taiwan.

The taboo on the use of nuclear weapons is strong but has never been as absolute as opinion-formers have implied in public. Both the USSR and USA/NATO actively planned for the use of nuclear weapons in scenarios short of mutually assured destruction. Tactical and strategic nuclear weapons have always been a central part of NATO nuclear doctrine, including ambiguity on “first use”.

Nuclear weapons are also playing an increasingly central role in U.S./China strategic competition. China historically assigned a minor role to nuclear weapons but it is massively increasing its arsenal and delivery systems to give it more leverage and room for manoeuvre in any future conflict with the United States.

Some of the basic outlines of Kahn’s work on escalation can be seen in the table below (taken from page 39). The current Russia/NATO conflict has already escalated beyond the “nuclear war is unthinkable threshold” and reached the 14th or 16th rung on the ladder, with open speculation about breaching the “no nuclear use threshold” and climbing to the 21st-24th rungs or even the 26th-28th rungs:

U.S. TREASURY YIELDS on notes with 10-year maturity have climbed to 4.00% up from just 1.50% a year ago, the fastest increase since 1984. The rapid increase reflects expectations inflation will remain persistent and interest rates will remain higher for longer. The escalation in “risk-free” benchmark yields will force a re-pricing of all other assets and borrowing costs:

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Best in Energy – 15 July 2022

White House downplays hopes for more oil

Middle East imports more Russian fuel oil

Japan plans reactor restarts before the winter

United Kingdom heads for winter crisis ($BBG)

Germany is moving into a recession ($BBG)

ERCOT confident will avoid blackout ($BBG)

U.S. household finances and inflation ($WSJ)

Russia/NATO conflict is test of resolve ($BBG)

Central banks turn hawkish on inflation

U.S. CENTRAL BANK is expected to raise short-term interest rates to 3.50-3.75% by February 2023 up from 1.50-1.75% at present to curb inflation. From the second quarter of 2023, however, policymakers are expected to start reducing interest rates as the economy slows and inflation decelerates:

U.S INTEREST RATE traders anticipate a recession has become virtually certain following the continued acceleration of inflation. The yield curve spread between 2-year and 10-year maturities is now in the 98th percentile for all months since 1990:

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Best in Energy – 4 July 2022

Australia’s export earnings rise on energy prices

South Africa’s electricity shortages are worsening

U.K. electricity pricing – space and time (parts 1-3)

Biden/Bezos disagree on causes of inflation ($FT)

U.S. government split on lifting China tariffs ($FT)

NATO’s resolve tested by economic downturn ($FT)

U.S. refineries push crude processing to limit ($BBG)

U.S. CENTRAL BANK is now expected to raise rates earlier and more aggressively to bring inflation under control, with traders anticipating rates will peak around the end of the first quarter or the start of the second quarter of 2023. By implication, the business cycle is expected to slow significantly by the end of this year, creating conditions for inflation to moderate and the central bank to begin easing interest rates a few months later by the second quarter of 2023:

U.S. MANUFACTURERS reported much slower growth last month. The Institute for Supply Management (ISM)’s purchasing managers’ index slid to 53.0 in June (45th percentile since 1980) from 56.1 in May (76th percentile) and 60.9 a year ago (97th percentile):

U.S. MANUFACTURERS reported a decline in new orders for the first time since the first wave of the pandemic in 2020. The ISM new orders index slumped to 49.2 in June (18th percentile) from 55.1 in May (45th percentile):

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Best in Energy – 3 May 2022

India plans to accelerate coal imports

EU lacks effective minerals strategy

Germany warns of recession risk ($FT)

EU sanctions threaten recession ($BBG)

NATO’s war aims become bolder ($WSJ)

Carbon capture – where is it working?

India’s heatwave in third month ($BBG)

China’s epidemic and economy (trans.)

China becomes world’s top gas importer

U.S./Iran nuclear talks hit impasse

India’s cooking oil imports at risk

‘Arsenal of democracy’ (Roosevelt 1940)

INDIA’s temperatures have been consistently above the long-term seasonal average in the north and west of the country since March 13, driving record demand for refrigeration and air-conditioning. In New Delhi’s Palam suburb, cooling demand has been 43% higher than normal since the start of the year:

INDIA’s daily peak electricity consumption hit a new record of 207,000 megawatts last week as the heatwave boosted demand:

INDIA’s power generators held coal stocks equivalent to just 8 days worth of consumption at the end of April, compared with 12 days at the same point in 2021 and 18 days in 2019, as record power generation has made it hard to rebuild inventories after they were severely depleted in 2021:

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