Best in Energy – 17 November 2022

U.S. hydrogen – funding and technology deployment

Aramco plans downstream investment in South Korea

U.S. diesel inventories at 70-year seasonal low ($FT)

Texas tries to prepare better for extreme winter cold

U.K. inflation accelerates to 11.1% in October

France’s nuclear generation starts to recover

China/Taiwan bilateral communications cease

U.S. PETROLEUM INVENTORIES depleted by -11 million barrels in the week to November 11. Large drawdowns in commercial crude (-5 million bbl), crude in the strategic petroleum reserve (-4 million) and other oils (-3 million) were partially offset by increased stocks of gasoline (+2 million), distillate fuel oil (+1 million) and jet fuel (+0.3 million). Total inventories have depleted by -509 million barrels since early July 2020, the largest drawdown on record and a symptom of persistent under-supply:

Best in Energy – 20 September 2022

Germany’s auto sector emissions remain high

China boosts imports of coal from Russia

EU/Africa tensions over gas investment ($FT)

La Niña to boost winter heating in Japan ($BBG)

U.S. shale producers hit drilling limits ($WSJ)

U.S. central bank refocuses on inflation ($WSJ)

Stranded asset story and the energy crisis ($FT)

Renewables and domestic energy security ($FT)

California relies on nuclear for 10% of electricity

United States is shifting policy on Taiwan ($BBG)

Coal boom leads to expansion of marginal mines

U.S. TREASURY securities with ten year maturity are yielding 3.53%, the highest since 2010, as traders anticipate the central bank will have to keep interest rates higher for longer to bring down inflation. Yields are rising at the fastest year-over-year rate since 1999. The increase is testing the downward trend in place since the mid-1980s. If the increase is sustained it will force a widespread re-pricing of most other assets:

HEDGE FUNDS and other money managers made few changes to their positions in the six most important petroleum futures and options contracts in the week to September 13. There were total net purchases of +4 million barrels with buying in NYMEX and ICE WTI (+10 million) and Brent (+3 million) but sales of U.S. gasoline (-5 million), U.S. diesel (-3 million) and European gas oil (-1 million):

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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 – 3 August 2022

G7 statement reaffirms exploration of Russia oil-price cap

France plans to fill gas storage completely by end of October

France cuts nuclear output as heatwave warms rivers ($BBG)

Rhine water levels close to forcing transport closure ($BBG)

U.S. retailers seek warehouses for excess inventories ($WSJ)

Global refinery capacity expansions

RIVER RHINE water levels at Kaub had dropped to just 61 centimetres on August 2, the lowest since December 2018, and the lowest for the time of year for more than 25 years, as prolonged drought causes river levels to fall across Northwest Europe, threatening power generation and transport of bulk commodities:

CHINA’s hydroelectric power stations generated a record 583 billion kWh in the first six months of the year, an increase of +100 billion kWh or more than +20% compared with the same period in 2021. China’s hydro generation was more than three times the entire electrical output of the United Kingdom:

CHINA’s thermal power generation, nearly all of it from coal, dipped to 2,728 billion kWh in January-June, a decrease of 98 billion kWh (-4%) compared with the same period in 2021, helping improve the coal inventory situation:

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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 – 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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