EUROPE’s gas storage sites reported small net inflows on March 18 and March 19, a tentative sign the winter inventory depletion season is coming to an end early. The data is provisional and contains a mix of confirmed reports and estimates. But storage across the European Union and the United Kingdom was 55.8% full on March 19, the second-highest for the time of year after winter 2019/20 (56.2%) and well above the prior ten-year average (34.8%):
U.S./China struggle to stabilise relationship ($WSJ)
U.S. CENTRAL BANK chief Jerome Powell toughened his rhetoric on core inflation during congressional testimony, sending forecasts for interest rates surging higher on March 7. Rate traders expected interest rates to end 2023 at around 5.55% up from a forecast of 5.38% on March 6:
SINGAPORE distillate inventories remain at their lowest level for the time of year since 2008. Stocks are -4 million barrels (-36% or -1.91 standard deviations) below the prior ten-year seasonal average. The deficit has only narrowed slightly from six months ago when it was -4 million barrels (-34% or -2.21 standard deviations):
CHINA’s manufacturers reported the most widespread rise in business activity for over a decade as the economy rebounded after the end of coronavirus lockdowns and the passing of the epidemic’s exit wave. The official purchasing managers’ index surged to 52.6 in February, the highest since April 2012, and up from just 50.1 in January 2023 and 47.0 in December 2022. The index was in the 96th percentile for all months since 2011 pointing to a very broad upturn in activity:
NORTHWEST EUROPE is more than three-quarters of the way through the heating season. Frankfurt in Germany has experienced 1,377 heating degree days so far this winter compared with a long-term seasonal average of 1,673, a deficit of almost 18%, reducing heating demand and easing the pressure on gas inventories and prices:
GLOBAL INDUSTRIAL PRODUCTION was essentially flat in December 2022 compared with December 2021, as output deteriorated through the latter part of 2022 in response to rising inflation, faltering consumer and business purchases of merchandise, and efforts to reduce excess inventories. Output growth has slowed to rates consistent with the onset of recessions in 2001, 2008 and 2020, though also with mid-cycle slowdowns in 2012 and 2015 from which the economy re-accelerated:
EUROPE’s gas futures prices for deliveries in March 2023 have fallen below €50 per megawatt-hour for the first time since December 2021, before Russia’s invasion of Ukraine. Prices have fallen from €177 at the beginning of the winter heating season at the start of October and a record €338 in late August. Energy-intensive industrial closures, conservation measures, the impact of previous high prices, reduced LNG purchasing from China and South Asia, and a mild winter in northwest Europe all combined to avert feared shortages or a price spike during winter 2022/23:
U.S. CRUDE OIL including condensates production fell by -35,000 b/d to 12.38 million b/d in November compared with October. But production was up by +585,000 b/d (+5.0%) compared with the same month a year earlier. Annual growth levelled off at around +600,000 b/d for most of 2022:
CHINA imported 508 million tonnes of crude oil in 2022, down from 513 million in 2021 and 542 million in 2020, according to preliminary data from the General Administration of Customs. Slower imports as the country grappled with intermittent lockdowns eased pressure on global petroleum supplies. But the economy’s re-opening is likely to boost crude imports and tighten the market in 2023:
¹ PJM’s post-event study for winter storm Elliot on December 24 is worth reading in full and confirms the major problem was the failure of many generators to respond to instructions from the grid because of a failure to start up or secure enough fuel (principally gas). Generators were unavailable even though they had been given repeated warnings of an extreme weather event for several days beforehand and told to prepare for a plunge in temperatures. In many cases, generators provided less than 1 hour of notice they would not be available. If generators cannot be depended upon to respond to instructions they cannot be considered firm dispatchable power for reliability purposes.
In response, PJM was forced to initiate a series of relatively extreme emergency measures to protect the transmission system, including voltage reductions and an order for flat-out maximum generation from units that were available.
U.S. PETROLEUM INVENTORIES including the strategic reserve totalled 1,599 million barrels on January 6, the lowest seasonal level since 2004. Stocks have fallen by -185 million barrels over the last 12 months and are down by -518 million barrels from their peak in mid-2020 as production has persistently fallen below consumption:
¹ When policymakers appeal to “patriotism,” or decry its absence, it usually means they have run out of good arguments. When I hear arguments based on patriotism and its variants, I am instinctively suspicious about the speaker’s motivations, and try to work out how someone is trying to mislead or distract attention from their own failures.
² Coal-fired units need roughly four hours to reach full generation from a warm start and 10-12 hours from a cold start. The grid’s instruction to start warming up ensures the two massive coal-fired units at Drax will be available to help meet electricity consumption during the evening peak on December 12. Before privatisation of the U.K. electricity industry, the state-owned Central Electricity Generating Board (CEGB) would often keep at least one coal-fired power station warmed up but not generating so it could be brought into service at relatively short notice. Long ramping times for coal-fired units, and the enormous quantity of fuel burned before commercial generation starts, are one reason gas-fired units are more efficient and have largely supplanted them.
CHINA’s semiconductor (integrated circuits) trade – export earnings have grown rapidly, but the cost of imports has risen even faster, so the country’s trade balance has become increasingly adverse:
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: