Chile focus on direct lithium extraction (Reuters)
Wind farms look to deeper offshore sites (Reuters)
JAPAN‘s LNG stocks ended January at 2.34 million tonnes, the highest for the time of year for at least eight years. Stocks remained plentiful even though the first part of winter was colder-than-average in Tokyo:
BRENT calendar spreads had already tightened significantly between March 20 and March 31, then tightened further after Saudi Arabia and its allies in OPEC⁺ announced production cuts on April 2. The six-month spread tightened from a backwardation of $1.13 (59th percentile since 1990) on March 20 to $1.46 (64th percentile) on March 31 and then $3.43 (88th percentile) on April 3. The spreads imply traders were not anticipating a significant oversupply or a large increase in inventories prior to the OPEC⁺ cut. Following the cut, however, traders expect the market to become very tight later in 2023:
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:
CHINA’s Lower Yangtze mega-region is being hit by a wave of intense of cold which will drive a significant increase in heating demand, though most factories are closed for the Lunar New Year holiday. Temperatures in Nanjing were more than -6°C below the long-term seasonal average on January 25. So far this winter heating demand (731 HDDs) has been lower than average (789 HDDs). But the recent run of cold weather has trimmed the cumulative deficit in heating demand to -7% down from -11% on January 13:
U.S. PETROLEUM INVENTORIES including the strategic reserve rose +4 million barrels to 1,606 million barrels in the seven days to January 20. But stocks were -170 million barrels below the level a year ago and -304 million barrels below the level before the pandemic in 2019. Commercial crude stocks have increased by +33 million barrels compared with the same point last year. But only because the strategic petroleum reserve has been depleted by -220 million barrels:
U.S. MANUFACTURERS are raising prices more slowly as input costs for raw materials and energy ease and demand for goods falls. Producer selling prices for finished products other than energy and food increased at an annualised rate of +4.2% in the three months to December 2022 down from an annualised +11.5% increase in the three months to April 2022. But selling prices are still rising twice as fast as the central bank’s target of a little over 2% per year for overall inflation, keeping upward pressure on interest rates:
U.S. GAS INVENTORIES ended the year at 2,891 billion cubic feet on December 30. Stocks were -293 billion cubic feet (-9%) below the pre-pandemic five-year seasonal average down from a deficit of -71 billion cubic feet (-2%) on December 16, the result of a heavy weather-driven depletion in the final two weeks of the year:
U.S. NON-MANUFACTURING businesses reported an unusually sharp deceleration in activity in December. The Institute for Supply Management’s purchasing managers’ survey, which covers services, construction, mining and real estate, slumped to 49.6 (8th percentile for all months since 1997) in December from 56.5 (63rd percentile) in November and 54.4 (35th percentile) in October.
Non-manufacturing activity has been slowing in line with the manufacturing sector over the last 12 months following the post-pandemic boom. The ISM non-manufacturing index is more volatile than its manufacturing counterpart, so the sudden deceleration should be treated with extreme caution. But if confirmed in the next couple of months it would indicate the business cycle downturn is spreading from merchandise to services:
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:
EUROPE’s gas futures prices for November and December have continued to fall as regional storage facilities near maximum capacity. There is enough gas in stock to ensure supplies through the first half of the winter. But the risk to supplies in the second half and during next year’s refill season is keeping prices for 2023 high:
U.S. OIL AND GAS drilling has levelled off. The number of rigs drilling for both oil and gas has been essentially flat for two months since the middle of August 2022, the first time there has been no growth since drilling began to recover in August 2020 from the first wave of the pandemic:
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U.S. OIL AND GAS producers added +16 new rigs last week with increases in both oil (+13) and gas (+3). The total number of active rigs climbed to 689, up from a cyclical low of 244 in August 2020 but below the pre-pandemic level of 793 in early March 2020:
U.S. NET GAS EXPORTS averaged 332 billion cubic feet per month in the three months from November to January compared with 294 billion in the same period a year earlier, as a result of the growth in liquefaction capacity and strong demand from Europe and Asia:
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