Best in Energy – 2 December 2022

Japan explores strategic LNG reserve ($BBG)

U.S./Russia signal readiness for negotiations

U.S. DOE wants to halt SPR sales ($BBG)

Energy prices spur interest in efficiency

U.S. ethanol blending rate at record high

U.S. refiners set to buy Venezuelan crude

Cybersecurity and the internet of things

NORTHERN EUROPE is forecast to experience colder-than normal temperatures through the first half of December, which will boost gas and electricity consumption. The European Centre for Medium-Range Weather Forecasting is predicting colder-than-average seasonal temperatures for the weeks from December 5 to 12 (first chart) and December 12 to 19 (second chart):

U.S. MANFACTURERS reported business activity started to decline last month, for the first time since the first wave of the pandemic. The ISM composite index slipped to 49.0 in November (22nd percentile for all months since 1980) from 50.2 in October (31st percentile) and 60.6 a year ago (96th percentile).

Manufacturing growth has decelerated progressively this year and activity now shows the first sign of falling in absolute terms. Firms signalled a further decline in new business last month. The new orders component slipped to just 47.2 in November from 49.2 in October and 61.4 a year ago. It is well-below the threshold dividing expanding activity from a contraction – implying activity is likely to slow further over the next few months:

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 – 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 – 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 – 22 July 2022

Germany to cut energy use to resist blackmail

EU divided on compulsory gas demand cuts

Europe’s electricity generation under stress

Europe turns to Africa for more oil and gas

China’s semiconductor manufacturing ($BBG)

Texas power grid and bitcoin miners ($BBG)

RHINE RIVER water levels measured at Kaub are the lowest for the time of year for more than a quarter of a century and indicative of drought conditions across northwest Europe. Low rainfall is restricting river borne freight and is an indicator of the stress for thermal and nuclear power plants that rely on river water for their cooling systems. For coal and gas combustion plants, efficiency and maximum output is reduced. For nuclear plants, insufficient cooling capacity can force output limits or a precautionary safety shutdown:

EUROZONE manufacturers reported a decline in activity this month for the first time since the first wave of the pandemic in 2020. Preliminary data show the manufacturing sector purchasing managers index fell to 49.6 in July (28th percentile) down from 52.1 in June (47th percentile) and 54.6 in May (65th percentile). Russia’s invasion of Ukraine and the sanctions the EU has imposed in response have pushed the region’s economy into recession:

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Best in Energy – 23 June 2022

Germany declares stage two gas emergency

(see official statement in translation)

U.S. presses EU to relax oil sanctions ($WSJ)

Biden requests three-month fuel tax holiday

Biden’s broken relations with oil and gas firms

Supply constraints trip up policymakers ($FT)

Batteries for grid storage – beyond lithium ion

EUROPEAN manufacturers are on the leading edge of a recession. Preliminary readings show the eurozone purchasing managers’ index has slipped to 52.0 (47th percentile) down from 54.6 (65th percentile) in May and a record 63.4 in the same month a year ago:

U.S. GASOLINE SUPPLIED averaged 8.86 million b/d in March 2022 compared with 9.18 million b/d in March 2019 (-328,000 b/d, -3.6%).

U.S DISTILLATE SUPPLIED averaged 4.16 million b/d in March compared with 4.18 million b/d in March 2019 (-23,000 b/d, -0.5%).

The differential recovery in distillate and gasoline consumption after the pandemic helps explain the relative shortage of diesel, as well as jet fuel, and why mid-distillate crack spreads and prices have been pulling the whole petroleum complex higher:

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