Best in Energy – 21 September 2022

European energy trading hit by falling liquidity

Small modular reactors – deployment challenges

U.K. government caps energy prices for businesses

Coal miners seek ways to stay in future energy mix

Germany nationalises gas importer Uniper

Hertz orders 175,000 more electric vehicles ($WSJ)

CHINA’s railway hauled a record volume of freight in the first seven months of the year. Freight tonne-kilometres were up +9% compared with the same period in 2021 and +22% compared with before the pandemic in 2019. Coal is by far the largest item on the network. The system is moving record quantities of coal from the northern mining areas in Shanxi, Shaanxi and Inner Mongolia to the major consuming centres in the eastern, central and southern provinces:

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Best in Energy – 11 July 2022

Saudi Arabia’s oil production capacity scrutinised

Canada to return Nord Stream impounded turbine

Ocean carriers likely to revert to slow steaming

India rejects US/EU calls to boycott Russian oil

France plans for complete loss of Russian gas

France prepares to switch from gas to fuel oil

Freight rates start to soften as volume falls ($WSJ)

U.S. central bank tries to avoid stop-go policy ($WSJ)

U.K. businesses prepare for onset of recession ($FT)

China boosts coal by rail deliveries by +9% (trans.)

Texas appeals for electricity conservation on July 11

U.S. BUSINESS inventory ratios have started to climb as sales slow and firms struggle to shift extra items ordered on a precautionary basis at the height of the supply-chain crisis. Manufacturers, wholesalers and retailers held inventories equivalent to 1.29 months worth of sales in April up from a cyclical low of 1.26 months in November. Excess stocks are concentrated at the retail level where the ratio has climbed to 1.18 months up from 1.09 months in October 2021.

U.S. inventory ratios remain low by pre-pandemic standards but will climb quickly if sales slow further in response to rapid inflation and a business cycle downturn. Inventory reduction is likely to weigh on economic growth over the next six months as businesses to limit or reverse overstocking:

TEXAS temperatures have climbed well above the long-term seasonal average since the start of July increasing the strain on the state’s isolated electric grid. Cumulative cooling degree days since the start of the year have been almost +30% higher than the 1981-2010 average:

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Best in Energy – 11 May 2022

India’s railways struggle to transport enough coal

India relaxes coal mine environmental rules ($BBG)

Ukraine cuts Russian pipeline gas flows to Europe

Global mining is central to future energy system

BlackRock updates energy-climate investor principles

Germany plans for disruption of Russian gas supply

U.S. ammonia prices increase with global gas prices

Nigeria subsidises fuel to keep aircraft flying ($BBG)

China forecasts record rain along south coast (trans.)

China issues flood warnings along the Yangtze (trans.)

China hydro generation rises on heavy rains ($BBG)

U.K. threatens energy majors with windfall tax ($FT)

U.S. inflation – how prices are really measured ($WSJ)

CHINA generated a record 221 TWh of hydro electricity in the first three months of the year, up from 196 TWh in the same period in 2021, relieving pressure on coal and gas inventories and prices:

U.S. EQUITY PRICES signal investors expect an imminent business cyclical slowdown – either a mid-cycle soft patch or an end-of-cycle recession. The S&P 500 index is down by almost 5% compared with the end of May 2021 and down by more than 11% in real terms:

Best in Energy – 5 April 2022

Germany takes control of local Gazprom unit

Aramco raises crude prices to refiners in Asia

India faces coal crisis for a second year ($BBG)

U.S. intelligence sharing sets precedent ($WSJ)

China’s rail freight rose +2.8% yoy in Q1 (trans.)

U.S. TREASURY yield curve is now flat between two-year and ten-year maturities, which puts it in the 94th percentile for all months since 1990, and is a strong signal the business cycle is on course for a mid-cycle slowdown or end-of-cycle recession inside the next 12-18 months as the central bank is forced to lift interest rates to bring inflation back under control. Interest rate traders expect the Federal Reserve to boost its target overnight rate to 2.50% by the end of the year up from 0.25-0.50% currently:

BRENT’s calendar spread from Jun 2022 to Dec 2023 has narrowed sharply as the announced crude oil sales from the U.S. strategic petroleum reserve depress nearby prices while the more vague promise to buy back the barrels later helps boost prices in 2023:

U.S. PETROLEUM inventories including the strategic petroleum reserve have depleted by -411 million bbl since the start of July 2020 after increasing by +225 million bbl during the first wave of pandemic and lockdowns. Inventories have fallen in 68 of the last 91 weeks. The drawdown confirms the global market has been persistently under-supplied for almost two years. Historically, market analysis has treated U.S. government-controlled stocks as purely strategic and passive and has therefore focused on inventory changes excluding the SPR. But as the SPR comes to be used more actively to manage prices, the focus will switch to inventories including the SPR as providing the best indicator of the balance between production and consumption:

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