Best in Energy – 20 January 2023

China traders buy spot market crude

EU LNG price survey off to slow start

U.S. renewables displace gas and coal

EU refiners focus on biofuels growth

Russia is losing the energy war ($FT)

Turkey’s energy transition stalled in 2022

U.S. REAL PERSONAL INCOMES less current transfer payments (PILT) were down marginally in the three months from September to November 2022 compared with the same period in 2021. Real PILT captures the combined impact of changes in employment, wages and other compensation, and inflation. Turning points are one of the main indicators the National Bureau of Economic Research (NBER)’s Business Cycle Dating Committee uses to identify the onset of recessions and expansions. The deceleration in PILT to zero is a sign the economy is close to stalling:

U.S. PETROLEUMINVENTORIES including the strategic reserve increased by +2 million barrels in the seven days ending on January 13 after rising by +22 million barrels the week before. The combined two-week increase was the largest since the first wave of the coronavirus pandemic in the second quarter of 2020. But similarly large increases occurred in the first weeks of 2020 and 2019 so the rise was probably attributable in part to seasonal factors. Inventories are still -94 million barrels (-5% or -2.76 standard deviations) below the prior ten-year seasonal average:

Best in Energy – 8 December 2022

Semiconductors as fulcrum of U.S./China conflict ($FT)

U.S./EU explore deal on technology and subsidies ($WSJ)

Saudi/China summit showcases U.S. triangulation ($FT)

China’s relationship with the Arabian peninsula (trans.)

Western allies try to unblock oil queue at Turkish Straits

Renewables growth sharpens focus on need for dispatch

United Kingdom approves first new coal mine for decades

U.K. temperatures fall well below seasonal average

U.S. coal-fired generation in slow retreat

Abadan oil crisis – U.K. official history

BRITAIN’s electricity transmission system is heading towards what is likely to be the first triad event of winter 2022/23 on the early evening of December 8. Freezing temperatures with little wind and an early end to solar generation will maximise demand on the island-wide transmission system from 1630-1800 GMT. Net demand has been climbing steadily towards likely-triad levels in recent days. Major customers with discretionary loads have a strong incentive to reduce demand in these critical periods to benefit from lower transmission charges through throughout the entire year ahead. Deliberate “triad avoidance” behaviour helps curb peak loads and reduce stress on the system:

Best in Energy – 6 December 2022

Renewables deployment accelerated by energy crisis

North Carolina substations in sophisticated sabotage

Oil tankers in queue to transit Turkish straits ($FT)

France prepares for tight power supplies next week

New England grid outlines winter reliability plan

EU retail sales fall with economy in recession ($WSJ)

EU plan for gas price cap distracts from real problem

U.S. jet fuel consumption below pre-pandemic level

BRENT’s six-month calendar spread has collapsed to a backwardation of just 67 cents per barrel (54th percentile for all trading days since 1990) from $8 (98th percentile) at the start of November. Month-to-month spreads are flat through April 2023. Traders anticipate crude supplies will remain comfortable through the first few months of next year because: (a) the EU/G7 price cap on Russia’s exports was set at a relatively high level; (b) policymakers have signalled a relaxed approach to enforcement (c) refiners have boosted purchases and inventories ahead of the price cap’s introduction; and (d) the slowing global economy is expected to dampen oil consumption:

Best in Energy – 23 November 2022

[MUST READ] U.S. Treasury publishes regulations for Russia price cap

Vitol chief says price cap will divert flow to small traders

Iran’s leaders struggle to reach out to moderates ($WSJ)

South California vessel queue dissipates  ($WSJ)

China’s coronavirus controls are multiplying

China’s renewable generation hits record high

U.S./Canada gas flows support winter reliability

Europe’s business confidence slumps ($FT)

Selective self-deception is an important leadership skill, especially in politics and diplomacy, but sometimes leaders say things they must know to be untrue, and I’m reminded of the exchange between Alice and the White Queen in Lewis Carroll’s “Through the Looking-Glass”:

“I can’t believe that!” said Alice.

“Can’t you?” the Queen said in a pitying tone. “Try again: draw a long breath, and shut your eyes.”

Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.”

“I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”

BRENT’s front-month futures price is trading close to the average since the start of the century once adjusted for inflation. The current price of around $87 per barrel is in the 54th percentile for all months since 2010 and the 47th percentile for all months since 2000:

Best in Energy – 22 November 2022

China hit by worst coronavirus outbreaks since April ¹

European Union proposes gas price cap, without figures

Australia’s gas consumers try to avoid high export price

Saudi Arabia boosts renewable power to export oil ($FT)

U.S./India diplomatic and economic relationship

¹ China has reported severe coronavirus outbreaks in megacities across the entire country, including Beijing and Tianjin in the northeast, Guangzhou in the southeast, and Chongqing in the southwest. Xinjiang in the northwest has been under semi-permanent lockdown for months. The central government’s lockdown and suppression strategy is failing to control transmission and disrupting the entire economy. But there is still no sign of an exit strategy that would enable the country to live with the virus, worsening the economic and oil consumption outlook for 2023.

BRENT calendar spreads for the first half of 2023 have softened significantly as traders anticipate a business cycle slowdown and China’s postponed re-opening from coronavirus will relieve some pressure on crude supplies and inventories:

Best in Energy – 10 November 2022

City leaders plan for 24/7 carbon-free energy

Aramco to ship full crude volumes to Asia in Dec

Coal prices tumble as winter supply fears ease

Corporate-level emissions receive more focus

U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -4 million barrels in the week to November 4. There were only minor changes in stocks of distillate fuel oil (-1 million barrels), jet fuel (+1 million barrels) and gasoline (-1 million barrels). Total inventories have depleted by -498 million barrels since the start of July 2020 and are at the lowest seasonal level since 2004:

Best in Energy – 3 November 2022

Africa’s governments demand fair energy transition

U.S. gas production and injections drive prices lower

China’s gas consumption growth stalls in 2022

Australia’s mining companies explore renewables

Saudi Arabia’s more independent foreign policy ($FA)

South Africa’s newest coal generator damaged ($BBG)

Aero-engine makers struggle to meet demand ($FT)

Canada excludes China from lithium sector ($FT)

China’s quarantine system – an inside view ($FT)

U.S. INTEREST RATE TRADERS expect the Federal Reserve to raise its federal funds target for longer to peak at a higher level and sustain them at a higher rate than before, following a warning by the central bank’s chief. Policy-controlled interest rates are expected to continue rising until they peak at 5.00-5.25% in May 2023, up from 3.75-4.00% at present, and still be at 4.00-4.25% at the end of 2024:

U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -3 million barrels in the week to October 28. Stocks have depleted in 90 of the last 122 weeks by a total of -494 million barrels since the start of July 2020:

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 – 1 June 2022

The United Kingdom has a two-day public holiday on Thursday and Friday to celebrate the sovereign’s platinum jubilee, so Best in Energy will resume on Monday.

OPEC ⁺ explores suspending Russia allocation ($WSJ)

Russia prepares to re-route oil from Europe to Asia

India’s private refiners benefit from cheap Russian oil

India’s record renewables output eases coal shortage

Africa pushes back against emissions hypocrisy ($FT)

U.S. retailers attempt to resist price increases ($WSJ)

Global diesel and gasoline shortage raises prices ($FT)

U.S. residential use of air-conditioning reaches 88%

OPEC’s spare capacity and market stabilisation

EUROZONE manufacturers reported a further slowdown in growth last month as rapid inflation and the war between Russia and Ukraine took their toll. The manufacturing purchasing managers’ index slipped to 54.6 in May (65th percentile) from 55.5 in April (74th percentile) and 63.1 in the same month last year (100th percentile):

EUROPE’s gas futures summer-winter calendar spread from July 2022 to January 2023 is moving deeper into contango as inventories rise at the fastest rate on record alleviating some concerns about filling storage sites:

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