Tag: sanctions

Best in Energy – 24 March 2023

Russia oil exports and rising shadow fleet risks

India grows both coal and renewable generation

U.S. energy chief says SPR refill could take years

EU plans to indigenise solar supply chain ($FT)

U.S. central bank’s sharp policy dilemma ($WSJ)

EUROZONE manufacturers have reported a widespread decline in business activity so far in March, the ninth consecutive monthly decline since July 2022. The preliminary purchasing managers’ index fell to 47.1 (17th percentile for all months since 2006) in March from 48.5 (25th percentile) in February:

EARTH’s northern hemisphere from 45°N poleward was hit by severe geomagnetic storm peaking around 0300Z to 0600Z on March 24, according to warnings issued by the Space Weather Prediction Center. The storm registered G4 / K9-minus, the second most severe rating, something expected to happen on only 60 days in every 11-year solar cycle. Solar activity, as measured by sunspots, is intensifying towards the next cyclical peak expected around 2025/26:

Best in Energy – 22 March 2023

Russia’s oil export prices become opaque ($FT)

Russia’s oil exports find new middlemen ($FT)

U.S. refiners to prioritise future distillate growth

U.S. commercial real estate problem loans ($WSJ)

Central banks’ bond purchases and bank failures

La Niña fades but timing of El Niño still uncertain

Lithium prices slump ($BBG)

U.S./China economic coercion

U.S. BUSINESS INVENTORIES remained elevated in January as manufacturers and distributors struggled to work down excess stocks despite an acceleration in retail sales. Reducing unplanned inventories is likely to take at least another six months, even if the economy avoids a recession, which will keep freight volumes under pressure until the third quarter of 2023:

Best in Energy – 20 March 2023

EU energy-intensive business ($FT) ¹

Russia oil trade and sanctions ($FT)

Iraq’s mismanaged reconstruction

Supercore prices and policymaking

Russia/China border trade ($WSJ)

Germany urges more gas conservation

India plan to extend fuel export controls

¹ The two most important observations in this article are about gas demand reductions by energy-intensive businesses:

“Lower prices are not only saving energy-intensive companies a fortune. They have also put the colour back in the elaborate creations of the Italian glass blowers at New Murano Gallery.  Each of the firm’s 11 1,000 degree furnaces produces glass with a different hue and, after the company had to turn half of them off last year, almost all are back on. ‘We have nearly the full palette,’ Francesco Scarpa, one of the gallery’s co-founders.”

“Fernández-Valladares described the mood of the tile making sector that dominates his small town in Castellón province as ‘generally quite pessimistic’. Sales have plunged. Since December, demand from clients — which are mostly wholesale buyers — has dropped 30 per cent. In January, the factory resorted to the radical option of turning off the kiln for an extended period, shutting it down for 22 days to save on gas. Fernández-Valladares said he could not rule out more shutdowns. ‘We normally work through the Easter holidays and I don’t know if we’re going to have to stop.’”

Multiply these examples across the entire European Union, and it helps explain much of the reduction in temperature-adjusted gas consumption during winter 2022/23.

BRENT’s six-month calendar spread has collapsed to a backwardation of just 47 cents per barrel down from $3 per barrel at the start of March as traders anticipate a much higher probability of a hard-landing or recession following enforced takeover of the crisis-stricken Credit Suisse by rival bank UBS:

Best in Energy – 17 March 2023

U.S. energy-related emissions projection

Bank rout as easy money era ends ($BBG)

OPEC⁺ calm despite oil price drop ($BBG)

OPEC⁺ sees oil price fall financially driven

Russia/India oil price above $60 on freight

China is diversifying away from U.S. trade

U.S. retailers press for price cuts ($WSJ)

Russia oil exports and rising storage ($BBG)

Shippers balk at costly green freight ($WSJ)

U.S. INTEREST RATE markets steadied on March 16 as the Federal Reserve organised major national banks to help boost confidence in their smaller regional counterparts by placing large-scale deposits with First Republic bank. Rate forecasts firmed slightly. But the rate trajectory implied by futures prices still shows rates declining from August onwards as the central bank responds to tightening credit conditions and a slowing economy:

NORTHWEST EUROPE is roughly 85% of the way through the heating season. Temperatures at Frankfurt in Germany have been close to the long-term seasonal average since the start of March. But very warm temperatures in October and from mid-December to mid-January have left a significant deficit in heating demand that has not been erased. The total number of degree days so far this winter (1540) is -16% below the long-term average (1842):

Best in Energy – 10 March 2023

U.S. Treasury reassures traders on sanctions ($FT)

Russia’s missiles target Ukraine’s energy networks

India to boost LNG imports for generators ($BBG)

U.S. central bank discovers r* is unreliable indicator

U.S. yield curve inversion and equity values ($WSJ)

U.S. economy and supply-driven inflation ($WSJ)

U.S. inflation fuelled by margin expansion ($BBG)

U.S./EU downplay race on energy subsidies ($FT)

EU eases state aid rules to match U.S. subsidies

(see also European Commission press release)

U.S. railroad safety and trackside sensors ($WSJ)

Yemen’s decaying oil storage tanker to be unloaded

U.S. TREAURY YIELD curve between two-year and ten-year maturities has inverted to around 100 basis points, the most extreme since August 1981, when the economy was entering the second part of the double-dip recession of the early 1980s. The inversion is signalling a sharp fall in interest rates, resulting from a rapid deceleration of inflation, a downturn  in the business cycle, or a combination of both:

U.S. GAS INVENTORIES are moving into an increasing surplus, keeping downward pressure on prices. Stocks were +240 billion cubic feet (+13% or +0.58 standard deviations) above the prior ten-year seasonal average on March 3, up from a deficit of -263 billion cubic feet (-8% or -0.98 standard deviations) on January 1, 2023, and a deficit of -427 billion cubic feet (-13% or -1.52 standard deviations) on September 9, 2022:

Best in Energy – 8 March 2023

Russia/India switch trade settlement out of dollars

India’s heightened risk of evening power shortages

Nord Stream sabotage linked to Ukraine ($NYT)

Ukraine denies involvement in pipeline sabotage

U.S. shale chiefs recognise end of revolution ($FT)

Tesla shifts focus to cutting manufacturing costs

Nuclear generation deployment is shifting to Asia  

China’s military researchers study Ukraine conflict

Europe boosts diesel from Middle East and Asia

Tech sanctions to spur industrial espionage ($FT)

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):

Best in Energy – 28 February 2023

Russia’s oil export revenue and sanctions impact

Japan’s opposition to nuclear power falls ($BBG)

BP transfers statistical review to new publisher

Lithium prices tumble as bubble bursts

China’s pensions and population ageing

Yemen’s stricken oil storage tanker ($FT)

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:

Best in Energy – 24 February 2023

U.S. central bank grapples with long and variable lag

BASF to cut chemicals production in Germany ($FT)

Cheniere outlines plan for U.S. LNG expansion ($FT)

U.S. shale firms squeezed by rapid cost rises ($FT)

G7/EU claim success on Russia oil sanctions ($WSJ)

Hafnium prices surge on increased aerospace demand

U.S. PETROLEUM INVENTORIES including the strategic reserve rose by +3 million barrels over the seven days ending on February 17. Increased inventories of commercial crude (+8 million), distillate fuel oil (+3 million) and jet fuel (+1 million) were partly offset by reductions in gasoline (-2 million), propane (-3 million) and other oils (-3 million).

Petroleum inventories have risen for seven consecutive weeks by a total of +55 million barrels, the largest increase over any similar period since June 2020, when the market was absorbing the impact of the first wave of the pandemic and lockdowns.

Total inventories are still at the lowest seasonal level since 2005 and -235 million barrels (-13% or -2.22 standard deviations) below the prior ten-year average, but the deficit has narrowed from -291 million barrels (-16% or -3.06 standard deviations) on December 30:

Best in Energy – 22 February 2023

EU gas consumption fell 19% in Aug-Jan period

U.S. Treasury outlines Russia sanctions strategy

China’s renewable energy deployment (trans.)

Iberia’s gas and power markets remain isolated

Kazakhstan plan to export oil via Russia ($BBG)

Freeport LNG obtains approval for partial restart

Derivatives go dark after cyber-attack ($BBG)

U.S. commercial property in recession ($WSJ)

Lithium prices retreat from record high ($FT)

Australia/China coal shipments resume

BRENT’s front-month futures price has fallen to $82 per barrel down from a high of $127 at the end of May 2022, after adjusting for inflation. But is that still fairly high or already below the long-term average? It depends whether or not the comparison includes the long period of low prices in the 1990s. In real terms, $82 is in the 65th percentile for all months since 1990, still fairly high. But if the 1990s are excluded, prices are in the 42nd percentile for all months since 2000 and the 48th percentile for all months since 2010, already in the lower half of the distribution:

Best in Energy – 14 February 2023

[MUST READ] U.S./China sanctions lessons

Russia’s crude is likely selling above quoted prices

Russia’s oil output unaffected by sanctions ($BBG)

U.S. SPR to sell 26 million barrels in second quarter

U.S. coal-fired generator retirements to accelerate

Russia’s gas exports in search of new markets

Global freight rates fall on excess capacity ($BBG)

High-altitude balloon monitoring systems ($WSJ)

Pakistan plans to shift from costly gas back to coal

Hedge funds cash in on coal investments ($FT)

Singapore slows new investment into China ($FT)

U.S. DURABLE GOODS orders for nondefense capital equipment excluding aircraft (a proxy for business investment) were up by +5 % in December 2022 compared with December 2021. Orders are reported in cash terms; with inflation running faster than 5%, the volume of new business was down in real terms. Even in nominal terms, however, orders have been flat since the middle of 2022, confirming the merchandise side of the economy has run out of momentum: