Best in Energy – 17 November 2022

U.S. hydrogen – funding and technology deployment

Aramco plans downstream investment in South Korea

U.S. diesel inventories at 70-year seasonal low ($FT)

Texas tries to prepare better for extreme winter cold

U.K. inflation accelerates to 11.1% in October

France’s nuclear generation starts to recover

China/Taiwan bilateral communications cease

U.S. PETROLEUM INVENTORIES depleted by -11 million barrels in the week to November 11. Large drawdowns in commercial crude (-5 million bbl), crude in the strategic petroleum reserve (-4 million) and other oils (-3 million) were partially offset by increased stocks of gasoline (+2 million), distillate fuel oil (+1 million) and jet fuel (+0.3 million). Total inventories have depleted by -509 million barrels since early July 2020, the largest drawdown on record and a symptom of persistent under-supply:

Best in Energy – 14 November 2022

Saudi Arabia widens diplomatic relationships ($BBG)

U.S. retailers push back against price increases ($BBG)

China says pre-winter coal stocks comfortable (trans.)

China underground gas storage for Jīng-Jīn-Jì (trans.)

Indonesia explores early retirement of coal-fired plant

China’s iron ore prices bounce on non-residential use

Western Interconnection’s rising reliability challenge

U.S/China presidents try to stabilise poor relationship

U.S./China leaders to meet at G20 ($FT)

OPEC⁺  and the stabilisation of oil prices

U.S. OIL PRODUCERS increased the number of rigs drilling for oil to 622 on November 10 up from 610 two weeks earlier. Drilling increased significantly for the first time since July. The number of active rigs has rebounded from a pandemic low of just 172 in August 2020 and is nearing the pre-pandemic level of 683 in early March 2020.

But the resumption has been much slower than after the two previous downturns. The rig count has risen by a total of +450 (+3.8 per week) over the 117 weeks since August 2020 compared with an increase of +544 (+4.6 per week) at the same point after the last cyclical low in 2016 and +885 (+7.6 per week) after the cyclical low in 2009:

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 – 25 October 2022

Freight season on course to be very weak

U.S./Saudi strains between leaders ($WSJ)

Nord Stream blasts and insurance claims

U.S. fertilizer exports surge

U.K. plan for warming centres ($BBG)

EUROPE’s maturing benchmark gas futures contract for November is falling rapidly as storage becomes full and the weather is forecast to remain mild. Prices for November delivery slipped to €99 per megawatt-hour (MWh) on October 24 down from €200 a month earlier. Mid-winter prices for January have remained higher at €143 compared with €200 a month ago. The extreme contango is symptomatic of storage becoming nearly full and the need to encourage more consumption by power generators and consumers in the short term, while concerns persist about availability in the middle and later stages of winter:

Best in Energy – 19 October 2022

Global freight’s peak season is fizzling out ($WSJ)

EU industry at risk from high energy costs ($FT)

OPEC⁺ and the U.S./Saudi diplomatic relationship

EU explores multiple price caps for imported gas

U.S. SPR will buy oil if futures prices fall to $67-72

(see also text of final rule)

MIDDLE DISTILLATES (focusing here on diesel and gas oil but excluding kerosene and jet fuel) are the most cyclically sensitive part of the oil market. If there is a global economic slowdown in 2023 it will hit distillate consumption hardest. Conversely, if distillate shortages ease it must come about through a slowdown in global growth:

EUROPEAN GAS PRICES are softening throughout the remainder of 2022 and 2023 in response to a near-record refill season, high gas inventories, warmer than average weather forecasts for the first part of winter, and the prospect of reduced consumption from energy-intensive industries:

Best in Energy – 17 October 2022

[MUST READ] U.S./China relations in Xi Jinping era ($WSJ)

[MUST READ] Nuclear war lessons from past crises ($WSJ)

[MUST READ] China prioritises energy security ($BBG)

Europe’s gas supply still at risk from cold winter weather

EU tries to reach internal consensus on capping gas prices

OPEC+ officials defend Saudi Arabia after U.S. criticism

NOPEC law would escalate U.S./Saudi tensions ($BBG)

California drought drains Lake Shasta ($WSJ)

China plans to boost coal and oil inventories

China to stop LNG resales to Europe ($BBG)

Retailers accelerate sales as inflation rises ($BBG)

Diesel shortage threatens global economy ($BBG)

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:

Best in Energy – 14 October 2022

U.S./Saudi relationship strained but not broken

U.S./Saudi recriminations over OPEC+ cut ($FT)

EU explores possible gas market interventions

U.S. electric vehicles stimulate battery boom

China tests electric-powered freighter (trans.)

U.S. winter fuels outlook (EIA)

U.S. SERVICES PRICES were rising at an annualised rate of +10.1% between August and September and were +7.4% higher than a year earlier, a sign inflation is proving persistent even as some energy and commodity prices have eased:

U.S. INTEREST RATE traders expect the central bank to increase its target federal funds rate to 4.75-5.00% by April 2023 up from just 3.00-3.25% at present as they try to bring inflation back under control:

U.S. DISTILLATE fuel oil shortages are worsening. Inventories fell -5 million bbl to just 106 million bbl last week and are now at the lowest level for the time of year for more than 40 years:

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Best in Energy – 13 October 2022

Saudi Arabia responds to oil cut critics

OPEC trims oil consumption forecasts

Manchin attacks Saudi output cut

OPEC+ cuts risk recession says IEA

Spain to leave Energy Charter Treaty

NORTHWEST EUROPE has had an unusually early start to the winter heating season. Temperatures at Frankfurt-am-Main were consistently below the long-term average from the middle of September until early October, boosting gas and electricity consumption:

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Best in Energy – 12 October 2022

U.S. president vows “consequences” for Saudi Arabia

White House to re-evaluate Saudi relationship ($FT)

U.S./Saudi relationship under pressure

U.S./Saudi relations under strain ($WSJ)

U.S./Saudi relations under strain ($FT)

U.S./Saudi relations congressional primer ¹

Global mining and the future energy system

La Niña’s impact on weather in China (trans.)

¹ This briefing paper is the best overview of the strategic relationship and tensions between the United States and Saudi Arabia. The U.S. Congressional Research Service (CRS) sets the benchmark for non-partisan, fact-driven, insightful and well-written policy research. CRS has always been a major inspiration for best in energy and my own research notes. The late CRS defense specialist Stephen Daggett has been one of the three biggest influences on my own writing.

EU28 GAS INVENTORIES are accumulating at a record rate for such a late date in the refill season. Gas storage increased by almost +3 TWh per day in the seven days ending on October 10, the fastest seasonal increase on record. Total stocks have risen to 1,027 TWh compared with 865 TWh at the same point in 2021 and a prior ten-year average of 919  TWh.

In response to government mandates and exceptionally high prices, the refill season is on course to persist later into October or even November than usual, boosting the volume of gas in storage, and delaying the onset of drawdowns later than usual:

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