Best in Energy – 6 March 2023

Automakers want to secure EV supply chain

China focuses on coal’s role in energy security

EIA blames oil blending for adjustment factor

EU firms relaxed about U.S. climate subsidies

U.S. downturn confined to tech sector? ($WSJ)

India’s loss-making Mundra power plant ($BBG)

EUROPE’s gas futures prices continue to slide despite a blast of colder weather across the northwest this week reflecting the high level of inventories. Front-month futures prices closed below €45 per megawatt-hour on March 3 for the first time since August 2021:

U.S. NON-MANUFACTURING firms reported a solid increase in activity in February. The ISM non-manufacturing index stood at 55.1 (40th percentile for all months since 1997) in February, little changed from January, but up from 49.2 (7th percentile) in December. The low December reading is starting to look like an anomaly. Service providers and other non-manufacturing businesses are reporting healthier conditions than their counterparts in manufacturing and freight:

U.S. OIL DRILLING activity continued to decelerate with the number of active rigs down -8 to 592 over the week ending on March 3. The oil-directed rig count has fallen in 10 of the last 13 weeks by a total of 35 rigs (-6%):

Best in Energy – 15 February 2023

Global central banks inject $1 trillion of liquidity

South Asia’s price-sensitive LNG consumption

U.S. services sector inflation remains high ($BBG)

U.S. automakers have more pricing power ($BBG)

Ocean freight rates slump as volumes fall ($WSJ)

China’s major refiners resume Russia oil buying

U.S. pilot shortage drives up airfares ($FT)

Near-space and sovereignty issues ($WSJ)

U.S. SERVICE SECTOR prices excluding rent (a measure economists have taken to calling “supercore” inflation) rose at an annualised rate of +5.2% over the three months ending in January, more than twice as fast as the central bank’s target of a little over 2% per year. Supercore prices rose at an annualised rate of +7% in January alone and were up by a similar amount over the previous 12 months, implying there is still a lot of momentum behind inflation:

U.S. INTEREST RATE traders expect the central bank will have to adopt a more restrictive policy to squeeze persistent inflation out of the economy. The central bank is expected to raise its fed funds target rate to 5.00-5.25% or even 5.25-5.50% by August 2023 up from 4.50-4.75% at present. Forecasts for interest rates at the end of 2024 have risen by almost +75 basis points since the start of the month:

Best in Energy – 14 September 2022

EU plans significant energy market overhaul

China set for turnover in economic officials

Poland to freeze household electricity prices

Equinor completes rapid sale of Russia assets

U.S. households’ real incomes are flat ($WSJ)

U.S. power generators’ carbon intensity falls

Expert interpretation of the Soviet Union

U.S. INTEREST RATE traders expect the central bank to boost its target federal funds rate to 4.25-4.50% by April 2023 up from 2.25-2.50% at present as officials try to bring inflation back towards their long term target. Inflation has proved faster and more persistent than anticipated implying higher interest rates and a greater probability of a hard-landing for the economy:

U.S. SERVICES prices increased at an annualised rate of +7.7% in the three months to August. Services inflation is a proxy for underlying price pressures in the economy because services account for more than 60% of consumer spending and are labour-intensive rather than energy or commodity-intensive. Service sector inflation has decelerated from a peak of +9.9% in the three months to June but remains more than three times faster than the central bank’s long-term target of a little over 2% per year:

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