Best in Energy – 24 January 2023

Freeport LNG requests approval to restart some operations

Pakistan restores power transmission system after blackout

North Sea seabed conflicts between wind farms and CCUS

U.S. official denies easing sanctions on Iran oil ($BBG)

Investors bet on rapid inflation slowdown ($WSJ)

U.K. explores tariff to protect steelmakers ($FT)

Nuclear reactor life extensions to 80 years ($BBG)

CHINA imported 508 million tonnes of crude oil in 2022, down from 513 million in 2021 and 542 million in 2020, according to preliminary data from the General Administration of Customs. Slower imports as the country grappled with intermittent  lockdowns eased pressure on global petroleum supplies. But the economy’s re-opening is likely to boost crude imports and tighten the market in 2023:

Best in Energy – 5 January 2023

China LNG imports to rebound later in 2023

Russia ships Arctic crude oils to India and China

North America electric reliability in next 10 years

Pakistan’s retail gas storage in plastic balloons ¹

China boosts coal output and inventories (trans.)

U.S. gas prices tumble on mild weather ($WSJ)

Amazon plans 18,000 layoffs ($WSJ)

Steel and decarbonisation pathways

¹ Gas has been transported and stored in bags or balloons by poorer, often rural, customers without connection to grid supplies across Asia for some time. Specialised gas containers are relatively expensive. Photo agency Alamy has a photograph of a cyclist trailing a gas-filled “balloon” in China’s Shandong province in 2014. Don’t try this at home!

EUROZONE MANUFACTURERS reported business activity declined for the sixth month running in December but the deterioration was less widespread than in November and October. The eurozone manufacturing purchasing managers’ index was at 47.8 (21st percentile for all months since 2006). The index remained well below the 50-point threshold dividing expanding activity from a contraction. But declines were less widespread than November when the index was at 47.1 (17th percentile) and October at 46.4 (13th percentile):

U.S. CRUDE PRODUCTION including field condensates rose by +69,000 b/d to 12.381 million b/d in October 2022. The increase came entirely from onshore production in the Lower 48 states, most of which is from shale. Production has been up year-on-year by an average of around +630,000 b/d (+5.7%) in the last 12 months:

Best in Energy – 4 January 2023

Duke’s insufficient generation during storm ($BBG)¹

China issues more export quotas for fuels

Japan gas suppliers seek overseas resources

India to compensate coal-fired generators

Saudi Arabia’s sovereign wealth fund ($WSJ)

U.K. steel makers seek another bailout ($FT)

China/Australia discuss end of coal boycott ($BBG)

¹ Failure of coal and gas-fired generators to start up when instructed by the grid because of instrument and equipment freezes has been a recurrent problem and major cause of power failures during extreme cold weather episodes in the last several decades. Failure to start has meant actual generation available has been much lower than forecast, reducing reserve margins and forcing rotating blackouts to restore margins to safe levels.

THE FUNDAMENTALS of commodity trading have not changed in 2500 years, illustrated by this quote about China’s commodity merchants taken from the Guan Zi, which purports to be a dialogue between Lord Huan of Qi and his powerful chief minister Guan Zhong in the Spring and Autumnperiod (771-481 BCE) but probably a compilation of traditional knowledge written during the Warring States period (481-221 BCE):

“Merchants observe outbreaks of dearth and starvation, scrutinize changes in the fortunes of states, study the patterns of the four seasons, and take notice of what goods are produced in each place. With this knowledge of prices in the marketplace, they gather up their stock of goods, load them on oxcarts and horses, and circulate throughout the four directions. Having reckoned what is abundant and what is scarce and calculated what is precious and what is worthless, they exchange what they possess for what they lack, buying cheap and selling dear … Marvellous and fantastic things arrive in timely fashion; rare and unusual goods readily gather. Day and night thus engaged, merchants tutor their sons and brothers, speaking the language of profit, teaching them the virtue of timeliness, and training them how to recognise the value of goods.”

Guan Zi: Political, Economic and Philosophical Essays from Early China (Rickett, 1985) cited in The Economic History of China: From Antiquity to the Nineteenth Century (von Glahn, 2016)

EUROPE’s gas prices are falling and the futures curve has shifted into contango as inventories remain very high for the time of year and traders no longer anticipate any risk of a shortage before the end of winter 2022/23. The end-of-winter March-April 2023 calendar spread is trading in a contango of more than €1.20/MWh down from a backwardation of €9.70 at the end of September:

Best in Energy – 3 January 2023

Europe’s energy crisis eased by mild weather ($BBG)

U.S./Venezuela crude oil trade set to resume

Russia/China struggle to bridge gaps on Ukraine

France energy security improves on mild weather

U.S. shale oil production growth slows in 2022/23

U.S. winter storm reveals energy fragility ($BBG)

U.S. regional indicators point to future recession

Semiconductor market moves into surplus ($WSJ)

Global supply chains starting to normalise ($WSJ)

Tesla discounts to clear excess inventories ($WSJ)

United Kingdom explores more steel subsidies ($FT)

CHINA’s manufacturers reported a severe contraction in business activity in December as coronavirus infections surged following the end of the government’s suppression policy. “The epidemic has had a great impact on the production and demand of enterprises, the arrival of personnel, and logistics and distribution,” according to the National Bureau of Statistics. The purchasing managers index fell to 47.0 (1st percentile for all months since 2011) in December down from 48.0 in November (2nd percentile) and 50.1 (26th percentile) in September:

NORTHWEST EUROPE’s temperatures ended 2022 much higher than normal, sharply reducing gas consumption and pulling down prices. On December 31, the average temperature at Frankfurt in Germany was almost +14°C higher than the long-term seasonal average. Frankfurt has experienced 764 cumulative heating degree days so far in winter 2022/23 compared with a seasonal average of 901, a deficit of -15%:

Best in Energy – 16 May 2022

China’s coal output rises sharply in Jan-Apr

China utilities to rebuild coal stocks ($BBG)

U.K. gasoline and diesel sales start to fall

EU hurries to rebuild depleted gas inventories

EU explores emergency price cap on gas ($BBG)

Climate pressure tempered by energy security

EU/Ukraine steel trade disrupted by war ($FT)

Texas grid appeals for electricity conservation

South Africa increases load-shedding blackouts

EU backs down on rouble gas payments ($BBG)

Remote workers balk at return to office ($WSJ)

CHINA’s coal production climbed by almost +12% in the first four months of the year compared with the same period in 2021, as the government ordered miners to maximise output to reduce the risk of electricity shortages and cut dependence on imports from Australia:

U.S. TRANSPORTATION SERVICES (freight, post and passengers) prices increased at an annualised rate of almost +47% in the three months from January to April – as the supply chain remained under pressure and fuel costs surged after Russia’s invasion of Ukraine and sanctions imposed in response:

U.S. CONSUMER SENTIMENT has weakened sharply this month and has fallen to levels consistent with a recession in the past:

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