Best in Energy – 30 November 2022

Guangzhou and other cities see more protests, arrests

France says most energy use reduction due to weather

Europe accelerates deployment of domestic heat pumps

(see also IEA report on future of heat pumps)

Europe increases LNG imports from Russia ($BBG)

EU struggles to agree caps on oil and gas prices ($FT)

Europe’s energy price controls cost €700 billion ($BBG)

Los Angeles port loses cargo share ($BBG)

CHINA’s official Xinhua news agency and other government-run sites are running multiple stories and commentaries emphasising epidemic controls must be applied with “softness”, “greater precision”, ensuring daily life and healthcare continues.  There has been a marked change of tone from the previous military-themed rhetoric and analogies to battling the epidemic, with greater focus on resuming as much normality as possible. Like other governments facing widespread social unrest, China appears to be pursuing a mixed strategy of rolling up protestors, intensifying street policing, while trying to make selective concessions to keep the majority of the population in line by relaxing epidemic controls to reduce their social and economic costs.

BRENT’s calendar spreads for the first part of 2023 have slumped from a steep backwardation at the start of November close to contango as the end of the month nears. The nearest to deliver January-February spread is no longer a useful indicator as the January contract nears expiry and there is insufficient liquidity to make the price representative. But the more active February-March and March-April spreads are now trading close to flat from backwardations of around $1.50 per barrel at the start of the month.

Refiners and traders seem to have accelerated purchases ahead of the introduction of the planned G7 price cap on Russia’s crude exports from early next month to protect themselves against any possible disruption. Concern about the impact likely drove up prices and spreads in September and October.

But the cap itself now appears likely to be set at a relatively high level with relaxed enforcement, at least initially. The result is a marked softening in the market. At the same time, the business cycle continues to weaken across most of Europe and Asia, dampening crude demand. All of this is weighing on prices and spreads for nearby futures contracts with deliveries in early 2023:

Best in Energy – 25 November 2022

Ukraine suffers widespread blackouts after Russia targets grid

G7/Russia price cap expected to be in line with current oil price

OECD energy expenditure to reach 18% of GDP in 2022 ($BBG)

Germany keen to avoid trade war over energy subsidies ($BBG)

United States prepares to ease Venezuela oil sanctions ($WSJ)

U.S. GASOLINE inventories have remained much closer to normal, in contrast to distillates, with gasoline stocks just -9 million barrels (-4%) below the pre-pandemic five-year seasonal average on November 18:

Best in Energy – 8 September 2022

Global energy employment report from IEA

Germany to subsidise basic electricity quota

China boosts coal imports amid hot dry spell

China buys cheap LNG from Russia ($BBG)

U.S. power use forecast to hit record in 2022

White House plan to cut industrial emissions

Semiconductor makers face downturn ($BBG)

Europe set for big gas shortfall in 2023 ($BBG)

Europe energy suppliers face Lehman moment

Goldman’s case for a U.S. soft landing ($WSJ)

Pakistan’s floods risk triggering unrest ($FT)

U.S. COOLING DEMAND since the start of the year has been around +11% higher than the long-term seasonal average (1981-2010) and +2% higher than the prior seven-year average (2015-2021). Higher-than-usual temperatures have contributed to pressure on electricity networks and put gas consumption by power generators on course for a record high this year:

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Best in Energy – 28 July 2022

EU/Russia gas pipeline flows fall sharply

U.S. frackers warn of supply chain limits

China’s plan to centralise iron ore purchasing

U.S. leaders embrace subsidies, tariffs ($WSJ)

Grid-scale batteries used for price response

U.K. households face winter bill crisis ($FT)

West London’s local power constraint ($FT)

U.S. PETROLEUM inventories depleted by -9 million bbl in the week to July 22, with declines in commercial crude (-5 million), gasoline (-3 million), and distillate fuel oil (-1 million) as well as a drawdown in the SPR (-6 million), partially offset by increases in propane (+3 million) and other oils (+3 million). Petroleum inventories have depleted in 80 of the last 108 weeks by a total of -438 million bbl since the start of July 2020. Total stocks are at the lowest seasonal level since 2008 and show no signs of rebuilding:

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