Tag: wind farms

Best in Energy – 15 March 2023

China to import more LNG after prices fall

China boosted coal production in January and February

East Asia plans massive deployment of wind generation

U.S. gas consumption hit multiple record highs in 2022

Central banks balance inflation and financial stability

Philippines/Vietnam set to start importing LNG ($FT)

BANK FAILURES – In March 2008, I was working as an analyst on the trading floor at a commodity firm. The Reuters terminal flashed an alert that the Federal Reserve Bank of New York (FRBNY) had extended a multi-billion dollar credit facility to the troubled investment bank Bear Stearns. As part of my market-monitoring role, I sent a brief one-paragraph email to the treasury and credit teams highlighting the news and warning it probably meant the end for Bear as an independent institution; emergency borrowing from the central bank normally marks effective failure.

Less than five minutes later, the finance director sent an email to all staff instructing no new positions were to be initiated with Bear; only risk-reducing trades that reduced our exposure were permitted. For the next week, our firm would not initiate any new trades unless we could verify Bear was NOT the counterparty. Presumably similar emails and trading prohibitions were being implemented at all the other firms in the market. Bear was isolated, unable to attract cash inflows, and collapsed a week later.

Watching the demise of a major investment bank taught me a valuable lesson:  financial institutions live or die by confidence, and once it has been damaged, the end can come extraordinarily fast. Financial institutions die slowly at first, but very quickly towards the end. They do not get the benefit of the doubt. Our firm started to cut our exposure to Bear immediately at the hint of trouble, we couldn’t afford to wait for more information to see if the bank might survive. No one wants to be one of the last counterparties.

Friday is a particularly dangerous day for a bank in trouble. Regulators like to close a bank on Friday so they have the weekend to put in place a resolution and attempt to stabilise confidence in the rest of the financial system by Monday.

Best in Energy – 14 March 2023

U.S./EU economies boosted by lower energy prices ($WSJ)

Global LNG market balance becomes less clear after 2027

European steelmakers restart selected blast furnaces

Russia/India crude oil flows and market price reporting

Philippines set for big rise in wind and solar generation

U.S. ethane consumption by petrochemicals makers

Silicon Valley recriminations over bank failure ($FT)

U.S. central bank’s favourable collateral loans ($WSJ)

U.S. INTEREST RATE traders no longer expect the central bank to lift rates further following the failure of Silicon Valley Bank, with overnight rates expected to start falling from July onwards, as credit conditions tighten and force a slowdown in the economy. The path for interest rates over the rest of 2023/24 is now forecast to be much lower.

But the outcome of a financial failure is notoriously difficult to predict since it depends largely on confidence. Some failures are resolved quickly with little or no impact on the rest of the financial system and the real economy. In other cases, contagion occurs and the economic impact is significant:

EUROPE’s gas storage sites are 56.5% full, the second-highest on record for the time of year, well above the prior ten-year seasonal average of 36.3%. The end of the winter heating and inventory depletion season is now very near (with stocks usually hitting a minimum on March 30 ± 14 days):

Best in Energy – 7 March 2023

OPEC/U.S. shale firms discuss tight capacity

EU to launch joint gas buying system ($BBG)

China’s next premier will be Li Qiang

BP resets renewable energy strategy

South Korea boosts coal-fired power

Russia’s crude shipped to Middle East

U.S. Customs clears China solar panels

U.S. solar generation and wind farms

U.S. oil firms to get CCS subsidies (FT)

India trade pivots to U.S. allies ($WSJ)

U.S. recession postponed again ($WSJ)

U.S./China relations deteriorate ($FT)

U.S./China escalation strategies ($FT)

U.S. INTEREST RATE traders continue to boost their expectations for benchmark short rates at the end of the year as the central bank signals rates may have to go higher and stay there for longer to bring inflation back to target. Rates are now expected to be around 5.25-5.50% in December 2023 up from an expectation of 4.25-4.50% at the start of February:

COMMITMENT OF TRADERS reports – the U.S. Commodity Futures Trading Commission (CFTC) and ICE Futures Europe suspended publication of their commitments of traders reports in late January following a ransomware attack on a major market participant and infrastructure provider which resulted in incomplete submissions. Both are now starting to catch up with the backlog of missed weekly reports. ICE has caught up; the CFTC is still some weeks behind. I am not going to publish a weekly analysis again until they have both caught up fully since the reports now contain very out of date information. For reference, however, the hedge fund and money manager positions on February 7, the most recent currently available, are shown below:

Best in Energy – 1 March 2023

India’s coal producers see booming fuel demand

China’s massive deployment of wind generation

Northwest Europe forecast cold winter end ($BBG)

India heatwave boosts power use to record ($BBG)

U.S. consumer confidence and expenditure ($BBG)

U.S. shale firms squeezed by escalating costs ($FT)

Colorado refinery shut after cold weather damage

U.S. electricians in increasing demand ($WSJ)

Russia/China nuclear cooperation ($BBG)

Central banks fear impact of rising wages ($FT)

CHINA’s manufacturers reported the most widespread rise in business activity for over a decade as the economy rebounded after the end of coronavirus lockdowns and the passing of the epidemic’s exit wave. The official purchasing managers’ index surged to 52.6 in February, the highest since April 2012, and up from just 50.1 in January 2023 and 47.0 in December 2022. The index was in the 96th percentile for all months since 2011 pointing to a very broad upturn in activity:

NORTHWEST EUROPE is more than three-quarters of the way through the heating season. Frankfurt in Germany has experienced 1,377 heating degree days so far this winter compared with a long-term seasonal average of 1,673, a deficit of almost 18%, reducing heating demand and easing the pressure on gas inventories and prices:

Best in Energy – 6 January 2023

U.K. windfarms provided almost 27% of electricity in 2022

Ukraine calls for power conservation as temperatures fall

New England power generators replenish distillate stocks ¹

New England grid’s event summary for Dec 24 emergency ²

China’s crude buying tightens supplies for Europe ($BBG)

Venezuela’s oil exports fell again in 2022

U.S. warehouse leasing falls as goods demand slows ($WSJ)

Europe’s gas futures prices fall on plentiful stocks ($WSJ)

Australia/China to resume coal shipments after diplomacy

¹ Distillate fuel oil is an important fuel source for electricity generators designed to serve peak loads and provide emergency reserves. New England is particularly reliant on distillate to provide reserve generation and distillate units were heavily used during cold weather around Christmas. In the rest of the country, distillate is also used as lighting-up fuel for coal-fired units, which were heavily used during the extreme cold. Coal will not ignite on its own and distillate is sprayed into the furnace to provide initial combustion, heat up the furnace, establish air circulation, and support the combustion process until the flame is stabilised. As the coal combustion becomes self-sustaining, the distillate burners are gradually shut off.

² Failure of generators to start when instructed by the grid contributed to the shortfall in capacity in New England ISO region on December 24, as in other areas. Scheduled generation of 2,150 MW became unavailable. Failure to start remains one of the biggest problems for electric reliability during extreme cold events.

EUROPE’s gas futures prices no longer command a premium over futures for deliveries into Northeast Asia. Europe’s prices have fallen much more rapidly than Asia’s as fears of a winter emergency have faded. Europe’s futures are now trading at a slight discount for the first time since Russia invaded Ukraine in February 2022. European importers are no longer paying a premium to attract cargoes which should leave more LNG cargoes available for consumers in Northeast and South Asia:

U.S. DISTILLATE STOCKS fell -1.4 million bbl over the seven days to December 30 (including drawdown of -0.7 million bbl in New England). Inventories were probably pulled forward along the supply chain to homes, offices and power generators as a result of extreme cold around Christmas:

Best in Energy – 1 December 2022

China set to announce easing of quarantine controls

China scales back epidemic quarantine control (trans.)

China considers another round of vaccinations ($BBG)

U.S. Treasury signals concern about too low price cap

Asia’s crude oil imports hit record high in November

China modernises and expands strategic nuclear force

United States eases oil sanctions on Venezuela ($FT)

U.S. wind farms and seasonal variations in generation

CHINA’s manufacturers reported a steep decline in activity last month as the economy buckled under pressure from city-level lockdowns. The official purchasing managers’ index slipped to 48.0 in November (1st percentile for all months since 2011), the lowest since April 2022, and before that the first wave of the pandemic in February 2020:

U.S. DISTILLATE inventories rose +4 million bbl to 113 million bbl last week. Stocks are still -20 million bbl (-15%, -1.04 standard deviations) below the pre-pandemic five-year average but the deficit has narrowed from -34 million bbl (-24%, -2.05 standard deviations) on October 7: