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IEA: Current Energy Crisis Is “Much Bigger” Than 1970s Oil Crunch

IEA: Current Energy Crisis Is “Much Bigger” Than 1970s Oil Crunch

  • IEA Chief Birol: The world faces a “much bigger” energy crisis than the one of the 1970s.
  • Back in the 1970s, the crisis was just about oil.
  • Birol: The world, especially Europe, could face a summer of shortages of gasoline, fuel, and jet fuel.

The world faces a “much bigger” energy crisis than the one of the 1970s, the Executive Director of the International Energy Agency (IEA), Fatih Birol, told German daily Der Spiegel in an interview published on Tuesday.

“Back then it was just about oil,” Birol told the news outlet. “Now we have an oil crisis, a gas crisis and an electricity crisis simultaneously,” said the head of the international agency created after the 1970s shock of the Arab oil embargo.

The energy crisis started in the autumn of last year, but the Russian invasion of Ukraine made it much worse as the markets fear disruption to energy supply out of Russia, while Western governments are imposing increasingly restrictive sanctions on Moscow over the war in Ukraine.

The EU agreed late on Monday to ban most of the imports of Russian oil, leaving pipeline supply exempted from the embargo, for now. This will further tighten already tight crude and product markets.

The world, especially Europe, could face a summer of shortages of gasoline, fuel, and jet fuel, the IEA’s Birol told Der Spiegel.

Fuel demand is set to rise as the main holiday season in Europe and the United States begins, Birol added.

Upended crude oil flows add to reduced global refinery capacity resulting in low inventories of products, including in the United States.

Refinery capacity for supply, globally and in the U.S, that is now a few million barrels per day lower than it was before the pandemic.

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

  • Analysts: Asian buyers are unlikely to be able to absorb all the Russian oil unwanted in the West.
  • There is a distinct possibility of a sharp drop in Russian oil exports.
  • BofA: A sharp contraction in Russian oil exports could push Brent well past $150/bbl.

Brent Crude prices could jump to well above $150 per barrel if Russia’s oil exports fall off a cliff in the coming months, according to Bank of America.

“With our $120/bbl Brent target now in sight, we believe that a sharp contraction in Russian oil exports could …. push Brent well past $150/bbl,” analysts at Bank of America (BofA) Global Research wrote in a research note on Friday carried by Reuters.

In a base-case scenario, Bank of America expects Brent Crude prices to average $104.48 a barrel this year and $100 a barrel in 2023.

Early on Friday, Brent Crude was trading at over $117 per barrel, the highest in two months, amid tight fuel supplies globally and bullish prospects of demand with the U.S. driving season beginning with the Memorial Day holiday weekend and Shanghai in China set for gradual reopening from June 1st.

There is a distinct possibility of a sharp drop in Russian oil exports as the EU continues to seek consensus and persuade Hungary to drop its opposition to a Russian oil embargo. Reports have it that some EU member states are inclined to accept a temporary exemption of Russian pipeline supply to central Europe via the Druzhba pipeline from the embargo as a bargaining chip to convince Hungary to agree to a ban on imports of Russian seaborne oil.

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Citi: Soaring Energy Bills Raise Chances Of Windfall Taxes In Europe

Citi: Soaring Energy Bills Raise Chances Of Windfall Taxes In Europe

  • Gas and electricity bills in Europe could jump to 4.5 percent of household disposable income in 2023.
  • Rising utility bills raise pressure on politicians to implement windfall tax.
  • Rising energy commodity prices weigh most on Eastern European countries.

The higher the energy bills in Europe become, the higher the chances are for a windfall tax on energy companies and utilities, as governments will be forced to ease the growing pressure on household finances, Citigroup says.

Europe as a whole could see a utility bill rise of over 3 percent of gross domestic product (GDP) through 2024, Citigroup Global Markets analysts Piotr Dzieciolowski, Jenny Ping, and Antonella Bianchessi wrote in a note on Monday carried by Bloomberg.

Gas and electricity bills in Europe could jump to 4.5 percent of household disposable income in 2023, up from 3.5 percent in 2021. The utility bills could further rise to 4.8 percent of household disposable income in 2024, according to Citi analysts.

In countries in Eastern Europe, where the prices of commodities account for a larger share of bills, the disposable income is likely to shrink the most, the investment bank says.

Per a Citi survey, one-quarter of respondents across Europe aged 18 to 29 say they would not be able to pay their bills on time if bills rose by one-tenth.

Bills have been surging in Europe since the autumn of 2021 when the natural gas shortage led to higher gas and electricity prices. The Russian invasion of Ukraine further strained household income as utility bills surged with the skyrocketing commodity prices.

Spain and Portugal set a cap on the price of gas used for generating electricity, after the EU allowed them to do so, acknowledging their exceptional energy requirements.

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Dutch Plan To Boost Gas Output At Earthquake-Prone Site Sparks Anger

Dutch Plan To Boost Gas Output At Earthquake-Prone Site Sparks Anger

Residents in the Groningen area in the Netherlands have voiced their anger at a plan by the Dutch government to potentially double this year production from the Groningen gas field, which has been hit by earthquakes in the past.

The Dutch government said on Thursday that it might need more gas to be pumped at Groningen, once Europe’s biggest gas field, which the Netherlands has pledged to phase out this decade after frequent earthquakes in the past damaged homes in the area.

After years of debates and measures to curb production at the field, the Dutch government decided in 2018 that output at Groningen would be terminated by 2030, with a reduction by two-thirds until 2021-2022 and another cut after that. The authorities had already limited production from the field because of the earthquakes, but they decided in 2018 that the risks and costs were no longer acceptable.

Now the government says that more gas needs to be extracted from the Groningen gas field in 2022 to ensure supply because of long-term export contracts with Germany and a delay in the commissioning of a facility in the Netherlands to treat imported gas for use for Dutch households.

The government is expected to make a final decision by April 1 on how much gas will be extracted from Groningen this year.

“I realize it really is a disappointment for people in the quake region that it has indeed proved necessary to extract more gas,” Dutch Economic Affairs Minister Stef Blok said on Friday, as carried by Associated Press.

The Groningen Earth Movement, a group of residents who have suffered damages from earthquakes, slammed the plan for more gas extraction at the field.

The Ministry of economic affairs and climate policy is playing with the safety of people in Groningen, the movement said, adding that “a government should not and cannot treat the safety of its citizens so lightly.”

Coal Generation In UK Jumps As Wind Speed Drops

Coal Generation In UK Jumps As Wind Speed Drops

Coal met some 3 percent of the UK’s electricity demand on Friday morning, reaching its highest level of Britain’s power generation in one month, amid lower wind speeds this week and an outage at a gas-powered plant, Bloomberg reports.

The last time the UK generated 3 percent of its electricity from coal was in early September when low wind generation reduced renewable power supply and triggered the massive spikes in UK wholesale electricity prices.

Utility Uniper fired up its coal-powered plant in Ratcliffe early on Friday, while the gas-fired plant in Pembroke, Wales, operated by RWE, suffered an unplanned outage.

Over the past week, gas has consistently accounted for the largest share of the UK’s electricity generation, according to data from National Grid ESO. For example, on Wednesday, gas produced 44.8 percent of Britain’s electricity, more than wind with 19.2 percent and nuclear with 12.6 percent.

Surging natural gas prices and warm and still weather in September forced the UK to fire up an old coal plant that was on standby in order to meet its electricity demand.

The UK has pledged to phase out coal-fired power generation by October 2024.

UK power company Drax could have its last two coal-fired plants in the country operating beyond the 2022 deadline it had set for closure if the UK government asks it to keep them operational amid the energy crisis in the country and the whole of Europe.

“If the government wants us to rethink our plans, we need to talk to them in the next few months,” Drax’s chief executive Will Gardiner told the Financial Times at the end of September.

Last week, the UK government committed to decarbonizing the country’s electricity system by 2035.

…click on the above link to read the rest of the article…

Gazprom: We’re Not Withholding Gas To Europe

Gazprom: We’re Not Withholding Gas To Europe

Russian gas giant Gazprom dismisses speculation and accusations that it is not supplying enough natural gas via pipeline to Europe, a senior official at Gazprom Export says.

So far in 2021, Gazprom’s gas deliveries to Europe have reached historic highs, Sergey Komlev, Head of the Contract Structuring and Pricing Directorate at Gazprom Export, wrote in an article for Gazprom’s corporate magazine, as carried by Russian news agency TASS.

Germany, Turkey, and Italy—some of Gazprom’s largest customers—all boosted imports of Russian gas in the first half of 2021, the manager said.

Gazprom’s exports to European countries rose by 23.2 percent between January and July, Komlev added.

“These figures prove the absurdity of accusing Gazprom of supply shortage,” the executive noted.

Europe is grappling with soaring natural gas and electricity prices ahead of the winter heating season due to tight gas supplies, very low gas inventories, and low wind power generation amid still weather.

More than 40 members of the European Parliament from all political groups have reportedly urged the European Commission to launch an investigation into Gazprom over alleged market manipulation that could have contributed to the record-high natural gas prices in Europe.

During the summer, even with the strong rebound in European natural gas demand and surging prices, Gazprom did not book additional entry capacity to Europe via Ukraine.

Analysts say that this could have been an opportunistic move from the Russian giant to drive up Europe’s gas prices further and take advantage of the very high prices. Other analysts think that Gazprom’s effective reduction in supplies would force Europe to recognize that gas customers on the continent need the controversial Nord Stream 2 pipeline to Germany bypassing Ukraine.

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Aramco On Lockdown After Houthi Missile Attack

Aramco On Lockdown After Houthi Missile Attack

Saudi Arabia had intercepted a ballistic missile attack on facilities owned by state oil major Aramco in the Eastern Region, Reuters has reported, citing the Saudi defense ministry.

Earlier reports said Aramco facilities in Dharan had gone on lockdown because of a suspected attack.

The Iran-affiliated Yemeni Houthi group claimed responsibility for the attacks on Sunday, saying it had used ballistic missiles and drones.

Ras Tanura, which is home to extensive oil infrastructure, was not the only target of the attack: the Houthis also targeted Aramco property in the southern Saudi provinces of Jizan and Najran, according to the rebel group’s spokesman who claimed responsibility for the attacks.

Aramco oil facilities are understandably a preferred target for the Houthis, which Saudi Arabia is trying to oust from Yemen after they removed the Saudi-affiliated government of the country in 2014 and has since then assumed power in most of Yemen. The Yemeni war, which has resulted in the worst humanitarian crisis in modern times, is widely seen as a proxy war between regional rivals Saudi Arabia and Iran.

The Saudis most often intercept the Houthi attacks but not always. The most notable attack that the Yemeni rebel group claimed responsibility for was the September 2019 attacks on Saudi Aramco’s oil facilities, including an oil field and a processing plant

That attack cut off 5 percent of the daily global supply for weeks, sending oil prices soaring. But Saudi Arabia and the United States said at the time that it was Iran—and not the Houthis—that was responsible for the attack, even though the Yemeni group again claimed responsibility for the strikes.

Since the start of the Yemen war, several attempts have been made at reaching a ceasefire agreement, but so far, all have failed, locking the Saudis and the Houthis in a stalemate.

U.S. Energy Production Saw Steepest Drop On Record In 2020

U.S. Energy Production Saw Steepest Drop On Record In 2020

Due to economic responses to the pandemic, U.S. energy production dropped by 5 percent last year, marking the steepest annual decline on record, the U.S. Energy Information Administration (EIA) said on Thursday.

Last year, energy production in the United States fell to just below 96 quadrillion British thermal units (quads), a 5-percent decline from the record production in 2019, according to EIA’s Monthly Energy Review. The decline in absolute terms was the largest annual decrease in U.S. energy production on record, and this decline was primarily due to the pandemic, which slashed demand for energy.

The EIA calculates and compares different types of energy reported in different physical units such as barrels or cubic feet by converting sources of energy to common units of heat, called British thermal units (Btu).

Due to plunging drilling activity amid low oil prices, U.S. crude oil production fell by nearly 1 million barrels per day (bpd) last year, registering the largest annual decline in history, the EIA said earlier this year.

In 2020, U.S. crude oil production averaged 11.3 million bpd, dropping by 935,000 bpd—or 8 percent—compared to the record-high annual average of 12.2 million bpd in 2019.

Less than two months after American crude oil production reached a peak of 12.8 million bpd in January 2020, oil prices collapsed in March, leading to production shut-ins over the following months, and to the lowest average monthly production for 2020 in May, when U.S. output was just 10 million bpd, according to EIA’s estimates.

U.S. coal production also booked its largest annual decline on record last year, falling by 25 percent to less than 11 quads, the EIA said today.

Natural gas production also dropped in 2020, by 0.6 quads, or by 2 percent.

U.S. renewable energy production, however, rose by 2 percent to a record-high 11.8 quads in 2020, due to higher electricity generation from wind and solar, the EIA said.

Nuclear Reactions At Chernobyl “Cause for Concern”

Nuclear Reactions At Chernobyl “Cause for Concern”

Sensors have detected increased levels of neutrons in an inaccessible chamber at the Chernobyl site, signaling that nuclear fission reactions are taking place in the entombed reactor hall, Science reports.

The signs that fission reactions are occurring come 35 years nearly to the date when the Chernobyl nuclear power plant in what is now Ukraine exploded on April 26, 1986. It was the worst-ever nuclear disaster in the world to date.

The nuclear fission reactions are taking place in a room that is sealed with concrete and contains a large part of the uranium fuel of the former reactor.

Ukrainian scientists are now trying to assess whether the detected nuclear fission reactions will die out or create a larger problem that will require some type of extraordinary intervention.

“It’s like the embers in a barbecue pit,” Neil Hyatt, a nuclear materials chemist at the University of Sheffield, told Science.

Maxim Saveliev of the Institute for Safety Problems of Nuclear Power Plants (ISPNPP) in Kyiv, Ukraine, says that the scientists cannot rule out the possibility of an accident.

“We’re talking about very low rates of fission, so it’s not like a fizzing nuclear reactor,” Hyatt told New Scientist.

“And our estimation of fissile material in that room means that we can be fairly confident that you’re not going to get such rapid release of nuclear energy that you have an explosion. But we don’t know for sure,” the nuclear materials chemist noted.

According to Hyatt, the higher level of neutrons is a “cause for concern but not alarm.”

However, if sensors continue to detect rising production of neutrons, the site may need an extraordinary intervention, Hyatt said. One approach could be to drill into the entombed chamber and spray it with a substance such as gadolinium nitrate, which would stop the fission reactions.

 

China Restricts Electricity Use Amid Coal Shortage

China Restricts Electricity Use Amid Coal Shortage

Despite the swift industrial recovery from the pandemic, factories in areas in China are working only part-time, and residents in several provinces are asked to save electricity, while authorities are turning off street lights and billboards, warning of coal shortages this winter.

In at least three provinces in China, authorities have ordered limits on electricity use, saying there could be shortages of coal, The New York Times reports.

At the same time, Chinese authorities vehemently deny that the potential shortages have had anything to do with the diplomatic spat with Australia, which has turned into a true energy trade war, with China banning imports of coal from one of its major suppliers.

Still, China has admitted there is a problem with electricity supply in parts of the country, just ahead of the winter season when Chinese industrial activity has been recovering very well from the COVID-related economic slump earlier this year.

“At the moment, some provinces temporarily do not have enough electricity. This is an objective fact,” the NYT quoted the Chinese authority overseeing state-held firms as saying during the weekend.

As a result of the power shortages with a reduced supply of thermal coal, some factories are cutting working hours and are operational only two or three days a week, while office workers in some cities have had to climb 20 flights of stairs to reach their workplaces because elevators have been shut down to save electricity.

“We are not living a normal life when our factory can only work two days a week and the streets are dark at night,” Mike Li, who owns a plastic flower factory in the city of Yiwu, eastern China, told the Financial Times.

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The Most Dramatic Year In The History Of Oil

The Most Dramatic Year In The History Of Oil

There are very few industries in the world that have been hit as hard or are set to face as many consequences as the oil and gas industry in 2020. In a recent report, Fitch Ratings forecast that oil and gas exploration and production companies would lose $1.8 trillion in revenues this year, which is six times more than the retail sector is set to lose. But the long-term consequences are going to be even more devastating. Perhaps the most visible change taking place in the oil and gas industry is the drastic cost-cutting measures being taken by the oil majors. BP has been forced to cut 10,000 jobs, or 15 percent of its workforce, as it tries to control costs in this new low oil price environment. Schlumberger had already slashed salaries and cut jobs in late March, while Shell and Chevron have announced plans to shrink their workforces.

And it isn’t just in the workforce where we are seeing unprecedented cuts. Shell’s decision to cut its dividend for the first time since 1945 was probably the single largest indicator of the long-term impact this pandemic will have on the oil industry. Shell and its fellow oil majors have prided themselves on paying out dividends regardless of market conditions in order to keep their shareholders happy. Its decision to cut its dividends marks a shift in strategy that suggests the oil major is now determined to cut its debt going forward and focus on financial sustainability rather than just pleasing shareholders.

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Can U.S. Shale Add 1 Million Bpd In 2017?

Can U.S. Shale Add 1 Million Bpd In 2017?

Rigs

Oil prices are up on expectations that OPEC will contribute to a faster balancing in 2017, with up to 1.8 million barrels per day in cuts along with some non-OPEC countries. That has put a floor beneath prices, with fears of another downturn largely dissolved after OPEC’s announcement.

But what if U.S. shale comes roaring back and ruins the price rally? Estimates run the gamut on how quickly U.S. shale production can rebound and by what magnitude. Citigroup sees output rebounding by 500,000 barrels per day if oil prices average $60 per barrel. A December 12 report from Macquarie said that oil prices above $60 could spark a 1 million barrel-per-day revival.

U.S. shale is already up about 300,000 barrels per day from a low point in the summer of 2016, at least according to preliminary data. The gains are expected to continue. The industry is producing about as much oil as it was two years ago, with only one-third of the more than 1,700 rigs in 2014. Drillers are producing just as much oil with a lot less effort.

If U.S. shale surges back by 1 mb/d as Macquarie suggests, it would offset most of the cuts from OPEC and non-OPEC countries. Additionally, one would have to assume some degree of non-compliance and/or “cheating” on the cuts from participating countries, plus an expected increase in supply from Libya and Nigeria. Altogether, a rise in oil prices could be self-defeating, leading to prices falling once again later in the year. Related: Oil Price Roulette: Investors Bet On $100 Oil

Then there are also the implications on oil demand to consider. Higher prices might cut into demand growth, leading to an expansion in consumption at a much slower rate. The IEA already thinks oil demand will grow by 1.3 million barrels per day in 2017, one of the weakest in years.

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China Stockpiling Oil At Highest Rate In Over A Decade

China Stockpiling Oil At Highest Rate In Over A Decade

China might be in the midst of another round of stockpiling, stepping up crude oil imports to fill its strategic petroleum reserve (SPR).

The slowdown in oil demand in China is one of the chief concerns regarding the state of oversupply in global oil markets. Excess production has driven down prices, but soft demand in China over the past year or so has led to a protracted recovery.

After a period of softness, oil imports could be rising once again. Bloomberg reports that the number of oil supertankers docking at Chinese ports is at a 16-month high. And there are 83 supertankers currently on their way to China, with a capacity of 166 million barrels of crude, the highest number in four months.

In the first quarter of this year China diverted about 787,000 barrels per day into its strategic stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March, China was importing around 7.7 million barrels per day.

The activity makes sense – China needs to fill up its strategic reserve and has had several facilities come online last year, with more storage sites under construction. The timing is fortuitous since China can fill its storage reserves with oil at incredibly low prices.

Another source of additional demand comes from a policy change in the downstream sector. The central government recently loosened the rules on oil imports, allowing smaller refineries to import more crude oil. These so-called “teapot refineries,” with capacities of around 20,000 to 100,000 barrels of production per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because of an inability to import oil. That has changed, and domestic refining production is set to rise, and with it, so are imports.

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End Of An Era: Peabody Declares Bankruptcy

End Of An Era: Peabody Declares Bankruptcy

The St. Louis-based Peabody Energy Corp. warned a month ago that it was considering filing for Chapter 11 bankruptcy, and on Wednesday they made it official. Peabody’s mines will continue to operate uninterrupted through the bankruptcy process. According to Peabody’s court filing, it has obtained $800 million in debtor-in-possession financing facilities.

“Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop. This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future,” the company said in a press release.

Peabody has suffered a dramatic fall from grace, after paying $5.1 billion to acquire major coal-producing assets in Australia in 2011. Since then, coal prices have collapsed, coal demand has ground to a halt, and Peabody’s debt has piled up. In the U.S., cheap natural gas and environmental regulation has led to coal’s downfall in the electric power sector. Abroad, a slowdown in China has hurt both thermal and metallurgical coal demand. China’s demand for steel has slowed and it is undertaking a shift away from coal because of air pollution, leaving the world’s top coal producers with a vastly smaller market than they had expected just a few years ago.

U.S. coal exports have declined in recent years, leaving Peabody – who oversees large mining operations in Wyoming – with too much coal and not enough demand. U.S. coal exports fell by 23 percent in 2015 compared to a year earlier.

Peabody’s bankruptcy is the latest in a string of bankruptcies from major coal producers, including Arch Coal, Alpha Natural Resources, Patriot Coal, and Walter Energy.

Export Ban, And Exports Went…Down

Export Ban, And Exports Went…Down

According to Clipper Data market intelligence cited by the Financial Times, we’ve seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.

And there’s no official data yet—not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January, the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.

An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven’t really picked up pace since then.

January’s cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau. Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February’s shipments is released by the U.S. Census Bureau.

The immediate beneficiaries of the ban suspension are gas and oil companies such as Chevron and Exxon Mobil—among the most tireless lobbyers against the ban—and oil trading giants such as Vitol Group BV and Trafigura Ltd Pet.

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