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UK Gas Crisis: Out Of The Frying Pan Into The Fire

March 14, 2018

UK Gas Crisis: Out Of The Frying Pan Into The Fire

Kent Moors

For the ministers and officials assembled, it was an embarrassment all around.

Late last week, as we were at the annual Windsor Energy Consultation (WEC) just outside London, British Gas Plc confirmed that the nation was facing a natural gas shortage as freezing temperatures grip the country.

You see, blizzards, strong winds, drifting snow, and bitter cold recently brought Britain to a standstill as the weather system nicknamed the “Beast from the East” combined with winter storm “Emma” to create some of the most testing weather the U.K. has had to face in years.

Now, I can attest first hand that this cold snap was not something to take lightly.

As a regular attendee of the Windsor Energy Consultation over the past decade, a visit that includes spending three days each year at the royal residence, I know that Windsor Castle can be drafty in any weather.

But this time around, it was positively frigid.

“Frosty” Windsor Castle grounds (St. George’s Chapel on the left), March 2, 2018; photo: Bill Arnold

And nationwide, this “big freeze” has brought to light a very serious problem.

And it’s one that is only getting worse…

Bitter Cold Adds (Further) Fuel to the Flames

The unfolding gas crisis has brought about a renewed immediacy to a major political issue that has been percolating in the U.K. for some time now.

You see, for the third year in a row, a portion of my two briefings (one to the plenary meeting; one to the ambassadors), was devoted to the growing global need for a new “energy balance.”

Simply put, that balance involves two related advances.

The first is an expansion in the number of reliable (and distinct) energy sources. The second addresses the extent to which these sources provide a genuine interchangeable network of availability from such sources.

The rise of renewable sources (solar, wind, biofuel, even geothermal) has been the most visible manifestation of the developing balance. But the crucial element to remember is the balance nature of it all.

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

Why Oil Prices Will Keep Moving Up

November 7, 2017

Why Oil Prices Will Keep Moving Up

Oil

Crude oil prices were have hit a two-year highs. Despite the misgivings of some pundits who view oil simply as a means for making money from short plays, the global market has finally stabilized.

That means we’re now in the perfect environment to make some nice money with the presence of two crucial ingredients: a degree of predictability and low volatility.

WTI posted a price above $57 on Tuesday morning, with the consensus now forming that the next resistance level may be around $59.

Meanwhile, Brent (set daily in London and the more globally used of the two primary oil benchmarks) is trading above $63, higher than my predicted range for December 31 of $58-$60 a barrel.

This means that my next estimates – for what the market will look like at the end of the first quarter of 2018 – will forecast a higher price.

I expect the movement to continue incrementally. Each new ceiling provides its own resistance, especially when improving profitability entices additional production from significant surplus reserves.

Nonetheless, there are two essential reasons why the price improvement is taking place, both of which we’ve discussed on numerous occasions here, and both boding quite well for investment returns in the sector.

Oil Supply Surpluses Can Be a Good Thing

First, the elusive, long-awaited balance in the market is here.

As I have previously remarked, such an equivalence between supply and demand does not mean the oil market is moving into a “just-in-time” situation.

This has been a recurring and popular strategy to minimize costs in a range of manufacturing and delivery venues. The idea is that you only make and ship what’s needed when it’s needed, to avoid having to pay for large warehouses and manage inventory.

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

A New Oil Crisis Is Developing In The Middle East

October 20, 2017

A New Oil Crisis Is Developing In The Middle East

oil

After over 40 years in the energy business, more than two decades of that with a parallel career in intelligence, I regularly witness the impact of global developments on the energy markets.

So it’s hardly surprising that I often address geopolitical events here.

Currently, situations in Latin America (Venezuela), Asia (the South China Sea crisis), and Africa (ongoing civil conflict in Libya and Nigeria) show how widespread the geopolitical impact is on energy prices and availability.

Each one either is, or could easily, spike oil price volatility.

But the instability in a different region remains the biggest single factor in how the two sectors interact…

The Middle East.

There, two significant events unfolded over the past week. Each is certain to have an impact on how crude oil trades in the near-term.

The curious de-certification of JCPOA (the Joint Comprehensive Plan of Action, more popularly known as the “Iranian nuclear accord”), by President Trump, was followed in short order by the ominous hostilities between Iraq and Kurdistan over the status of the city and region of Kirkuk.

Both impact the northern Persian Gulf, already a region with a short fuse.

The toppling of Raqqa, the self-styled ISIS capital, may be underway in Syria, but the ongoing cross-border disagreements have already spread elsewhere.

And they could set the whole region on fire…

Sanctions Don’t Work Very Well

First, take the Iranian nuclear deal. Decertifying it was a curious choice by the White House, as it actually accomplishes very little.

The move kicks the can back to Congress, where the legislative branch has 60 days to decide whether the U.S. remains in the accord.

What it does do, of course, is increase volatility.

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

The Geopolitical Consequences Of U.S. Oil Exports

October 9, 2017

The Geopolitical Consequences Of U.S. Oil Exports

Tanker

Two crucial things happened yesterday.

The first you may have noticed – oil prices moved back up.

As for the second, most so-called “experts” seemed to have missed.

See, the environment we’re seeing in energy markets is very different from what we saw only a week ago, when oil prices were also rising.

Because yesterday also saw – for the first time in world history – a reigning Saudi Arabian monarch in Moscow for talks with Russia’s head of state.

Historically, Russia has been much closer to Iran – Saudi Arabia’s main regional enemy.

Now, King Salman and President Putin are expected to endorse the plan to extend the OPEC-Russia deal to cut oil production and boost prices beyond the current end date of March 2018.

But that’s not all they’re going to talk about…

Other, more far-ranging matters will also be on the agenda, including the war in Syria.

And the catalyst for this huge shift in global geopolitics is surprisingly simple.

It’s all about America’s record-breaking oil exports…

Russia and Saudi Arabia Need Each Other… for Now

Now, there’s no indication that Russia and Saudi Arabia are on the road to an alliance on anything beyond oil prices.

Even then, that accord remains only as long as it is in the subjective interest of the parties.

Nonetheless, it is disquieting to Washington that any such prospects may be on the horizon… or that U.S. oil exports may be introducing a range of foreign policy concerns.

From an energy perspective, the main issue at hand is the OPEC-Russian deal to cap oil production, which is now almost certain to continue further than the agreed-on end date of March next year.

And after some concerns had been raised over individual OPEC members exceeding the quotas the deal assigned them, evidence is now emerging that the restraint is holding.

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

Is An Oil Price Spike Imminent?

September 15, 2017

Is An Oil Price Spike Imminent?

Corpus Christi

As the U.S. market begins its recovery from the double whammy served up by hurricanes Harvey and Irma, my earlier projections of where crude oil prices are headed have come true.

Just a little quicker than anticipated.

As I am writing this, WTI (West Texas Intermediate, the benchmark crude rate for futures contracts written in New York) has moved above $50 a barrel for the first time in over five weeks.

In fact, it’s up 6.1 percent in barely three days. Meanwhile, Brent (the equivalent and more globally used benchmark set daily in London) is approaching $56.

Two months ago, I said WTI would be at $52-$54 and Brent at $55-$57 by the end of September. Currently, WTI is within $2 a barrel of its predicted range and Brent has already reached it.

What’s interesting is the fact that this rise is taking place while much of the Gulf Coast refinery infrastructure either remains offline or is running at partial capacity.

After all, refiners form the bulk of crude end users. A reduction in refinery flow rates usually cuts into crude demand and, thereby, pushes prices down.

Despite that, oil prices are going up this morning. There are three reasons for this…

Ignore the News – Oil Demand is Rising

First, the crude oil balance we’ve talked about for some time has been coming in quicker than anticipated. That’s the case even with the rising U.S. production levels.

But remember, oil prices are set by global developments, not (primarily) by what happens in North America or Western Europe.

Both the International Energy Agency (IEA) in Paris and the U.S. Energy Information Administration (EIA) have recently reported that the balance between supply and demand should be realized in the first quarter of 2018. That is much earlier than previously forecasted.

 

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

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