Energy, (Geo)Politics & Money - 2024.04.30
Non-partisan, objective & neutral analysis where global developments in energy, business & geopolitics intersect & sourced from leading global sources.
Welcome to EPM, where we take our daily look at the interconnected worlds of Energy, (Geo)Politics and Money. Curated from the world’s leading sources of information, we provide you both the information and the objective, neutral commentary that you need to make sense of it all – and beat the market.
In this roundup, we look at:
The currently upward pressures on oil prices, caused by Israel’s declared intent to invade Rafah irrespective of the peace negotiations taking pushed by the US
Iraq’s and Kazakhstan’ promise to lower their crude oil production to below their current OPEC production quota
Why a group of energy analysts regularly polled by Reuters is becoming more bullish on the outlook for oil prices
The view that the Russian oil price cap has become unenforceable as it has only pushed more ships into joining a shadow fleet
The Eurozone’s return to (very minor) growth during the first quarter of 2024, with reduced inflation in April, which is supportive of a rate cut decision in June
The rapid deterioration in US soft power in Africa
China’s success in the new energy sector of the economy, as evidenced by record exports of products from this sector in 2023
The view of Saudi Aramco CEO Amin Nasser on the energy transition
China’s Special Envoy for Climate Change Liu Zhenmin’s plan to visit the US in May for official face-to-face meeting with US counterpart John Podesta
Photo by Jason Blackeye Unsplash
General Energy News
TENSIONS OVER ISRAEL DRIVE CRUDE HIGHER
Crude oil futures moved slightly higher Tuesday, writes CNBC. Brent’s June contract moved to $88.48 a barrel, up 8 cents, or 0.09%, while WTI’s June contract was up to $82.90 a barrel, up 27 cents, or 0.33%. Driving the increase was Israel Prime Minister Benjamin Netanyahu’s dismissal of hopes that a proposed hostage deal would prevent an Israeli attack on the southern Gaza city of Rafah. "The idea that we will halt the war before achieving all of its goals is out of the question," Netanyahu said Tuesday at a forum of hostage families. "We will enter Rafah and we will eliminate the Hamas battalions there – with or without a deal, in order to achieve the total victory."
IRAQ AND KAZAKHSTAN REDUCE OPEC PRODUCTION QUOTAS
Iraq and Kazakhstan promised extra oil production cuts to make up for not meeting earlier OPEC production quotas have now presented plans for delivering them, and compensating for overproduction writes Bloomberg. Iraq and Kazakhstan agreed to submit plans by April 30 explaining how they’d compensate for pumping several hundred thousand barrels a day above the targets agreed to at the start of the year. Those schedules have been sent. Kazakhstan said it would compensate by producing less during the remainder of 2024, while details of the Iraq plan are not yet known.
CRUDE PRICES FOR 2024 AVERAGING UP BUT $100 OIL IS UNLIKELY
A Reuters poll of 43 economists and analysts surveyed in the last two weeks forecast that Brent crude will average $84.62 a barrel in 2024, against a $82.33 projection in March. This is the second consecutive upward revision this year, it notes. On the supply side, the OPEC+ group led by Saudi Arabia and Russia is expected to maintain its production cuts beyond June, which could keep the supply-demand balance in a deficit, according to most poll respondents. Most analysts also noted that a $100 a barrel oil price point is unlikely despite the uncertainties and volatility in supply that surround the Middle East crisis.
RUSSIAN OIL PRICE CAP UNENFORCEABLE
A group of Western insurers, the International Group of P&I Clubs, has said that the Russian oil price cap has become unenforceable and is only pushing more ships into joining a shadow fleet, writes Reuters. The Group says it comprises 12 marine third-party liability insurers covering 87% of the world's ocean-going tonnage. It estimates around 800 tankers have left the International Group Clubs as a direct result of the introduction of the oil price cap.
Macroeconomics
EUROZONE GDP GROWS WHILE INFLATION REMAINS STEADY
Eurozone gross domestic product expanded at a quarterly rate of 0.3 per cent in the three months to March, writes the Financial Times. The fastest rate since the third quarter of 2022 and an improvement from a contraction of 0.1 per cent in the final quarter of last year. Economists had forecast 0.1 per cent growth, FT notes. Germany’s economy grew at a quarterly rate of 0.2 per cent in the three months to March, in a marked rebound from a 0.5 per cent contraction in the previous quarter in Europe’s largest economy.
Meanwhile, Eurozone inflation held steady at 2.4% in April, while core inflation, filtering out volatile food and energy prices as well as alcohol and tobacco, a key measure watched by policymakers to gauge the durability of price pressures, slowed to 2.7% from 2.9%, writes Reuters. The data solidifies an already strong case for the European Central Bank to cut interest rates in June, Reuters says.
Geopolitics
US INFLUENCE WANING AND CHINESE INFLUENCE GROWING IN AFRICA
Washington’s influence on the African continent is waning, and it is being edged out by Beijing, new polling from Gallup shows according to Semafor. Approval ratings of the US have sunk in African nations in recent years, the data shows, and people are instead turning their attention towards China, which has pledged myriad investments to African countries through its Belt and Road Initiative and other private investments. China last year saw its highest approval rating on the African continent in decades, Gallup wrote, most notably in Ghana, Côte d’Ivoire, and Senegal. The US, meanwhile, saw its approval rating sink by 3% in 2023. Washington’s approval sank by 29% in Uganda, which was blocked from receiving benefits from Washington’s African Growth and Opportunity Act following its enactment of a harsh anti-LGBTQ law last year. Its approval also slumped in the Gambia and Kenya. But it is Russia that has perhaps seen the sharpest shift in views from Africans, according to Gallup. Moscow’s approval amongst many African countries slumped following the invasion of Ukraine in 2022, but there are signs that attitudes towards Russia are becoming more positive: Moscow’s approval is now at 42%, up from 34% in 2022, and the highest level since 2012.
Energy Transition & Technology News
CHINA’S EV, BATTERIES AND SOLAR PANELS REACH RECORD HIGH IN 2023
China’s exports of batteries, electric cars and solar panels hit record highs in 2023, writes Bloomberg. Overseas sales of batteries, electric cars and solar panels surged above $150 billion last year, an increase of more than one-fifth. The dollar numbers are down in 2024, but that’s largely due to sliding prices rather than a drop in shipments. EPM notes that one can choose to call this an economic success, a result of wise industrial planning, and an element of export-led economic development, which is how the Chinese see it; or as overproduction and dumping, which is how the US and EU classify it. The reality as we see it, however is that China’s focus on integrated supply chains, and innovation, has given it a real competitive advantage. Nevertheless, we believe the US and EU will use tariffs to undo some of this advantage, which the Chinese will attempt to counter by opening up manufacturing internationally.
SAUDI ARAMCO URGES MULTI-SPEED APPROACH TO ENERGY TRANSITION
In a special meeting of the World Economic Forum in the Saudi capital Riyadh, Saudi Aramco CEO Amin Nasser shared his views on the energy transition. According to S&P Global, "They [Global North] are putting a lot of funds to create the transition," Nasser said, when positing that global oil demand would nevertheless increase. "It doesn't work where the demand is today. Fifty to 60% of the demand is in the Global South. By 2050, 80% of the hydrocarbon demand is going to be in the Global South.” He cautioned against a costly transition that could disincentivize Global South economies and force some to adopt cheaper hydrocarbons such as coal. "Coal is an average of $50/boe, LNG [liquefied natural gas] is $70/boe and oil is fluctuating between $80/b and 90/b. Countries have different priorities and will go for the most affordable," Nasser said. He urged energy transition policy makers to consider a "multi-speed" approach that takes into account the "economic maturity" of each country. As to his own company, Nasser reaffirmed its commitment to achieve Net Zero by 2050, as well as its intent to aggressively ramping up its hydrogen business. But, he noted, when seeking offtake agreements at $200/b of oil equivalent for blue hydrogen and $400/boe for green hydrogen, the company found few takers, he added.
Meanwhile, Bloomberg asked a variety of other energy executives, analysts and activists how they see the energy transition progressing.
Climate Politics
CHINA SEEKS TO WORK WITH THE US ON CLIMATE ISSUES
China’s new climate chief, Special Envoy for Climate Change Liu Zhenmin, plans to visit the US in May for first formal talks, writes Bloomberg. Liu will take a delegation from different Chinese ministries to Washington DC and hold a first official face-to-face meeting with US counterpart John Podesta. China will aim to extend cooperation on issues including energy, the circular economy and efforts to curb greenhouse gases beyond carbon dioxide, Liu says.