World Energy News for 4 July 2022
General Energy News
Bloomberg writes that “Iran is being forced to discount its already cheap crude even more as a top ally gains a bigger foothold in the key Chinese market. China has become an important destination for Russian oil as Moscow seeks to maintain flows following the fallout from its invasion of Ukraine. That’s led to increased competition with Iran in one of the few remaining markets for its crude shipments, which have been significantly curtailed by US sanctions.” It further mentions that “Iranian oil has been priced at nearly $10 a barrel below Brent futures to put it on par with Urals cargoes that are scheduled to arrive in China during August, according to traders. That compares with a discount of about $4 to $5 prior to the invasion.”
Julian Lee highlights that OPEC crude quotas are now back to where they before COVID19 disrupted the energy industry: “The OPEC+ group of oil producers has completed its mission to restore all the oil it removed from the market during the depths of the Covid-19 pandemic — at least on paper… The group of 23 oil-exporting countries met virtually on Thursday… and agreed to add back in August the final tranche of the 9.7 million barrels a day of supply that they agreed to cut back in April 2020.” At the same time, in most countries actual production is well behind the quota. Russia is behind by some 800,000 barrels per day, for obvious reasons. But Nigeria is also almost 500,000 barrels behind, and Angola a further 300,000.
Interesting QuickTake over at Bloomberg about “What LNG Can and Can’t Do to Replace Europe’s Imports of Russian Gas”. It highlights that, In theory, there’s enough LNG on the market to cover the EU’s gas imports from Russia, the equivalent of 118 million tons of LNG. However, that means the EU needs to scoop up almost all of the 136 million tons of LNG that is available on the spot market, which will leave many other countries around the world short, and of course significantly push up prices. Most important, however, is that the two dozen import terminals in Europe have spare capacity to take in only about half that. Meaning that if Russia continues its current restrictions of supply, let alone worsens them, the global gas market will be in crisis as we head into winter.
Energy Transition & Technology News
According to Bloomberg, “European governments, banks and businesses raised a record 311 billion euros ($324 billion) of green finance last year, which is almost twice the amount reached in 2020 but still nowhere near enough to meet a mid-century target of net zero greenhouse gas emissions.” Apparently, in order to hit climate neutrality by 2050, Europe will need to spend as much as 1 trillion euros each year, as per estimates of the EU Commission.
CNBC writes, “The IEA has put together a plan for how the world can reach net zero emissions by 2050, and in that plan, the amount of nuclear power generation has to double between 2020 and 2050.” But, it highlights, “Advanced economies have lost market leadership, as 27 out of 31 reactors that started construction since 2017 are Russian or Chinese designs”. Therefore, despite all the talk for the need to increase nuclear power, the practical ability to do so at a meaning full scale and in a meaningful timeframe in the developed western markets will be limited.
The Macro Environment (economics & geopolitics)
Analysts are reading a lot into the demotion of Le Yucheng, China's first vice foreign minister, to deputy head of the National Radio and Television Administration. According to NikkeiAsia, he is a “pro-Russian diplomat” and his dismissal indicates that China intends to take its diplomacy in a new direction. Apparently, foreign policy circles in China felt that his explicit stance on Russia exposed China as it could be exploited by the US.
The Electrification of Transport
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ESG
According to NikkeiAsia, “ASEAN governments rush to issue green bonds”. Some of the 10 members of the Association of Southeast Asian Nations have been issuing green bonds to fund eco-friendly projects, in hopes of realizing plans that can safeguard their environment. The amount of sustainable bonds outstanding from core markets in ASEAN and East Asia reached $478.7 billion at the end of March, posting a year-on-year expansion of 51.3%.
https://asia.nikkei.com/Business/Markets/Bonds/ASEAN-governments-rush-to-issue-green-bonds
Special features – The Global Energy Crisis
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Other
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