David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Email of the day - on the USA's oil advantage:

    Quick thought, following your comment on America's oil glut, and Morgan Stanley's report you highlighted.

    I have been watching the difference in price between the WTI and Brent Crude for a long time now. The difference seems to vary between 10 and almost 20% depending on the day, with WTI obviously being the cheaper. Is it too SIMPLISTIC to say?

    1) that US factories, offices, homes etc enjoy an enormous advantage over their global competitors with energy costs being so much cheaper, not forgetting it already enjoys a significant tax advantage over many as well.

    2) when the US does become a significant oil exporter, it can make a lot of profit, even by offering only minor discounts to the Brent price to attract business. Possibly more profit than from its LNG exports.

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    Uranium Sector

    Thanks to a subscriber for this report from Eight Capital which may be of interest. Here is a section:

    Enviro Minister Schulze recently said that Germany will stick to its timetable to close the last nuclear reactor by YE22.  Some critics like Volkswagen CEO Herbert Diess believe that it should wind down coal before nuclear. A recent Forbes article “What Does It Actually Cost to Charge Up an Electric Car focused on cost of charging an EV.  We took it one step further and also determined the environmental impact of Germany’s decision.  Given that France’s electricity generation is 73% nuclear and Germany is only 12%, we compared estimated costs and emissions associated with charging a Tesla Model S with a 100-kWh battery. First off, electricity prices appear 45% lower in France.  Secondly, CO2 emissions from electricity generation to charge an EV in France is just 13% of what it is in Germany. Yes, Germans would see a 140% CO2 reduction by using EV’s versus that from an average ICE vehicle, but the French would see a 1,720% CO2 reduction.

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    Shell's Floating Prelude LNG Poised to Load First Cargo

    This article by Stephen Stapczynski for Bloomberg may be of interest to subscribers. Here it is full:

    Shell’s Prelude floating LNG plant offshore Australia is expected to load its first cargo on the vessel Valencia Knutsen, which is currently idled in the area, according to commodity shipment tracker Kpler.

    * The vessel arrived near Prelude on June 4 and was likely attempting to load from the facility, but it left berth range a few hours after arrival, Kpler analysts said

    ** The vessel will probably be moored alongside the Prelude facility before the end of the week: Kpler

    * NOTE: Shipment of the first LNG cargo is “imminent,” Platts reported on June 4, citing Shell’s head of integrated gas, Maarten Wetselaar

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    Stock Rally Gains Momentum on Risk Bet, Bonds Fall

    This article by Randall Jensen and Vildana Hajric for Bloomberg may be of interest. Here is a section:

    This has become a pattern where you get a big aggressive statement from the administration that might impact trade and then the market reacts aggressively as it did on Monday and then it seems to back off,” Chicago-based Susan Schmidt, head of U.S. equities at Aviva Investors, said in an interview. “Business is still doing well. I think if the market can stay focused on the facts and the data, then I think the market will hold.”

    Strong economic data and earnings, along with hints from the Trump administration that it may be willing to compromise on trade has helped stocks rebound from the battering they took when the tariff battle with China flared. But the headlines have come fast and furiously, most recently President Donald Trump signed an order that’s expected to restrict Chinese telecommunications firms from selling in the U.S.

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    Oil Rises as Drones Strike Saudi Pipeline and Trade Fears Recede

    This article by Alex Nussbaum and Grant Smith for Bloomberg may be of interest to subscribers. Here is a section:

    Oil climbed as drones struck Saudi Arabia’s main cross-country crude pipeline, while President Donald Trump said a trade deal with China is still within reach.

    Futures gained 1.2% in New York, amid assaults on the world’s chief crude exporter. State-owned Saudi Aramco halted operations in the area after the strike on two pumping stations, which was claimed by Iran-backed rebels from neighboring Yemen. The attack followed damage to four oil tankers anchored off the United Arab Emirates on Sunday.

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    Email of the day - on oil prices

    “May I clarify something? The item denoted as Oil (1st West Texas) (CL1 COMB COMDTY) in the Chart Library - is this the Spot Price for WTI? Or is it the near-term futures price for WTI? Thanks in advance.“

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    Shell's Great Natural Gas Earnings Had a Helping Hand From Oil

    This article by Kelly Gilblom and Dan Murtaugh for Bloomberg may be of interest to subscribers. Here is a section:

    Shell is the world’s largest liquefied natural gas trader and sells most of the fuel on long-term contracts linked to oil prices. Some of those agreements are structured with a three-month lag, Chief Financial Officer Jessica Uhl told reporters on a conference call. That means that while global gas prices were tanking, Shell was still reaping benefits from a crude rally that sent Brent prices to the highest level in four years in early October.

    “We have a business structured predominantly around long-term contracts, mostly oil linked,” Uhl said. “The price environment doesn’t have material impact on our business.” In addition, Shell also benefited from trading. The gas business was buoyed by a $234 million accounting gain in the value of its commodity derivatives. Shell’s rival, BP Plc, told investors on Tuesday that its strong trading earnings reflected shorting gas contracts.

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    Email of the day on crude oil prices:

    Please check on my enquiry below (sent to Eoin on 16.4.2019): [On 12/4/2019, you wrote "Nevertheless, a great deal of additional supply, internationally, becomes economic above $80 so that level represents a significant Rubicon for prices." I presume the $80 refers to the Brent crude oil price. What is the equivalent Rubicon price for the WTI? Thanks in advance.] I have not seen a reply to my query above. Can you please check what happened?

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    Perspectives for the Clean Energy Transition

    This report from the International Energy Agency may be of interest to subscribers. Here is a section:

    In contrast to current trends, the Faster Transition Scenario sets out a vision for an extremely ambitious transformation of the energy sector. Energy-related emissions peak around 2020 and drop 75% to around 10 gigatonnes of CO2 (GtCO2) per year by 2050. The carbon intensity of the power sector falls by more than 90% and the end-use sectors see a 65% drop, thanks to energy efficiency, uptake of renewable energy technologies and shifts to low-carbon electricity.

    Electrification plays a major role in the transition, combined with clean power generation. Electricity’s share in final energy reaches about 35% by 2050, compared to less than 20% today. That growth is mainly due to adoption of heat pumps in buildings and industry, as well as a swift evolution in transport. Efficiency improvements keep electricity demand for other end uses, such as lighting and cooling, relatively stable, while access to electricity improves worldwide.

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