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

    Cobalt price: Congo production surges

    This article by Frik Els for Mining.com may be of interest to subscribers. Here is a section:

    Supply risks for cobalt are centred on the Democratic Republic of the Congo which is responsible for two-thirds of world output. And the country’s share will only increase over the next five years as Chinese investment in new mines come on stream.

    The central African nation's output of cobalt – as a byproduct of copper production – is already soaring as top producer Glencore's operations in the country ramps up again after a refurbishment period.

    The DRC produced 296,717 tonnes of copper in the first quarter of 2018, up 8.2% over the same period last year, the central bank said in a report on Thursday. Cobalt production in the first quarter of 2018 rose 34.4% to 23,921 tonnes. Global production last year was around 117,000 tonnes.

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    U.S. Oil Poised for Weekly Loss as Record Output Weighs on Price

    This article by Tsuyoshi Inajima for Bloomberg may be of interest to subscribers. Here is a section:

    While hedge funds invested in U.S. oil are betting pipeline bottlenecks will make Texas crude even cheaper, trading giants are seeing an opportunity to export millions of barrels as shale output continues to surge. For now, American price moves have favored the financial players. Meanwhile, Brent climbed last month following President Donald Trump’s decision to reimpose sanctions on Iran, and as Venezuelan output plunged amid an economic crisis.

    Also at the forefront of investors’ minds is OPEC and the allies’ next step on output cuts. Saudi Arabia and Russia said last week that they are considering boosting production to ease potential supply disruptions in Iran and Venezuela after a global surplus was eliminated. Most producers weren’t consulted about the proposal, and officials from several producers said they disapproved of raising output.

     

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    Musings from the Oil Patch May 29th 2018

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB which may be of interest. Here is a section:

     

    Oil Slips After Saudi-Russian Revival Talk `Popped the Bubble'

     

    This article by Jessica Summers for Bloomberg may be of interest to subscribers. Here is a section:

     

    “Clearly, the commentary from Russia and Saudi Arabia popped the bubble,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “There’s some legitimate skepticism about whether or not they will follow through. There is going to be nervousness right up until next month’s meeting.”

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    Saudis Signal Oil Output Boost, Offering Relief to Consumers

    This article by Jack Farchy, Dina Khrennikova and Elena Mazneva for Bloomberg may be of interest to subscribers. Here is a section:

    “Given current developments, with supply worries driving the price to $80, it would make perfect sense to remove the over-compliance by compensating for the shortfall from Venezuela,” said Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen.

    Excess cuts amounted to about 740,000 barrels a day in April, according to estimates from the International Energy Agency. Without compensating supply from other members, this number looks likely to expand as the U.S. re-imposes sanctions on Iran and the collapse of Venezuela’s oil industry worsens.

    Whether the size of the supply increase is ultimately "a million, more, or less, we’ll have to wait until June," when OPEC and its partners will meet, Al-Falih said. Novak echoed that, saying “it’s too early now to talk about some specific figure, we need to calculate it thoroughly.”

    Typically, OPEC operates by consensus, meaning members that have little prospect of boosting production -- Venezuela, Iran and Angola -- would have to agree to the proposal.

    Saudi Arabia has recently shown willingness to push prices higher to bankroll domestic economic reforms and underpin the valuation of its state oil company in a planned initial public offering. That appears to be changing, with the Aramco listing delayed until 2019 and Brent crude flirting with the kingdom’s desired price of about $80 for most of this month.

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    Renewable energy: A green light to Copper Demand

    Thanks to a subscriber for this report for BMO which may be of interest to subscribers. Here is a section:

    Petrobras Punished by Wall Street for Caving on Fuel Prices

    This article by Peter Millard for Bloomberg may be of interest to subscribers. Here it is in full:

    The reaction was swift and severe. Petrobras Chief Executive Officer Pedro Parente woke up this morning to a wave of downgrades from the same Wall Street analysts who had been praising him since he took the helm of the state-controlled oil producer two years ago.

    Bank of America Merrill Lynch, Morgan Stanley and Credit Suisse Group AG all cut their recommendations after Parente announced a 10 percent cut in wholesale diesel prices late Wednesday to help the government negotiate an end to a nationwide truckers strike that has wrought havoc on Latin America’s largest economy.

    “The just announced diesel price reduction in response to truckers’ protest is likely to materially damage Petrobras’ perceived independence in a way that may be difficult to recover,” Frank McGann, an analyst at Merrill Lynch, wrote in a report where he cut his recommendation on the company’s American depositary receipts to neutral and his price objective to $17.

    “We think that the investment case for Petrobras has been seriously damaged, and the risk profile has risen.”

    While Parente said Petrobras isn’t bowing to pressure and that the temporary measure doesn’t mean a change in its pricing policy, shares extended losses in after hours trading to as low as $13.40 in late New York trading.

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    Global surge in air-conditioning set to stoke electricity demand

    Thanks to a subscriber for this article by Ed Crooks for the Financial Times which may be of interest. Here is a section:

    Over the next 30 years, air-conditioning could increase global demand for electricity by the entire capacity of the US, the EU and Japan combined, unless there are significant improvements in the efficiency of the equipment, the IEA warned.

    In a report released on Tuesday, the agency urged governments to use regulations and incentives to improve the efficiency of air-conditioning units, to avoid a surge in demand that could put strains on energy supplies and increase greenhouse gas emissions.

    Fatih Birol, the IEA's executive director, said: “This is one of the most critical blind spots in international energy policy.”

    Air-conditioning has had an enormous effect on the quality of life in hot regions, but its use is unevenly distributed around the world. About 90 per cent of homes in the US and Japan have air-conditioning, compared with about 7 per cent in Indonesia and 5 per cent in India.

    Electricity used for cooling in the US is almost as great as the entire demand for power in Africa.

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    Email of the day on the high cost of electric vehicle subsidies

    I just returned from a very eye-opening trip to Arizona, visiting Scottsdale (in the Sonoran desert) and the mountains of Northwestern Arizona. We flew into Phoenix and drove a lot. We saw zero Teslas. I'm told there are a few around Phoenix. But with the poor performance of electric vehicles in both cold and hot environments, it probably should not be shocking.

    Going to Arizona from California is like going from lala land, where the majority of people are drinking weird kool-aid, to the real world, where people work for a living, dislike taxes, and are really concerned about the massive influx of Californians who are oddly leaving their dream state.

    Electric car enthusiasts here in CA get the pleasure of paying $0.38/kwh for their electricity, FAR above the advertised $0.12/kwh, thanks to tiered billing and some of the highest real electric rates in the nation. When an electric car is parked in every driveway, neighborhood power distribution systems will be grossly overloaded (recharging typically starts after 6pm and finishes before 8am, compressing the "average" load on power networks). So, these systems will have to be replaced at taxpayer or ratepayer expense, with lower income people getting no benefits but definitely sharing substantially in the costs.

    All this means that one of the highest tax states in the Union will become far higher taxed, both in direct taxes and indirect taxes like state mandated burdens on electricity ratepayers. Meanwhile gas taxes remain some of the highest in the nation, and will only go higher, putting yet more burden on the lower income folks. 

    Meanwhile, the exodus of retirees naturally accelerates.

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    The Coming Scramble for Middle Distillates

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