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

    Shipowners on Pace to Scrap $1 Billion in Oil Tankers This Year

    This article by Costas Paris for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Some 1,000 vessels are broken up every year and their steel and other metals are melted or simply stacked up and sold to factories. The yards in the Indian subcontinent recycle around 80% of all ships, with the remainder going to China and Turkey, although Beijing has said it will suspend scrapping starting next year.

    The average age of VLCCs going to scrap this year is 18.8 years, the youngest since 2013, according to VesselsValue. A ship’s average operational age is around 25 years, but after 15 years in the water, the vessel has to go through an extensive survey to determine if it is seaworthy. “An average survey costs about $2 million, and you have to do it again at 20 years, so a number of owners opt to scrap instead,” Mr. Sharma said.

    The oil glut is also sending offshore rigs to scrapyards. It is a relatively new business that has boomed over the past five years, as the cost of drilling at sea is much higher than inland exploration. At least 18 rigs have been broken up so far this year, compared with 46 last year, according to GMS.

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    Musings from the Oil Patch June 26th 2018

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

    To appreciate how the energy world is changing, two charts presented by Mr. Dale set the stage.  Global energy growth last year was 2.2%, up from 1.2% in 2016, and above the 10-year average of 1.7%.  That robust growth came as a result of strong global economic growth, but also due to a decline in energy productivity.  While the International Monetary Fund is warning of potential dark clouds on the horizon for global economic growth, its forecast remains robust, meaning energy growth is likely to remain high.  

    Also important is the difference in where energy growth originated.  The driver for the above-average growth was the strength of the developed economies of the OECD, but also some deterioration in energy productivity.  However, nearly 80% of the total energy growth came from the non-OECD or developing economies of the world.  That is not surprising as they benefit from the global economic recovery, especially China.  China saw energy demand grow by 3%, nearly three times its growth rate of the past several years.  That higher growth was driven by recoveries in numerous high-energy sectors such as iron, crude steel and non-ferrous minerals.  Still, the high growth rate was well below China’s 10-year average rate, even though it was helped by a decline in energy intensity that was more than twice that of the global economy.  

    The picture of primary energy fuel mix highlighted the title of Mr. Dale’s remarks – Two Steps Forward and One Step Back.  He pointed to the dramatic growth in natural gas and renewables as the two steps forward.  Combined, those two fuels accounted for 60% of the total growth in energy fuels.  

    The backward step was the growth in coal usage.  In 2017, global coal use rose by 1.0%, or 25 million tons of oil-equivalent, marking the first annual increase since 2012.  The increase was driven by India, although China’s consumption also rose after declines in the three prior years.  

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    OPEC+ to Boost Oil Output After Saudis Secure Deal With Iran

    This article by Wael Mahdi, Grant Smith and Nayla Razzouk for Bloomberg may be of interest to subscribers. Here is a section:

    The final communique made no mention of whether the kingdom, or any other member, could compensate for losses elsewhere. Yet it said the group as a whole should strive for “overall conformity” of 100 percent, which in practice will only be achievable if those nations with spare production capacity step in to fill the gap left by others.

    "The lack of specificity is bullish for prices,” said Joe McMonigle, senior energy analyst at Hedgeye Risk Management LLC. “It’s a mystery oil production increase because we don’t really know the final numbers."

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    Musings From The Oil Patch June 12th 2018

    Thanks to a subscriber for this report edition of Allen Brooks’ ever interesting report for PPHB. Here is a fascinating section on energy efficiency statistics over the last 50 years:

    Truckers Protest High Gas Prices in Spotty Strikes Across China

    This article by Te-Ping Chen for the Wall Street Journal may be of interest to subscribers. Here is a section:

    While trucker protests in China have occurred in the past amid complaints of road tolls, fuel prices and excessive fees, Geoff Crothall, spokesman for the labor monitoring group, said he couldn’t recall trucker protests of a similar scale. He estimated thousands of truckers participated.

    As they have the world over, gas prices have risen in China this year, by 8.6%, according to data from the Ministry of Commerce. Taxes and other fees generally make gas more expensive in China than the U.S., and on top of that the government sets the prices, lagging changes in international oil markets by 10 days or more.

    China’s National Development and Reform Commission, which sets those prices, announced Friday that it would cut the retail price of gasoline and diesel by 130 yuan ($20.29) per ton for gasoline and 125 yuan per ton for diesel. The new prices, effective this past Saturday, reflect a recent retreat in global oil prices. In the central province of Anhui, a transportation hub where protests occurred, gasoline now costs $3.99 a gallon, and diesel $4.04 a gallon.

    Rising fuel costs have elsewhere prompted worker frustrations to spill over, most notably in Brazil, where protesters blocked highways and halted shipments of food, fuel and medicine before the government called in the military to help end the strike. Other trucker protests have also recently broken out in Iran.

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    Biggest Electric-Vehicle Battery Maker Soars 44% on Debut

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

    Shares of the world’s biggest maker of electric-vehicle batteries jumped on their trading debut as investors bet on rising demand for new-energy cars worldwide.

    Contemporary Amperex Technology Ltd. rose by the maximum 44 percent to 36.20 yuan at 10:17 a.m. in Shenzhen, China, valuing the company at about $12.3 billion. The manufacturer sold a 10 percent stake at 25.14 yuan a share in its initial public offering on May 30.

    Investors are confident that CATL, as the company is known, can fend off rivals including Panasonic Corp. and continue to win orders as automakers move toward electric vehicles. CATL, whose customers include Volkswagen AG, had reduced the size of its IPO by more than half compared with its original ambitions because of declining margins and a cap imposed by Chinese authorities on price-earnings ratios in IPOs.


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    Milestone claimed as experimental nuclear reactor reaches temperature of the Sun

    This article by Nick Lavars for NewAtlas may be of interest to subscribers. Here is a section:

    The pursuit of nuclear fusion is inspired by the collision of atomic nuclei in stars, which fuse together to form helium atoms and release huge amounts of energy in the process. If we can recreate this process we could have an inexhaustible supply of energy on our hands that brings no harmful by-products, such as carbon dioxide emissions or the radioactive waste generated at nuclear fission-based power plants like Fukushima and Chernobyl.

    But to do that we need to create Sun-like conditions here on Earth, which calls to mind one requirement first and foremost – incredible amounts of heat. Tokamak Energy hopes to achieve this through what's known as merging compression, where running high currents through two symmetrical magnet coils generates two rings of plasma, or electrically charged gas, around them.

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    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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