PAST NEWSLETTERS

Main Takeaways for the week of February 9, 2022

Concerns about short oil supply in 2022 and 2023 are keeping oil prices high, although the potential for a breakthrough on JCPOA talks has slightly cooled the run-up. Disputes over LNG strain relationship between Japan and Qatar, as the U.S. pulls the Emirate closer. EU and U.S. gain more alignment on response to Russia, even as Macron pursues own negotiations with Putin. Russia bans exports of major nitrogen fertilizer ingredient just as it is needed in South America. Kazakhstan asks oil companies politely to divert oil to domestic refineries.

Featured Article

Don’t Blame Putin for Europe’s Energy Crisis, by Jason Bordoff, dean of Columbia Climate School and Director of the Center on global Energy Policy for Foreign Policy

Headlines

Global Petroleum Liquids

• Nigeria’s oil production is rising, but production still below January OPEC quota
• Giant private oil trader Vitol partnering with shale specialists to expand operations in U.S. Permian and Bakken shale
• DarkSide, the Colonial Pipeline cyberattackers, disrupt German liquid fuel supplies from storage company Mabanaft
• Head of Vitol Asia sounds alarm - inventories and OPEC+ spare production might not be enough at the end of 2022

Global LNG

• As Japan reduces long-term gas contracts with Qatar, it is also stung by the Emirate’s promotion into ranks of U.S. close allies, while Japan gets cold shoulder from Biden
• Venture Global gets final approval from FERC to load first commissioning cargo of new Calcasieu Pass natural gas liquefaction block
• Democratic Senators call on Biden administration to halt U.S. LNG exports in hope of lowering domestic natural gas prices
• Tellurian’s Driftwood LNG facility will begin construction in April

Global Coal

• EIA sees renewables making up the bulk of India electricity supply in 2050, but high total electricity consumption means higher coal consumption

North American Energy Infrastructure

• Winter storm results in power outages in the United States, mainly due to damage to power lines rather than natural gas disruptions

U.S. - China Energy Relations

• CNPC’s ETRI sets out path for China to reach net zero emissions by 2055, with potential for 500 Bcm/year of natural gas consumption in 2060, paired with CCS

EU – Russia Energy Relations

• Russia records highest January natural gas production in 5 years
• As natural gas inventories decline on cold weather, Japan warns that it will have to look after its own energy security before helping Europe
• EU will sanction dormant Nord Stream 2 pipeline if Russia invades Ukraine
• S. eases tariffs on Japanese steel days after asking Japan to assist with diverting LNG to Europe
• Macron attempts to extend olive branch to Putin, hinting that European concessions may be necessary to avoid war

China – Russia Energy Relations

• China and Russia agree on major new natural gas deal for additional 10 bcm per year from Sakhalin, with payments in Euros rather than USD

U.S. - Canada Energy Relations

• S. is weighing allowing Chevron to take Venezuelan oil in lieu of cash for debt payments

U.S. – EU Energy Relations

• S.-EU Energy Council meeting affirms alignment, stresses a “just energy transition”

Middle East Energy Geopolitics

• S. and Iran come closer to a JCPOA deal, with unknown additional production and storage from Iran potentially easing crude oil tightness
• Republican senators warn that they may block any new Iran nuclear agreement if Congress does not get to review and vote on its terms
• Qatar angry with JERA’s decision not to re-up giant 25-year LNG supply contract in search for more flexibility, causing distress among Japanese officials

Central Asia Energy Geopolitics

• Kazakhstan’s government is asking foreign oil companies to divert oil toward domestic refinery in wake of fuel price sparked protests

Canadian Oil and Gas

• Enbridge announces agreement with First Nation Capital Investment Partnership to advance plan for carbon transportation and storage hub near Edmonton

Electricity

• European EV charging infrastructure lagging behind EV adoption
• Russia generating record amounts of electricity

Renewables

• Biden extends tariffs on solar panels, but makes concessions on bifocal panels and solar cells, making solar more economic but hurting domestic solar industry

Copper

• Morrison 30,000 tonne/day copper and gold mine rejected for the third time by B.C. government

Lithium

• Global lithium production hits a record high

Nickel

• Indonesia plans to use its dominance of global nickel to become an EV battery producer and exporter

Cobalt

• No significant developments

Carbon

• Australian government to provide two loans worth combined $239 million for companies to produce highly purified graphite, an important battery material
• Australian energy company Santos reaches FID with 1.7 mmt/yr Moomba CCS project in South Australia

Hydrogen

• No significant developments

Nuclear

• K. approves Chinese-designed reactor for Hinkley Point C
• France’s EDF again cuts nuclear output outlook, now between 295 to 315 TWh

Biofuels

• Russia bans exports of ammonium nitrate fertilizer for two months, threatening South American soybean and corn crops

Quotes

Oil prices, now at their highest level since 2014, have made up 27 percent of the “excess” inflation since the pandemic began, according to the financial journalist Matthew C. Klein. Yet despite widespread Democratic agreement over its terms, Congress has not yet passed President Joe Biden’s climate and energy package, which could start to relieve this mess. If the mismatch between producers and consumers continues, higher oil prices—and higher prices for energy in general—could stick around for a long time.

From The Rise of Greenflation, by Robinson Meyer for The Atlantic

In the event that inflation rises and then remains intolerably above target, the Federal Reserve is expected to raise its policy rate. In theory, this is the conventional policy response necessary to stabilize inflation under a passive fiscal policy regime. But if the fiscal authority is determined to pursue its deficit policy into the indefinite future, raising the policy rate may only keep a lid on inflation temporarily and possibly only at the expense of a recession. In the longer run, an aggressive interest rate policy may contribute to inflationary pressure—at least until the fiscal regime changes.

From Is It Time for Some Unpleasant Monetarist Arithmetic?, by David Andolfatto for the Federal Reserve Bank of St. Louis Review

Wind, solar and electric vehicles aren’t enough to generate the kinds of returns that Barclays private bank wants to offer its environmental, social and governance investment clients. Instead, “it’s the second order of ideas that are of interest,” said Damian Payiatakis, who leads a team advising individuals, families and charities, as well as private and public market specialists on ethical and sustainable investing.

From Barclays Steers Ultra-Rich Clients Toward New ESG Entrepreneurs, by Morwenna Coniam for Bloomberg

Qatar potentially holds a crucial role in Afghanistan and Ukraine, the two international crises draining Biden's political resources. Though the emir's visit simply reflects that reality, some in Tokyo wonder where the U.S. administration's true priorities lie after a year of stressing that the Indo-Pacific, and especially China, is the No. 1 concern.

From Biden’s elevation of energy-rich Qatar stuns Japan, by Hirofumi Matsuo for Nikkei Asia

More recently, in January, the Saudis agreed to a Russian increase in production but resisted pressure from the West to step in and unleash its own reserve capacity to halt spiking prices, which are feeding inflation and, in turn, the erosion of public support for US President Joe Biden and other western democratic leaders.

From Russia-Ukraine crisis: When oil prices climb, Putin gets bolder, by Michael Moran for Al Jazeera English

This market is incredibly vulnerable to any kind of supply or demand disruption, much like we saw in European gas and power late last year. Oil has now teed itself up to look very similar to what European gas and power looked like. We highlighted this in late October last year, and we’re at that point right now. So the question is, can you come up with any supply or reduction in demand as you move into the spring in order to ease the situation?

Jeff Currie, head of commodities research at Godman Sachs for Bloomberg TV

OPEC+ too may do the unexpected. Nigeria, Angola and a few others may be at capacity but, if prices rise above US$100 a barrel, other members will come under domestic pressure to pump. Saudi Arabia, the United Arab Emirates and Iraq can easily add a total of 3 million barrels a day above their current output. While Russia may appear to be tapped out, it would be wrong to assume it could not produce more by June or December. Vladimir Putin needs as many petrodollars as he can get, and will push everyone to deliver.

From What if Goldman is Wrong and a Lonely Oil Bear is Right? By Javier Blas for Bloomberg