- The political standoff between Iraq and the Kurdish Regional Government took a new twist this week after industry associations of oil producers claimed crude production in the semi-autonomous region has reached 350,000 b/d.
- Kurdish production is the main reason why Iraq cannot meet its OPEC+ output quota of 3.99 million b/d, increasingly angering other members of the oil group as the total Iraqi supply remains around 4.25 million b/d.
- Baghdad warned Erbil that unless the KRG cuts down production to the ‘minimum required’ for its refineries, it would face punitive measures from federal Iraqi authorities including the withholding of its share of the budget.
- Iraq promised to cut its oil output between 3.85 and 3.9 million b/d in September, deepening the output curbs as its OPEC+ compliance rate has barely changed despite lower supply from Baghdad-controlled territory.
China Reaches Key Renewables Target Six Years in Advance
- Chinese President Xi Jinping set a goal in December 2020 to reach 1,200 GW in clean energy generation capacity by 2030, however, the country’s power industry has reached that target already this summer.
- Already leading the world in renewable capacity, China added another 25 GW of wind turbines and solar panels in July, taking the nationwide tally to 1,206 GW, sticking to previous years’ trend of…
- The political standoff between Iraq and the Kurdish Regional Government took a new twist this week after industry associations of oil producers claimed crude production in the semi-autonomous region has reached 350,000 b/d.
- Kurdish production is the main reason why Iraq cannot meet its OPEC+ output quota of 3.99 million b/d, increasingly angering other members of the oil group as the total Iraqi supply remains around 4.25 million b/d.
- Baghdad warned Erbil that unless the KRG cuts down production to the ‘minimum required’ for its refineries, it would face punitive measures from federal Iraqi authorities including the withholding of its share of the budget.
- Iraq promised to cut its oil output between 3.85 and 3.9 million b/d in September, deepening the output curbs as its OPEC+ compliance rate has barely changed despite lower supply from Baghdad-controlled territory.
China Reaches Key Renewables Target Six Years in Advance
- Chinese President Xi Jinping set a goal in December 2020 to reach 1,200 GW in clean energy generation capacity by 2030, however, the country’s power industry has reached that target already this summer.
- Already leading the world in renewable capacity, China added another 25 GW of wind turbines and solar panels in July, taking the nationwide tally to 1,206 GW, sticking to previous years’ trend of commissioning two-thirds of global new energy supply.
- Despite the notable capacity builds, solar and wind power still represent only 14% of the electricity generated across China, with coal staying at the top with approximately 40% of all generation.
- China’s levelized cost of electricity remains 40-50% cheaper than in other Asia Pacific countries, with the profitability of utility solar energy being the cheapest power source and onshore wind expected to overtake coal next year.
Transatlantic LNG Flows to Stay Strong as Arbitrage to Asia Weakens
- LNG price premiums in Asia versus US natural gas futures are the highest in 2024 to date, however a closed arbitrage from the United States will make it very difficult for US exporters to capitalize on higher prices, for now.
- The October assessment of the JKM marker price edged higher to $14.3 per mmBtu this week, a $2.6 per mmBtu premium over the FOB US Gulf Coast prices, lifted by a roughly 10% increase in consumption.
- Even though European inventories are now above 90%, upcoming maintenance in offshore Norway, Algeria, and Libya will squeeze spot availability in Europe, making the Old Continent the preferred destination for US LNG, yielding a $0.40 per mmBtu premium over Asia.
- Northwest European LNG prices are currently trading at a $1.4-1.5 per mmBtu discount to JKM, nevertheless Europe represents almost a third of US LNG exports, with Asia accounting for 20% and the rest coming from the Middle East, North Africa, and the Americas.
Healthy Demand and Dividend Anticipation Lift Indian Stocks
- The Indian stock market is experiencing a bull run as the country’s impressive 7.2% GDP growth this year and improving dividend strategies are attracting investors from across the globe.
- Commodities have been particularly strong in 2024 so far, with India’s Nifty Energy Index, a local benchmark for oil producers, refiners and commodity firms, rising by 31% this year, more than sixfold the average growth rate globally.
- Despite being state-owned, upstream-focused Oil India has become the industry’s top-performing stock with a year-to-date gain of 209%, buoyed by the government’s incentives that include a 20% price premium from natural gas produced from new wells.
- Most Indian oil firms have been maintaining a dividend ratio of 4-6%, but the combination of stable gross refining margins, fuel prices, and cheaper feedstock costs thanks to Russian and Venezuelan barrels could prompt the likes of IOC or BPCL to lift payouts.
Project Delays and Ukraine Transit End Prompt Hedge Funds to Bet on Natural Gas
- Hedge funds continue to ramp up their net-long positions in the European natural gas and LNG markets to reach multi-year highs, in anticipation of Russia’s pipeline flows to Europe drying up and on the back of LNG project delays.
- In the last reported week ending August 16 the net long position of money managers rose by 14%, marking the most bullish positioning since July 2021
- The largest incremental source of supply in the US, the 18.1 mtpa Golden Pass LNG project has been pushed out to 2026-2027 and will not start up next year, whilst Sempra’s 3.3 mtpa first train of Energia Costa Azul is expected to start up in 2026.
- The 5-year transit contract between Russia and Ukraine is set to expire this December and Kyiv signaled that it would not seek to extend it, prompting Brussels to find alternative solutions such as an Azeri-Russian gas swap.
Europe’s EV Bonanza Fizzles Out on Subsidy Phaseouts
- European car sales are flattening out after the past years’ incremental demand for electric vehicles seems to be fizzling out as new car registrations ticked up just 0.4% in July, a total of 1.03 million units.
- The year-on-year statistics are even more telling as EV car registrations in Germany totaled only 30,762 units last month, down almost 40% compared to July 2023, and almost a third of robust hybrid car sales.
- Having paid out more than 10 billion to German citizens in EV subsidies between 2016 and 2023, the German Economy Ministry ended its electric vehicle subsidy program late last year, forcing EV sales to plummet this year.
- The underperformance of EVs has already prompted carmakers to react – Volkswagen would be closing its Audi EV-only plant near Brussels in Belgium, whilst Mercedes has corrected its future EV ambitions to the downside.
China Tries in Vain to Ease Pressure on Steel Industry
- China has temporarily suspended approvals for new steel capacity swaps, a mechanism introduced in 2018 to replace outdated facilities with new and more efficient ones, in a bid to confront production overcapacity.
- In the post-Covid years alone, China has commissioned 143 mtpa of pig iron and 153 mtpa of crude steel facilities, boosting overall capacity by 13 mtpa and 29 mtpa, respectively, with further expansions planned for the remainder of 2024 and 2025.
- According to China’s National Bureau of Statistics, the country’s ferrous smelting and processing industry recorded an aggregate loss of ¥2.76 billion ($390 million) over January-July amidst a slumping property sector and slower infrastructure construction.
- China’s crude steel capacity is believed to have reached 1.3 billion metric tonnes per year by now, well above the 934 mtpa domestic consumption recorded last year, a number that will most probably decline 5% this year.
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