A Nightmare Start To The Year For Clean Energy Stocks

1. OPEC+ Underproduction Sparks $100 per Barrel Hype

- With crude oil prices breaking the $90 per barrel threshold this week, an increasing number of voices have been forecasting a soon-to-happen surge to $100 per barrel, for the first time since 2014.

- Several OPEC officials surveyed by Reuters claimed that the coming two months might see increased volatility as supply disruptions, such as Libya's recent month-long force majeure, should remain on the table.

- By November 2021 OPEC+ production was already 650,000 b/d below the intended target, with further discrepancies coming up as West African countries and Russia seem to have hit a production ceiling.

- If OPEC+ continues with its monthly increase over the course of this year, its available spare capacity would drop to a mere 1 million b/d by June 2022, a level that Saudi Arabia has previously avoided for fear of maintaining sustainable production rates at its legacy fields.

2. Clean Tech Stocks Having a Nightmare Start to 2022

- Clean energy stocks have been going through a stormy period, with two indexes that track the sector - WinderHill Clean Energy and S&P Global Clean Energy - falling by 14% and 8%, respectively, since the start of 2022.

- Renewable stocks have been impacted by anticipation of higher US interest rates, speculation about lower solar subsidies in California, and President Biden's 'Build Back Better' program running aground.

- Despite the decline, analysts at investment banks such as Morgan Stanley or BNP Paribas maintain their 'buy' recommendations, Bloomberg reports.

- Venture capital investors moved some $54 billion to start-up companies in the clean-tech industry last year, so it is expected that some of those stakes would fizzle off.

3. UK Consumers to Feel the Power Pinch Soon

- Whilst European countries like Germany or France tried to shield domestic consumers from soaring power prices, the UK is facing a steep increase in the power price cap, up by 50% from April 2022 onwards.

- A recent CEBR report claims annual living costs will increase by as much as $2700 next year, trebling the number of households who would be in 'fuel stress', being unable to pay their energy bills.

- Industry analysts warn that a second surge in October 2022 could send electricity bills more than 75% above current prices.

- UK power prices remain in triple digits all the way through the summer of 2023, with the front-month February contract trading at £195 per MWh (equivalent to $265 per MWh).

4. EV Car Sales Hit All-Time High in 2021

- Electric battery-powered vehicles saw a 108% year-on-year growth in 2021, brushing aside shortages of semiconductor chips and increasingly expensive shipping costs.

- Battery-powered vehicles make up a little more than 70% of newly purchased cars (500-550,000 cars per month), whilst monthly sales of plug-in hybrids currently trend around 200,000 per month (i.e. 30% of the total).

- For the first time ever, EVs posted higher monthly sales in Europe than diesel-powered ones in December 2021.

- S&P Global Platts expects EV sales to add another 40% year-on-year in 2022, putting the global tally of EVs sold to 8.8 million cars overall.

5. China Admits to Buying Iranian Crude

- For the first time in a year, China's General Administration of Customs reported Iranian crude exports to the extent of 4 million barrels for December 2021, with market rumors indicating the volumes were placed into state reserve tanks in Zhanjiang.

- This being said, China remains the only major buyer of Iranian barrels, allowing the Islamic Republic to ramp up exports to an average of 650,000 b/d (based on Kpler data).

- Most China-bound cargoes are first routed to Malaysia, nominally the largest importer of Iranian barrels in 2021, only to be subsequently ship-to-ship transferred onto another vessel.

- Market analysts assume that with Chinese authorities openly admitting to buying sanctioned barrels, Beijing wants to test the White House's reaction, whilst simultaneously trying to tame rising prices.

6. Permian Supply Boost Hinges on Expanded Gas Infrastructure

- The US Permian Basin is expected to reach an all-time high production level of 5 million b/d this month, continuing its rise over the course of 2022.

- At the same time, lacking gas infrastructure to utilize, the Permian's associated gas is poised to slow down oil production growth and push gas prices at the Waha hub into heavily discounted territory.

- The major gas processing facilities currently built, such as Enterprise Products Partners' Delaware Basin hub or the Lucid Energy's facilities in Carlsbad, NW, will come onstream only by the end of 2022, leaving a gap for most of this year.

- New Mexico already mandates gas pipelines to be available before oil production starts, however, analysts reckon there is still at least one major gas pipeline missing to move natural gas closer to the sea.

7. Nickel Prices Still Soaring on Low Stocks

- Historically low nickel inventories have driven up prices of the in-demand metal, with LME quotes reaching just a little below $24,500 per metric tonne, the highest level since August 2011.

- China stands behind the drawing down of LME warehouses lately, with its annual nickel imports surging 97% year-on-year to 257,500 per metric tonnes.

- The plummeting of Chinese nickel stocks in Shanghai Exchange warehouses is even more spectacular than the ones in Europe - from 36,500 tonnes in January 2020 they have dropped to as little as 2,600 tonnes right now.

- The market has been consistently misestimating the strength of nickel demand from the battery and stainless steel sectors, with annual 2022 demand estimates to come in at 3.05 million tonnes.