- The European Union agreed on a deal to place methane emission limits on Europe’s oil and gas imports from 2030, putting additional regulatory pressure on key suppliers such as the US, Algeria, and Russia.
- Methane is the second-biggest cause of global warming, and despite its relatively short atmospheric lifespan of some 10-12 years, it absorbs much more heat than carbon dioxide.
- Whilst European think tanks anticipate energy suppliers will comply with the 2030 deadline and improve their methane leakage, a continent that relies on imports for 90% of its oil and gas might face further sourcing issues.
- According to the EU methane deal, importers are to receive penalties if they purchase oil or gas from non-European suppliers that do not comply with the emissions limit.
2. China’s Refining Bonanza Slows Down
- Chinese oil refinery throughput rates declined in October after a string of several big month-on-month increases, easing to 15.12 million b/d, some 400,000 b/d lower than in September.
- Easing consumption patterns have impacted refinery runs, with peak demand season for diesel and gasoline coming around the Golden Week national holiday in early October, dropping from then onwards.
- The import quota plight of independent refiners in Shandong province, with most of them well above 90% quota utilization rates, has also adversely impacted throughputs, as Beijing…
1. Europe Cracks Down on Methane Emissions
- The European Union agreed on a deal to place methane emission limits on Europe’s oil and gas imports from 2030, putting additional regulatory pressure on key suppliers such as the US, Algeria, and Russia.
- Methane is the second-biggest cause of global warming, and despite its relatively short atmospheric lifespan of some 10-12 years, it absorbs much more heat than carbon dioxide.
- Whilst European think tanks anticipate energy suppliers will comply with the 2030 deadline and improve their methane leakage, a continent that relies on imports for 90% of its oil and gas might face further sourcing issues.
- According to the EU methane deal, importers are to receive penalties if they purchase oil or gas from non-European suppliers that do not comply with the emissions limit.
2. China’s Refining Bonanza Slows Down
- Chinese oil refinery throughput rates declined in October after a string of several big month-on-month increases, easing to 15.12 million b/d, some 400,000 b/d lower than in September.
- Easing consumption patterns have impacted refinery runs, with peak demand season for diesel and gasoline coming around the Golden Week national holiday in early October, dropping from then onwards.
- The import quota plight of independent refiners in Shandong province, with most of them well above 90% quota utilization rates, has also adversely impacted throughputs, as Beijing is not expected to issue any additional allowances.
- State-owned refineries, managing to pull off a respectable 83% utilization rate last month, are expected to decline further into November and December as their import quotas are running out, too.
3. The EV Industry Faces Its First Wave of Consolidation
- Electric vehicles still account for only 15-18% of global car sales in 2023, but the nascent industry is already facing one of its biggest challenges as equity investors start to lose faith in the proliferation of EVs.
- Whilst the past years have seen ample pricing upside for EV batteries on the back of rising metal costs, the plunge in lithium, nickel, and cobalt prices this year has allowed the likes of CATL or LG Chem to produce cheaper batteries.
- Lower revenues for battery producers did not trigger higher profits for EV car makers that have found themselves in a pricing war, with the average new EV in the US now wielding a mere 6% premium over a conventional car ($47,899 vs $50,683).
- Production overcapacity and a looming Chinese EV expansion outside of Asia have set the stage for further pain, all the while the build-out of adequate EV infrastructure lags behind recent pricing developments.
4. US Sanctions on Myanmar Jeopardize Thailand’s Energy Security
- As the civil war between Myanmar’s military junta and militias composed of ethnic minority groups becomes ever more entrenched, adjacent countries that rely on natural gas from Myanmar face supply risks.
- Aggravating Thailand’s import choices, the Biden administration slapped sanctions on the state-owned Myanma Oil and Gas, prohibiting US entities from providing financial services to Myanmar’s NOC.
- As 66% of Myanmar’s 4.5 BCf per day gas production gets exported and most of it ends up in Thailand, Thai importers might be forced to look for LNG alternatives, especially if they don’t find financing options to circumvent US sanctions.
- Thailand relies on gas for 70% of its electricity generation and has already ramped up LNG imports by 25% year-on-year in 2023, boosting Australian imports to a total of 10.8 million tonnes of LNG.
5. Glencore-Teck Deal Rekindles Hope in Coal
- Following months of speculation, mining giant Glencore sealed the deal to buy 77% of Teck Resources’ coking coal unit for $6.93 billion, paving the way for a reorganization of Glencore itself.
- Swiss-based Glencore aims to put its combined coal operations into a new company that is set to be listed on NYSE within two years of the Teck acquisition closing, whilst also diversifying away from its reliance on thermal coal.
- The first huge coal M&A deal of this year, Glencore betting on King Coal underpins still growing coal consumption that is set for another 2% year-on-year increase after hitting 8.3 billion tonnes in 2022.
- Listing Glencore’s coal business would create the West’s largest coal major, roughly eight times the size of Peabody in the US, but the deal still needs to be approved by the Canadian government.
6. Sweden Doubles Down on Nuclear Power
- The Swedish government pledged to take an important role in a massive buildout of new nuclear capacity to meet increasing electricity demands as the Scandinavian country pioneers the energy transition.
- Sweden’s energy mix is now mostly focused on hydro (41%) and nuclear (29%), with incremental generation coming from wind energy, although electricity demand is set to double over the next 10 years to 300 TWh per year.
- The government plan is to build two new conventional reactors by 2035 and to have the equivalent of 10 new reactors by 2045, with long-term construction plans mostly focused on small modular reactors.
- Vattenfall, operating five out of six of Sweden’s nuclear plants, is expected to spearhead the nuclear buildout, with the company already starting to purchase land adjacent to the Ringhals plant on the country’s west coast.
7. Argentinian Election to Seal the Fate of Energy Subsidies
- As Argentina prepares for the run-off presidential election between Economy Minister Sergio Massa and opposition candidate Javier Milei, voters will also decide on the future of the country’s $12 billion in energy subsidies.
- Argentina’s inflation rate is headed towards 185% by year-end, the government has been mitigating the impact of families’ energy bills by keeping them at under 15% of the assumed market rate.
- The opposition would seek to scrap energy subsidies altogether as they seem to have been financed through additional monetary emissions, equivalent to 2% of Argentina’s GDP being printed every year.
- Both candidates have highlighted the promise of Vaca Muerta shale oil and gas, hoping to tap into that resource to bring energy costs lower and ramp up oil supply from the current level of 636,000 b/d.
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