The World's Largest LNG Exporter

1. COP26 Struggle Foreshadows Two-Speed Development of Renewables

- The watered-down version of the COP26 communique, “calling upon parties to adopt policies that are accelerating the phase out of coal” instead of just phasing out coal, provided another example of wide rifts amongst the world’s leading energy consumers.

- The final text also shied away from banning fossil fuel subsidies outright, despite them being assessed at $2.5 trillion.

- With poorer nations discontent that wealthy countries have not fulfilled their 2009 promise to give them $100 billion per year to help them cut emissions, compliance with the given text might be rather lax.

- Participant countries’ current pledges would result in global warming reaching 2.4° C by the end of the century, CAT analysts claim, well above the UN-stipulated cap of 1.5° C.

2. US on the Cusp of Becoming No.1 LNG Exporter Globally

- The United States is getting increasingly close to becoming the world’s leading LNG exporter tandem of Qatar and Australia and might overtake them in several months.

- Venture Global LNG is reportedly ‘very close’ to starting up the Calcasieu Pass terminal in Louisiana, whilst Cheniere is closing in on a multibillion-dollar expansion of its LNG terminal in Corpus Christi.

- Whilst Qatar is more endowed with natural gas, its oft-flaunted expansion would only reach its stipulated capacity of 126 million tons LNG per year by 2027.

- In stark contrast to last year when Japan and South Korea were the main buyers of US LNG, this year saw tangible increases in flows to Brazil and China, the two combined equaling to a third of total outflows.

3. India Needs to Ramp Up Coal Imports

- Shortages of coal, India’s main source of energy, have eased across the country somewhat as swift increases in coal production allowed to build up some semblance of coal stocks in the nation’s power plants.

- Buoyed by the Chinese output surge, India is bent on ramping up domestic production that routinely covers some 80% of domestic demand, however its meagre coal buying on the markets exposes it to supply disruption of all sorts.

- Current nationwide stock levels of coal in power plants average some seven days of supply, with the government mandating to reach the level of 18 days of consumption by end-November.

- Just as South Korea, India is suffering from shortages of urea that is routinely extracted from coal, threatening the South Asian country’s harvest.

4. Oil Majors Side with Caution amidst Increasing ESG Risks

- Despite rock-solid Q3 results on the back of crude prices remaining above the 80 per barrel mark, oil majors are still yet to reach production levels of the pre-pandemic era.

- According to Platts, the aggregate production of the world’s top eight non-state-owned majors currently amounts to 11.8 million b/d, i.e. 11% below pre-COVID levels.

- Whilst crude output from European majors like BP and Shell has already peaked, US firms such as ExxonMobil or Chevron are still counting on further output hikes that would see their peaks at some point in the late 2020s.

- Another divergence between Europe and the Americas lies in natural gas as most European majors would prioritize natural gas projects, currently accounting for 55% of their portfolios, whilst US majors are still primarily looking into oil.

5. Jet Fuel to Fully Recover Only in Upcoming Years

- Saudi Aramco stated that the spare crude capacity levels available now will shrink next year as oil producers will have invested less in new projects, despite rising demand.

- In terms of demand, there is still one middle distillate product that has been lagging behind the others, namely jet fuel.

- With demand at 70% of pre-pandemic levels, the current consumption levels of jet fuel stand at some 2.5 million b/d below 2019 levels, at 5.5 million b/d.

- The market anticipates that with the gradual normalization of the market in 2022, jet fuel demand would increase, pushing up middle distillate cracks and putting further pressure on global spare capacity.

6. Iron Ore Falling for Fifth Consecutive Week

- With China still not out of the woods with its energy crunch, iron ore prices were set for their fifth consecutive weekly fall, overwhelmed by Chinese demand concerns.

- China’s Dalian front-month December contract dropped 3% week-on-week to ¥545 per metric ton ($85/mt), with spot prices similarly at 18-month lows.

- Iron ore flows to China, traditionally some 75% of seaborne traded volumes, recorded a whopping 16 million ton drop in October, down 16% month-on-month (and November poised to see further decline).

- Adding salt to the injury of iron producers, ArcelorMittal said it estimates Chinese steel demand for the year to slightly decline year-on-year, despite the post-coronavirus rebound.

7. Angola is Desperate to Bounce Back from Production Trough

- Once one of the crude powerhouses of Africa, Angola is wrapping up a licensing round and plans to launch two more rounds in 2023 and 2025 to halt a crippling supply decline.

- The ongoing licensing round for eight offshore blocks in the Lower Congo and Kwanza basins has already entered the phase where Luanda conducts one-on-one meetings to determine the future setup of the fields.

- Angolan crude exports have averaged 1.07 million b/d in October, an 11% decrease year-on-year and some 500,000 b/d lower than three years ago.

- Angola’s government believes that should all the licensing activities go according to plan, the national crude production fall could be stopped altogether and reach a preliminary peak of 1.2 million b/d by 2031.