Category: Energy

By Laura Sanicola

(Reuters) -Oil prices settled slightly higher after a choppy trading session on Wednesday as investors worried about global trade disruption and tensions in the Middle East following attacks on ships by Yemen’s Iran-aligned Houthi forces in the Red Sea.

Limiting price gains were a surprise U.S. crude inventory build, larger than expected fuel stocks gains and record domestic oil production.

Brent crude futures settled up 47 cents, or 0.6%, at $79.70 a barrel, while U.S. West Texas Intermediate crude settled up 28 cents, or 0.4%, to $74.22 a barrel.

Both benchmarks briefly turned negative following the EIA report and the possibility of a new ceasefire after the leader of Hamas paid his first visit to Egypt for more than a month.

Early in the session, the benchmarks rose by more than $1 as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages increasing transport and insurance costs.

On Wednesday, Greece advised commercial vessels sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters. Greek ship owners control about 20% of the world’s commercial vessels in terms of carrying capacity.

“The possibility of a significant price downturn would appear likely on first suggestion of stabilization of cargo transits through the Red Sea corridor,” said John Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

On Tuesday, Washington launched a task force to safeguard commerce in the region. Sources including shipping and maritime security officials told Reuters that few practical details are known about the initiative or whether it will directly engage in the event of further armed attacks.

The Houthis vowed to defy the U.S.-led naval mission and to keep targeting Red Sea shipping in support of Palestinian enclave Gaza’s ruling Hamas movement.

About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal. Although oil supply has been realigned, no shortages have yet emerged, analysts said.

“As long as production is not threatened, the market will eventually adjust to changing supply routes,” said Ole Hansen, an analyst at Saxo Bank.

ECONOMIC GREEN SHOOTS

Recent data suggests central bank action to quell sticky inflation in Europe had made a meaningful difference.

German producer prices fell more than expected in November, data showed on Wednesday, a day after it was confirmed that euro zone inflation slowed sharply to 2.4% last month on a year-on-year basis.

A European Central Bank policymaker cautioned it was “rather unlikely” interest rates would be cut during the first six months of next year.

In Britain, inflation plunged in November to its lowest rate in more than two years, strengthening the case for rate cuts.

On Tuesday, the U.S. Energy Department said the government bought 2.1 million barrels of crude for delivery in February, as the U.S. continues to replenish reserves.

(Additional reporting by Natalie Grover, Florence Tan and Jeslyn Lerh; editing by Paul Simao, Nick Zieminski and David Gregorio)

By Erwin Seba

HOUSTON (Reuters) – Brent and U.S. crude futures finished at a small loss following a see-saw session, in which prices fell more than $1 a barrel at one point on Friday, as traders tried to reconcile mixed signals for oil demand in the coming year.

Brent futures settled down 6 cents, or 0.08%, at$76.55 a barrel. U.S. West Texas Intermediate (WTI) crude finished down 15 cents, or 0.21%, at $71.43.

The market tumbled earlier in the session after a New York Federal Reserve Bank manufacturing survey showed a third month of declines in new orders, which could be a sign of weaker demand for oil in the coming year.

“What started the sell off was the sharp drop in the New York manufacturing numbers,” said Phil Flynn, analyst at Price Futures Group.

“This market seems a little more sensitive to every new headline,” Flynn added. “They’re still not sure we’ve found the bottom to this market.”

Traders were also shaken by comments from New York Federal Reserve Bank President John Williams on Friday about hopes for interest rate cuts in the coming year.

“We aren’t really talking about rate cuts right now,” Williams said in an interview with CNBC. When it comes to the question of lowering rates, “I just think it’s just premature to be even thinking about that” at this point, he said.

On Thursday Federal Reserve Chairman Jerome Powell said interest rate hikes intended to curb inflation were likely at an end, but left open the possibility for further increases.

The dollar fell to a four-month low on Thursday after the U.S. central bank after Powell’s comments, seeing signs lower borrowing costs are coming in 2024. The dollar index was broadly steady on Friday.

A weaker dollar makes dollar-denominated oil cheaper for foreign buyers.

World oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the IEA said in a monthly report.

While that is a 130,000-bpd increase from its previous forecast, the estimate is less than half of the Organization of the Petroleum Exporting Countries’ (OPEC) demand forecast of 2.25 million bpd.

OPEC and its allies led by Russia, in late November agreed on voluntary cuts of about 2.2 million bpd lasting throughout the first quarter.

“The markets in general and oil in particular are trying to sort out what’s going on,” said John Kilduff, partner with Again Capital LLC. “Everyone’s trying to feel their way.”

Money managers cut their net long U.S. crude futures and options positions in the week to December 12, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Another bullish signal for oil markets on Friday was the lower drilling rig count from energy technology firm Baker Hughes. The oil and gas rig count, an early indicator of future output, fell by 3 to 623 in the week to Dec. 15.

Baker Hughes said U.S. oil rigs fell 2 to 501 this week, while gas rigs were unchanged at 119. That brings the rig count down from a post-pandemic high of 784 in December 2022 due to a drop in oil and gas prices.

(Reporting by Erwin Seba; Additional reporting Ahmad Ghaddar and Andrew Hayley; Editing by Susan Fenton, Tomasz Janowski and Diane Craft)

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices fell on Thursday to six-month lows, as investors worried about sluggish energy demand in the United States and China while output from the U.S. remains near record highs.

Brent crude futures dropped 25 cents to $74.05 a barrel. U.S. West Texas Intermediate crude futures fell 4 cents to $69.34. Both benchmarks posted their lowest prices since late June.

Front-month prices for Brent began trading this week at a discount to prices in a half year for the first time since June, a signal that traders believe the market may have become oversupplied.

“With the largest global importer of oil (China) shuttering its thirst for crude, pressure remains on prices as the largest producer, the United States, continues with headline output,” said PVM Oil analyst John Evans.

U.S. output remained near record highs of over 13 million barrels per day, U.S. Energy Information Administration data showed on Wednesday.

U.S. gasoline stocks rose by 5.4 million barrels last week to 223.6 million barrels, the EIA said, more than quintuple the 1 million barrel build that had been expected.

Concerns about China’s economy also put a lid on oil’s price gains.

Chinese customs data showed that crude oil imports in November fell 9% from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

While China’s total imports dropped on a monthly basis, exports grew in November for the first time in six months, suggesting an uptick in global trade flows may be helping the manufacturing sector.

Ratings agency Moody’s put Hong Kong, Macau and many of China’s state-owned companies and banks on downgrade warnings on Wednesday, a day after it put a downgrade warning on China’s sovereign credit rating.

Oil prices have fallen by about 10% since OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies, announced a combined 2.2 million barrels per day (bpd) in voluntary output cuts for the first quarter of next year.

“The market seems to be suggesting that they don’t believe OPEC+ has the ability to follow through on their cuts,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

Saudi Arabia and Russia, the two biggest oil exporters, on Thursday called for all OPEC+ members to join an agreement on output cuts for the good of the global economy.

Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met on Wednesday to discuss further oil price cooperation, while OPEC+ member Algeria said it would not rule out extending or deepening oil supply cuts.

On Tuesday Russian Deputy Prime Minister Alexander Novak on Tuesday said the producer group stood ready to strengthen oil supply cuts in the first quarter of 2024.

Russia has pledged to disclose more data on the volume of its fuel refining and exports after OPEC+ asked Moscow for more transparency on classified fuel shipments from the many export points across the country, sources at OPEC+ and ship-tracking companies told Reuters.

(Reporting by Stephanie Kelly; additional reporting by Ahmad Ghaddar, Colleen Howe and Muyu Xu; Editing by Jan Harvey, David Goodman, David Gregorio and Jonathan Oatis)

(Reuters) – The global wind power sector will add less capacity in the next decade than previously expected due to financial trouble in the U.S. offshore wind industry and sluggish approval and project execution in China, consultancy Wood Mackenzie said on Tuesday.

Orsted, the world’s largest offshore windfarm developer, energy giants BP and Norway’s Equinor have booked hundreds of millions of dollars worth of impairments on their U.S. offshore wind power portfolios, citing spiralling financing costs and supply delays.

Wood Mackenzie cut by 29 gigawatts (GW) its forecast for global wind power capacity by end-2032, downgrading cumulative installed capacity to 2.35 terawatts.

The downgrade makes up less than a 2% change in expected capacity, with more than 80% of the cut stemming from headwinds including in key markets like the United States and China.

“Long-term market fundamentals remain strong globally despite near-term challenges in project execution in China and offshore market maturation in the U.S.,” said Luke Lewandowski, Vice President, Global Renewables Research at Wood Mackenzie said in a statement.

Orsted’s cancellation of its Ocean Wind project in New Jersey and supply chain issues are expected to push nearly 8 GW of U.S. offshore projects beyond 2032, WoodMac said. This means that the United States will reach around half of its goal to install 30 GW of offshore wind by 2030.

WoodMac said near-term headwinds from a slow Chinese project market led to its 12 GW reduction in the global wind capacity forecast due to tightened permit requirements and project cancellations, but China’s onshore wind outlook from 2026 to 2032 remained unchanged despite the short-term challenges.

(Reporting by Anushree Mukherjee and Deep Vakil in Bengaluru; Editing by Emelia Sithole-Matarise)

(This Nov. 24 story has been officially corrected to fix tracking firm LevelTen’s data to show that solar contract prices reached their highest level this decade, not ever, in paragraph 14)

By Nichola Groom and Jarrett Renshaw

(Reuters) – Canceled offshore wind projects, imperiled solar factories, fading demand for electric vehicles.

A year after passage of the largest climate change legislation in U.S. history, meant to touch off a boom in American clean energy development, economic realities are fraying President Joe Biden’s agenda.

Soaring financing and materials costs, unreliable supply chains, delayed rulemaking in Washington and sluggish permitting have wrought havoc ranging from offshore wind developer Orsted’s project cancellations in the U.S. Northeast, to Tesla, Ford and GM’s scaled back EV manufacturing plans.

The darkening outlook for clean energy industries is tough news for Biden, whose pledge to deliver a net-zero economy by 2050 faces headwinds that the landmark Inflation Reduction Act’s billions in tax credits alone can’t resolve.

After walking into last year’s United Nations climate summit in Egypt touting the IRA as evidence of unprecedented progress in the fight against climate change, Biden is expected to skip this year’s event in Dubai amid dire warnings that the world is moving too slowly to avert the worst of global warming.

Clean energy experts interviewed by Reuters say the mounting setbacks will make the United States’ ambitious targets to decarbonize by mid-century even harder to reach.

“While we see healthy numbers being deployed each and every quarter and we’re continuing to be on a growth path, it’s certainly not at the level that is required to hit some of those targets,” said John Hensley, vice president for the clean energy trade group American Clean Power Association (ACP).

The dynamics of soaring costs and broken supply chains are also slamming projects in other regions. No major nation is on track to meet the emissions reduction goals outlined in the United Nations’ Paris accord, which aims to limit global warming to 1.5 degrees Celsius, according to Wood Mackenzie.

A White House official said that while there have been macroeconomic setbacks and bottlenecks at the local level to renewable energy deployment, there are plenty of examples of progress, including an expanding EV market and Dominion Energy Inc making headway on the nation’s largest offshore wind farm off the coast of Virginia.

“In the face of headwinds that are macro in nature, headwinds that affect decision making across the economy, this has been a resilient trajectory,” White House National Climate Advisor Ali Zaidi said in an interview. He said the United States will achieve it’s climate goals.

TEN MILLION HOMES

More than 56 gigawatts of clean power projects, enough to power nearly 10 million homes, have been delayed since late 2021, according to an ACP analysis. Solar energy facilities account for two thirds of those delays due in part to U.S. import restrictions. Washington has been trying to combat the use of forced labor and tariff-dodging in a panel supply chain that is dominated by Chinese goods.

Issues like permitting gridlock, local fights over where to site solar and wind projects and a grid connection process that can take an average of five years are also routinely cited by developers as among the industry’s biggest challenges.

“In a number of areas investment has increased,” Prakash Sharma, vice president of scenarios and technologies at Wood Mackenzie said in an interview. “But then when it comes to some of those permitting and approvals that are required to push projects forward, or infrastructure development, that’s an issue which IRA cannot solve.”

Tight supplies and strong demand for renewables from utilities and corporations have also driven up contract prices, which could mean higher costs for consumers. Solar contract prices rose 4% to hit $50/MWh for the first time this decade in the third quarter, according to tracking firm LevelTen.

Vic Abate, Chief Executive of GE Vernova’s wind business, said progress is happening more slowly than some had anticipated, but was not fundamentally off course.

“I’m not betting against the IRA,” he said in an interview. “This is more of a question of when. If last year people were thinking ’23 to ’24, it’s probably more ’24 to ’25.”

The IRA aims to shore up the U.S. clean energy supply chain by incentivizing domestic production of equipment like solar panels and wind turbines, but recently manufacturers have warned that a wave of new Asian capacity is threatening the viability of dozens of planned American factories.

Turmoil in the nascent U.S. offshore wind industry, meanwhile, is perhaps the most high profile setback. Developers like Orsted, BP and Equinor have sought to renegotiate or cancel contracts due to soaring costs, and have taken multi-billion dollar writedowns on projects. Players also largely failed to show up for a federal sale of wind leases in the Gulf of Mexico in August. The Biden administration’s target of deploying 30 gigawatts of offshore wind by 2030 is now widely regarded as unattainable.

Meanwhile, some corporations are delaying investment decisions while awaiting the Treasury Department to craft rules on how the IRA’s tax credits can be used.

Robert Walther, director of federal affairs at ethanol maker POET, for example, says his company is waiting on the design of tax credits for sustainable aviation fuel under the IRA, to see whether the corn-based fuel can qualify as a feedstock.

“We’re not pulling the trigger on anything until we know what the value of these tax credits are,” Walther said.

Still, the U.S. can be proud of how it is tackling climate change, particularly when compared with the Trump administration’s relatively recent efforts to roll back policies that protect the climate, according to Dan Reicher, a scholar at Stanford University.

“These are the normal ups and downs of clean energy development and deployment,” Reicher said.

“I think we can go to COP with our chin held high that we’re making some real progress.”

(Reporting by Nichola Groom; Editing by Richard Valdmanis and Alistair Bell)