Category: Nieuws

The Netherlands has taken its first supply of liquefied pure gasoline at a brand new terminal, marking a step ahead in Europe’s efforts to develop infrastructure that helps it minimize its dependence on Russia gasoline.

As a part of the bid to diversify away from Russian gasoline after President Vladimir Putin launched the full-scale invasion of Ukraine, European international locations have been racing to safe floating storage and regasification models, or FSRUs — liquefied pure gasoline tankers with warmth exchangers that use seawater to show the supercooled gasoline again into gasoline.

The EU has fashioned plans for as many as 19 new FSRU initiatives at an estimated expenditure of €9.5bn, in keeping with calculations by Ember, an power think-tank. The terminal at Eemshaven was formally opened late on Thursday with the primary LNG cargo arriving from the US gulf, mentioned Dutch gasoline grid operator Gasunie.

Until now, the Netherlands might solely import LNG via Rotterdam however that has modified with two FSRUs, the Golar Igloo and Eemshaven LNG, moored in Eemshaven. The Eemshaven challenge was accomplished in document time and the primary gasoline will circulation into the nation’s community from mid-September, in keeping with Gasunie.

he pair of floating ships will provide gasoline to Germany and the landlocked Czech Republic. “The arrival of the new LNG terminal is an important step not only for the Netherlands, but for the whole of Europe to completely phase out the dependence on energy from Russia as quickly as possible,” mentioned Rob Jetten, Dutch minister for local weather and power.

FRSUs provide the quickest manner for Europe to finish its reliance on the pipelines that herald giant portions of pure gasoline from Russia. Land-based LNG terminals price extra and take longer to construct. However, further import infrastructure will do little to decrease European gasoline costs, that are round 10 instances increased than the common of the earlier decade, except there’s a important enhance in provides from LNG producers just like the US, Qatar and Australia.

The EU is growing proposals to assist industries and customers address the hovering power costs. One of the measures being mentioned by the bloc’s power ministers on Friday is an general worth cap on gasoline imported into the bloc. The Netherlands is one in all a handful international locations to have expressed reservations about such a plan, saying that it will hurt the EU’s relations with worldwide companions.

Germany, which had no LNG import terminals and sourced greater than half of its gasoline imports from Russia earlier than the invasion of Ukraine, goals to constitution at the least seven FSRUs, three of that are deliberate to begin this winter. Another FSRU serving Estonia and Finland is anticipated to be prepared by year-end, whereas different international locations resembling France, Greece and Italy have plans for floating terminals within the coming years.

Brussels additionally needs member states to enhance pipeline connections between international locations. A dispute between France and Spain, which has the most important capability to deal with LNG imports within the EU, has been intensifying over efforts to reboot plans for the MidCat pipeline between the 2 international locations.

French president Emmanuel Macron has questioned the necessity for the challenge which Paris estimates would price at the least €3bn, though he left the door open for additional discussions with European companions.

By NewsNCR, Septmeber 8, 2022

This Sept. 2 story corrects to show Germany plans to build five LNG terminals not two!

The Nord Stream 1 pipeline that transports Russian gas to Germany will undergo further maintenance, Gazprom said on Friday after scrapping a Saturday deadline to resume flows, deepening Europe’s difficulties in securing fuel.

Gazprom was already undergoing maintenance from Aug. 31-Sept. 2, prompting concerns about supply to Europe ahead of the onset of winter if the outage was extended.

Russia slashed flows through the pipeline to 40% of capacity in June and to 20% in July.

It has also cut off supply to several European countries such as Bulgaria, Denmark, Finland, the Netherlands and Poland, and reduced flows via other pipelines since launching what Moscow calls its “special military operation” in Ukraine.

The following outlines Europe’s options.

WHAT ARE THE MAIN ROUTES FOR RUSSIAN GAS TO EUROPE?

Russia typically supplies about 40% of Europe’s natural gas, mostly by pipeline. Deliveries last year were around 155 billion cubic metres (bcm).

Via Ukraine the gas goes mainly to Austria, Italy, Slovakia and other east European states. The Ukrainian transmission system operator has declared force majeure at the Sokhranovka entry point pipeline that runs through Russian-occupied territory in the east of the country.

Ukraine’s state-owned energy company Naftogaz has said it is working to increase natural gas production, and could supply gas to European countries in time for next year’s heating season.

European countries have been seeking to find alternative supply, including some cut off by Russia after rejecting a demand they pay in roubles.

Others, including Germany, still need Russian gas and are trying to refill gas storage ahead of winter.

Alternative routes to Europe that do not go via Ukraine include the Yamal-Europe pipeline, which crosses Belarus and Poland to Germany.

The Yamal-Europe pipeline has a 33 billion cubic metre (bcm) capacity, around a sixth of Russian gas exports to Europe. Flows have been reversed to flow eastward between Poland and Germany since the start of this year.

Moscow has placed sanctions on the owner of the Polish part of the Yamal-Europe pipeline. However, Poland can manage without reverse gas flow on the Yamal pipeline, its climate minister has said.

On Nord Stream 1, the Kremlin has blamed Western sanctions for a delay in the return of equipment sent for maintenance to Canada.

EUROPE’S ALTERNATIVE SUPPLIERS?

Some countries have alternative supply options and Europe’s gas network is linked up so supplies can be shared, although the global gas market was tight even before the Ukraine crisis.

Germany, Europe’s biggest consumer of Russian gas, which has halted certification of the new Nord Stream 2 gas pipeline from Russia because of the Ukraine war, could import from Britain, Denmark, Norway and the Netherlands via pipelines.

Norway, Europe’s second biggest gas supplier behind Russia, has been raising production to help the European Union towards its target of ending reliance on Russian fossil fuels by 2027.

Britain’s Centrica (CNA.L) has signed a deal with Norway’s Equinor (EQNR.OL) for extra supply for the next three winters. Britain does not rely on Russian gas and can also export to Europe via pipelines.

Southern Europe can receive Azeri gas via the Trans Adriatic Pipeline to Italy and the Trans-Anatolian Natural Gas Pipeline (TANAP) through Turkey.

The United States has said it can supply 15 bcm of liquefied natural gas (LNG) to the European Union this year.

But U.S. LNG plants are producing at full capacity and a blast at a major LNG export terminal in Texas will keep it idle until late November.

Europe’s LNG terminals also have limited capacity for extra imports, although some countries say they are seeking ways to expand imports and storage.

Germany is among those who want to build new LNG terminals. It plans to build five.

Poland, which relies on Russia for about 50% of its gas consumption or around 10 bcm, has said it can source gas via two links with Germany. A new pipeline allowing up to 10 bcm of gas per year to flow between Poland and Norway will be opened in October. A new gas link between Poland and Slovakia was also commissioned last week.

Spain wants to revive a project to build a third gas connection through the Pyrennes mountains but France has said new LNG terminals, which can be made to float, would be a quicker and cheaper option than a new pipeline.

OTHER OPTIONS TO COPE WITH A GAS SUPPLY CRUNCH?

Several nations can seek to fill any gap in energy supplies by turning to electricity imports via interconnectors from their neighbours or by boosting power generation from nuclear, renewables, hydropower or coal.

Nuclear availability is falling in Belgium, Britain, France and Germany with plants facing outages as they age, are decommissioned or phased out. Hydro levels have been falling this summer due to low rainfall and a heatwave.

Europe has been trying to shift from coal to meet climate targets but some plants have been switched back on since mid-2021 because of surging gas prices.

Energy ministers agreed that all EU countries should voluntarily cut gas use by 15% from August to March, compared with their average annual use during 2017-2021 and introduced EU-wide targets for refilling gas storage.

Germany has triggered stage two of its three-stage emergency gas plan and urged businesses and consumers to save gas to avoid forced rationing.

The Dutch energy minister has said its Groningen field could be called upon to help neighbouring countries in the event of a complete cut-off in Russian supply but ramping up production would risk causing earthquakes.

Reuters by Nina Chestney, September 8, 2022

TotalEnergies Marine Fuels said it has successfully completed the first biofuel bunkering operation for a containership in Singapore.

The COSCO Shipping Lines-operated 4,250 TEU container vessel, COSCO HOUSTON, was refuelled on 11 July with TotalEnergies-supplied biofuel in Singapore waters via ship-to-ship transfer.

The biofuel blend used in this operation composed of VLSFO (Very Low Sulfur Fuel Oil) blended with 20% second-generation, waste-based and ISCC-certified UCOME (Used Cooking Oil Methyl Ester).

The local operation was made possible with support from the Maritime and Port Authority of Singapore (MPA) and the involvement of local partners such as tank storage company, Vopak Terminals Singapore at Penjuru.

From a well-to-wake assessment, the biofuel will reduce approximately 17% of Greenhouse Gas (GHG) emissions compared with conventional fuel oil. The biofuel has been consumed during the container vessel’s voyage to Jakarta, Indonesia.

Laura Ong, General Manager of Trading and Operations for Asia Pacific, TotalEnergies Marine Fuels, based in Singapore, said:

“We are honoured to partner COSCO Shipping Lines, one of the world’s largest container shipping companies, in their decarbonization journey with the provision of their first biofuel bunker stem. This successful collaboration lays a foundation for both companies to explore new joint initiatives that promote the introduction of clean, low-carbon alternative fuels.”

“This milestone bio-bunkering operation also further validates the important role of biofuels in decarbonizing conventional marine fuels, and the potential greenhouse gas reduction gains it can bring to existing vessels.”

“In line with TotalEnergies’ climate ambition to reach net-zero emissions by 2050 together with society, we will continue to scale up our biofuel capabilities and to support the growing interest for sustainable marine biofuels in this region.”

This operation follows successful biofuel bunkering trials that TotalEnergies Marine Fuels performed in Singapore with a vehicle carrier operated by Mitsui O.S.K. Lines, Ltd. (MOL) and a bulk carrier chartered by NYK Line this year.

By ManyFold Times, 8, 2022

Vision Hydrogen Corporation (OTCQB:VIHD) (“VisionH2” or the “Company”) is pleased to announce it has secured an additional 2.1 hectares (20,670 square metres) of prime industrial lands contiguous to its existing 14.3 hectares green energy hub development in the North Sea Port of Vlissingen, the Netherlands.

VisionH2, through its wholly owned subsidiary Evolution Terminals BV, is pioneering a green energy hub capable of receiving seagoing vessels, barges, and coasters.

Strategically located in Vlissingen (Flushing) at the mouth of the Westerschelde estuary in the Netherlands, the liquid-bulk storage terminal will be served by a dedicated deep-water jetty, rail and truck loading infrastructure that will enable direct access to purpose-built storage and handling facilities with a core focus on hydrogen carriers including ammonia, methanol, and liquid organics.

The expansion of the facility’s land assets to 16.4 hectares will allow for greater design optionality for the project, including the integration of Phase 2 infrastructure for back-cracking green ammonia to hydrogen to facilitate the import and supply of clean hydrogen to Europe.

VisionH2’s green energy hub is in an advanced stage of permitting, with the Company targeting the award of all necessary construction and environmental permits for Phase 1 by Q1 2023.

By Yahoo!, September 8, 2022

Without Russian gas, the European Union would have to reduce demand by approximately 15%, with big differences between different parts of Europe

The share of the European Union’s gas supply provided by Russia dropped from over 40% in 2021 to just 20% in June 2022. The gap of over 300 terawatt hours in the first six months of 2022 compared to 2021 has so far been filled mostly by 240 TWh of additional imports of liquified natural gas (LNG). Gazprom has broken several long-term supply contracts with its EU commercial partners, and the risk is high that Russia will cut all supplies to the EU ahead of the winter, if it deems this strategically beneficial.

Replacement of Russian gas by LNG has largely reached its limit. Lower imports from Russia can now only be met by reducing EU gas demand. Immediate deployment of a coordinated EU approach offers the best option to reduce substantially the overall gas demand-reduction cost.

For the EU as a whole, a total demand reduction over the next 10 months of about 15% compared to average demand in 2019-2021 would be required to compensate for a complete stopping of Russian pipeline imports. For EU countries (arranged into regional groupings), we calculate the required reduction as ranging from zero to -54%.

The EU internal gas market is not perfectly connected, implying that certain country groups will require much steeper demand cuts. Winter temperatures are the key variable driving uncertainty: a long, cold winter would make steeper cuts necessary. We address this by assuming an average winter, and that that storage should not fall below 20% before 1 May 2023.

Countries are relatively well connected and will face similar demand disruptions. For each group we use historic (2019-2021) demand and own production, as well as current storage levels, to assess the development of storage filling throughout the winter.

Each group’s gas imports and exports are based on the observed gas flows in in the first half of 2022. To assess the impact of a stop to Russian supplies, we calculated the implied share of Russian gas in each group’s import mix by aggregating the Russian shares in incoming flows (see here for the methodology). A complete stopping of Russian flows would reduce each intra-EU flow by each country group’s calculated dependence on Russian gas.

A limitation is that we assume markets will operate in the same manner as they did in the first half of the year. While it is likely that markets will adjust, many areas of the grid are already running at full capacity and today’s flows do offer a good indication.

Gas demand and imports are also highly seasonal, but as the first half of the year contains a mix of winter and warmer months, seasonal interference should be reasonably compensated for. We do not include explicitly in our analysis the infrastructure planned to be built in the coming six months, but discuss consequences below.

A closer look at the groups

Portugal, Spain and France are effectively isolated from the wider European market because of limited connections between Spain and France, and France and the north and east.

These countries’ supplies are not vulnerable to a Russian disruption, although weak French nuclear power generation places a strain its neighbour’s power supply and hence gas demand. Cooperation might allow Algerian gas to be re-routed from Spain to Italy, putting the Spanish spare capacity to better use in a European context.

The Baltics have historically been highly dependent on Russia. The region is now heavily reliant on imports via the Klaipeda LNG terminal in Lithuania, while a new interconnection (Santaka) with Poland is important because it connects the region to the wider European market.

For now, the connection is used to supply Poland, but allows for flexibility in terms of reductions in Poland and the Baltics. A Floating Storage and Regasification Unit under construction in Estonia might provide an extra 2 TWh/month. The Baltics have so far achieved the largest demand response in Europe, while also experiencing some of the highest energy price increases. Finland’s ability to switch fuels has led to a more than halving of national gas demand.

Poland relies on eastward flows from Germany to complement imports from the big LNG terminal in Świnoujście (6 TWh/month). Polish storage at time of writing is full and reasonably large. By the end of 2022, the Baltic pipe should allow direct imports of 8 TWh/month from Norway. This cannot all be attributed to Poland as flows will potentially transit Poland into the Baltics via the new Santaka connection (1.5 TWh/month), to Germany or possibly even south to Slovakia via a new interconnector.

Denmark and Sweden form a joint balancing zone. Normally the countries would be largely self-sufficient for gas but the Danish Tyro field is under maintenance until June 2023, creating a dependence on imports from Germany, which are exposed to Russian disruptions.

Romania has substantial own production capacities. However sizeable imports come from Ukraine and Bulgaria (both based on Russian gas). There might be options for re-routing through Bulgaria other gas (LNG arriving in Turkey or Greece, or other gas transited through Turkey). However, Bulgaria serves as a key transit country into the south-east European region, being the point of entry for Turkstream. Thus if flows through the pipeline slow, many countries will look to Bulgaria for gas transit.

Czechia, Austria, Slovakia and Slovenia will depend heavily on Germany should Russian flows through Ukraine stop. A key variable will be how demand responds in southern Germany and whether sufficient gas continues to pass through into Czechia and Austria. Austrian storage is relatively large, meaning the country group has a major opportunity to prepare for the winter over the next couple of months.

Croatia and Greece’s LNG terminals are key points of entry into the market. Some Azeri gas imported through Greece might be diverted northward to feed Bulgaria. If Italian demand for Azeri gas were reduced, more might be freed up to head into Bulgaria. An expansion of the Croatian KrK terminal later in the year might bring another 0.3TWh/month capacity, which would be welcome for a terminal currently running at very high capacity.

A newly operational interconnection between Greece and Bulgaria (2.5TWh/month) also improves the situation. With Serbia signing a new deal for more Russian gas in recent days, and Hungary’s negotiated exemption from the oil embargo, it is likely that Turkstream will anyway be the last Russian pipe still operating.

Italy’s dependence on Russia comes via imports through Austria. The slowing of these flows will be felt particularly in the north of Italy, while Italy overall has quite substantial options for diversification. A key variable, not only for Italy but also for Italy’s ability to help neighbouring countries, is the ability to transmit gas from the south to the north of the country. Another particularity is the high share of gas in power generation in Italy (43%). Reducing power consumption or tapping into alternative electricity sources would thus substantially reduce gas consumption, currently standing at 22 TWh of gas in power generation per month.

For Belgium, the Zeebrugge LNG terminal will remain vital, as will imports from the UK which might be at risk in case of a cold winter in the UK. Some gas passes from France to Belgium. The Netherlands has significant own-production capacities, and good LNG import capacities. Exports to neighbouring countries drives the need for lower consumption in the Netherlands, where a large share of power generation is also gas-fired. In the first four months of 2022, Dutch gas-fired power consumption was 33% below 2021 levels (2.5 TWh/month).

Germany will rely on flows from Norway, domestic gas from the Netherlands and LNG imports via Belgium. As an important transit country, the volume of re-exported gas is a key variable. The German government has already initiated phase 2 (out of 3) of its emergency gas-rationing plan. Emergency plans are also in place to bring a new LNG terminal on line in Wilhelmshaven (8TWh/month).

By Bruegel, September 7, 2022

Canada is taking a second crack at developing a liquefied natural gas (LNG) export industry on its west coast a decade after soaring costs and indigenous opposition derailed a previous wave of proposed LNG terminals.

This time, companies are focusing on smaller west coast projects they bet will be cheaper and faster to build.

“Smaller project are easier to manage, especially in Canada,” Enbridge chief executive Al Monaco told Reuters in an interview. “The need for global LNG is clearer now than it was before, we’re getting a second chance and I hope we don’t blow it this time. We’ve got to get on it right away.”

Environmental and regulatory hurdles to pipeline construction have discouraged new LNG terminals on Canada’s Atlantic coast.

British Columbia’s Pacific coast is close to Canada’s vast Montney shale field and Asian markets, where LNG prices hit a record high last week.

Privately owned Port Edward LNG is raising capital and negotiating off-take agreements with Asian buyers, a Shell-led consortium is studying the feasibility of building Phase 2 of the LNG Canada project and last month Enbridge Inc outlined a C$1.5 billion investment in Pacific Energy Corp’s Woodfibre LNG project.

Woodfibre will start construction in 2023 and the 14 million tonne per annum (mtpa) LNG Canada project in Kitimat is under construction and expected in service in 2025. They are the only two out of 18 proposed projects to get underway.

Building a large LNG terminal in B.C. costs roughly double what it does on the U.S. Gulf Coast, The trend, with the exception of LNG Canada, is for much smaller plants.

STREAMLINED PROCESS

Developers, keen to avoid past mistakes, are securing support from indigenous people early, said Karen Ogen-Toews, CEO of the First Nations LNG Alliance. Companies are also modifying existing infrastructure to avoid lengthy regulatory delays.

“That is one major difference, the scale of these new LNG projects versus the old ones,” said Wood Mackenzie analyst Dulles Wang. “Producers and developers are conscious of the financial risk associated with larger projects.”

Woodfibre LNG will be a 2.1 mtpa project built on a disused pulp mill site near Squamish. Port Edward LNG in northern B.C. will ship just 300,000 tonnes per annum using an existing dock and gas pipelines, and has engaged investment bankers in Houston and London to raise C$350 million in financing.

“There’s no question this is a more streamlined process,” Port Edward LNG President Chris Hilliard said. “By not using the conventional LNG approach we’re able to leverage considerable existing infrastructure.”

Exporting from the west coast opens access to world markets to landlocked Canadian gas producers. But the window to build new terminals is narrow. With the world targeting net-zero carbon emissions by 2050, a report by the International Institute for Sustainable Development warned that Canadian LNG terminals could become stranded assets.

Project economics could be reconfigured to provide faster returns on capital, or terminals could one day be converted to export hydrogen, Federal Natural Resources Minister Jonathan Wilkinson said.

“I think everybody’s trying to get their heads around exactly how that would work,” he told Reuters.

Reuters, by Steve Scherer, September 6, 2022

India’s national hydrogen fuel strategy includes a focus on using renewable H2 as a primary energy source for transportation. In the movement ahead along the path of this strategy, state-run gas and oil companies have been investing in – and participating in – a number of different projects focused on its production, distribution, storage and use.

Among the projects include blending H2 with compressed natural gas for use in transportation.

The companies are also focused on green hydrogen fuel for mobility using fuel cells. Together, the state-backed oil and gas companies formed an H2 corpus fund to pay for research and development related to various applications for the clean energy, including in powering vehicles. This, according to a statement from Rameswar Teri, the union minister of state for petroleum and natural gas in the Rajya Sabha, the upper house of parliament. The companies have also started R&D projects for using renewable H2 for fuel cell-based mobility.

Furthermore, the Indian government has been backing research and development as well as technology demonstration projects at academic institutions. This strategy will help to ensure that there will be adequately educated and trained people graduating into the country’s workforce as the clean energy industry skyrockets.

Some of the hydrogen fuel projects will also be conducted at the educational institutions themselves.

Among the projects being worked on include one focused on H2-powered two-wheelers. That project is under development at Banaras Hindu University for demonstration. Another project includes H2-powered three-wheelers being developed and demonstrated by Banaras Hindu University, IIT Delhi and Mahindra & Mahindra.

Another project underway is being conducted by Indian Oil. That energy company has developed a compact reforming process for the process of hydrogen fuel production in the form of H2-enriched compressed natural gas (H-CNG). That H-CNG is used for fueling buses that are operating in Delhi.

As a component of that particular joint study with Indraprastha Gas Ltd., Indian Oil installed its complex reformer plant located at the Rajghat bus depot for Delhi Transport Corp. The oil giant also held a sixth-month trial for operating fifty of the gas-powered buses on the resulting blended H-CNG.

Hydrogen Fuel News by Erin Kilgore, August 30, 2022

Oil prices bounced off session lows to trade nearly flat in a volatile session on Monday as markets weighed Saudi Arabia’s warning that OPEC+ production could cut output against the possibility of a nuclear deal that could return sanctioned Iranian oil to the market.

Brent crude futures for October settled at $96.48 per barrel, down 24 cents, or 0.25%. It had fallen as much as 4.5% earlier in the day, breaking a three-day streak of gains.

U.S. West Texas Intermediate (WTI) crude for September delivery, which expired on Monday, was down 54 cents, or 0.6%, at $90.23. The more active October contract was down 4 cents, or 0.03%, at $90.41.

Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ has the commitment, flexibility, and means to deal with challenges and provide guidance including cutting production at any time and in different forms, state news agency SPA reported.

Meanwhile, the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, which could allow sanctioned Iranian oil to return to global markets.

The U.S. State Department said a nuclear deal was closer now than it was two weeks ago.

Earlier in the session, worries that aggressive U.S. interest rate hikes may lead to a global economic slowdown and dent fuel demand had pushed down prices.

“The near-term fundamentals seem more to the bears until we see some positive economic indications either out of the U.S. or China, which is looking unlikely,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The U.S. Federal Reserve will raise rates by 50 basis points in September amid expectations inflation has peaked and growing recession worries, according to economists in a Reuters poll.

Investors will be paying close attention to comments by Fed Chair Jerome Powell when he addresses an annual global central banking conference in Jackson Hole, Wyoming, on Friday.

Also pressuring prices were worries over slowing fuel demand in China, the world’s largest oil importer, partly because of a power crunch in the southwest.

Beijing cut its benchmark lending rate on Monday as part of measures to revive an economy hobbled by a property crisis and a resurgence of COVID-19 cases.

The dollar index rose to a five-week high on Monday. A stronger greenback is generally bearish as it makes it more expensive for buyers with other currencies in the dollar-denominated oil market.

High natural gas prices exacerbated by reduced supply from Russia is strengthening oil demand, said Ole Hansen, head of commodity strategy at Saxo Bank.

Supply worldwide remains relatively tight, with the operator of a pipeline supplying about 1% of global oil via Russia saying it will reduce output again because of damaged equipment.

OPEC+ produced 2.892 million barrels per day (bpd) below their targets in July, two sources from the producer group said, as sanctions on some members like Russia and low investment by others stymied its ability to raise output.

Reuters by Noah Browning, August 30, 2022

Price volatility is a trader’s bread and butter, but in oil, volatility is becoming excessive, pushing traders away and making life harder for a lot of businesses that normally use oil hedges to secure some price stability that is vital for their operations.

This is according to a Reuters analysis that notes oil prices have become so wild in their everyday swings that the usual suspects, such s hedge funds, are quitting the oil market in droves, with activity there falling to the lowest in seven years.

It appears, then, that volatility is only a good thing up to a point, and this point seems to be a daily price range five times the usual one. According to the Reuters analysis, between February 24 and August 15 this year, Brent crude’s daily range averaged $5.64 per barrel. This compared with $1.99 per barrel last year.

The pullout of the speculators is only one of the problems with such high oil price volatility. The fact that companies in the food industry, for example, don’t dare hedge against further price swings is affecting their business. And it is also affecting the business of the oil industry itself.

One analyst cited by Reuters explained that oil companies are being wary of capital expenditure because of the excessive volatility in oil markets. And because they are being wary, these companies are delaying projects that could help bring the oil market into balance again, Arjun Murti told Reuters.

Speaking of the oil industry, it is not only the current volatility that is interfering with potential production growth. It is also the uncertainty about future demand as the transition movement gathers pace.

In a recent piece for the Houston Chronicle, James Osborne wrote that predicting oil demand was becoming increasingly difficult amid developments such as the now notorious Inflation Reduction Act that Congress passed earlier this month.

With all these incentives for the electrification of transport and the shift to renewable electricity generation, the future of oil demand has dimmed, he argued, even according to Big Oil.

One might argue that most Big Oil is heavily involving itself in the energy transition, which might cast a shadow over the credibility of its oil demand predictions. Yet the fact remains many governments are dead set on having a transition, however much it costs, and that’s bearish for oil demand.

The latest transition push in both Europe and the U.S. probably made a bad volatility situation worse by clouding the demand outlook while everyone can see with a plain eye that oil demand, right now, is stronger than many had expected, especially as some utilities in Europe switch from gas to oil due to prices.

This has proved too much not only for speculators but also for industry players in the oil market, according to the Reuters analysis. Open interest on the oil futures market has dropped by a fifth since Russia invaded Ukraine, with traders apparently getting tired of the price seesaw of tight supply and inflation fears.

What the future holds is—as always—impossible to say, but it is quite unlikely that the price situation will change anytime soon. This means that the negative effect this price volatility is having on businesses across industries will continue, fueling the abovementioned oil price seesaw.

Businesses will continue to need energy that is in tight supply, but high prices for this energy will continue threatening their growth prospects and the growth prospects of their respective economies.

Governments, meanwhile, will continue pouring money and legislation into the energy transition, further discouraging the oil industry from doing something meaningful about supply.

OilPrice.com by Irina Slav, August 18, 2022