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Last Updated: November 23, 2018
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Headline crude prices for the week beginning 19 November 2018 – Brent: US$67/b; WTI: US$57/b

  • After taking a severe beating all of last week – with Brent tumbling by over US$4/b alone on November 14 – global crude prices recovered somewhat this week, as language from OPEC signalled that production cuts might be back on the agenda
  • Crude has been sliding over the past two weeks as American sanctions on Iranian crude exports were muted by surprise waivers granted to 8 large importers, switching the narrative from constrained supply to a supply glut
  • South Korea seems to be taking full advantage of the waiver it received, scheduling meetings to resume Iranian oil imports after halting them for three months, aiming to take some 200,000 b/d of crude, mainly condensate
  • Alarmed by this change, Saudi Arabia is now backing a production cut of at least 1 mmb/d to stabilise the market – likely around the US$70/b sweet spot; with the biannual OPEC meeting around the corner, this would be the likely place to announce such a measure
  • A recent joint meeting between OPEC and NOPEC concluded that a majority of the members felt that the current market situation substantiates a production cut in 2019, which may rise to 1.5-2 mmb/d above the proposed 1mmb/d cut
  • Saudi Arabia already intends to export 500,000 b/d less barrels in December, taking the lead to stem the price rout, although Russia is advising against rash moves and a need to ‘monitor the situation’
  • Global trade tensions are also feeding into the demand outlook, as US Vice President Mike Pence issued sharp rebukes to China at the recent APEC meeting in Papua New Guinea, with the disagreements resulting in the failure to issue a joint communique for the first time
  • Meanwhile, the US gas markets have been on a see-saw ride, triggered by a ‘polar vortex’ that brought freezing Arctic temperatures to the US Midwest and northeast, moving against crude oil’s downward trajectory; US natural gas futures jumped 30% in a day, then plunged 25% the next day
  • In Asia, forecasts of a milder winter caused Asian spot LNG prices to weaken on the expectation that China’s short-term LNG demand will not be so strong this year
  • There was another gain in the US active rig count, with 2 new oil rigs added to the list, a slowdown from the large 14 rig gain from the week before; with American Thanksgiving being this weekend, drilling activity should slow down
  • Crude price outlook: OPEC+’s best efforts to prop up crude prices won’t see any fruit until early December, when – or if – a supply cut deal can be reached; until then the downward pressure on crude prices will continue. We see the range for Brent at US$63-65/b and WTI at US$53-55/b this week


Headlines of the week

Upstream

  • After being halted for a year, Iraq has resumed oil exports from Kirkuk via the region’s pipeline to Ceyhan, Turkey, with some 50-100/000 b/d flowing through, with plans to also increase total capacity to some 1 mmb/d
  • ADNOC has announced a US$1.4 billion investment plan to upgrade and expand the Bu Hasa oil field from 550,000 b/d to 650,000 b/d by 2020
  • India has signed an agreement with ADNOC to lease half of the Padur strategic reserve facility, giving it capacity to store up to 18 million barrels of crude
  • Saudi Aramco has signed a deal to supply some 130,000 b/d of crude to China’s Hengli Petrochemical in 2019 for its new refinery in Dalian, Aramco’s second such agreement with a Chinese firm this year after Zhejiang Rongsheng
  • ConocoPhillips has entered into exclusive talks with Ineos to sell off its UK oil and gas assets, including the Clair Field, for some US$3 billion

Downstream

  • Chevron is reportedly in talks to acquire the Pasadena Refining System’s 110 kb/d refinery in Texas from Petrobras, as it aims to expand its refining system to capitalise on rising volumes of American shale crude
  • Despite being officially opened, the commercial start-up of SOCAR’s 200 kb/d STAR refinery in Turkey has been delayed to Q1 2019, with full capacity only set to be reached in mid-2019 due to minor faults revealed during testing
  • ADNOC has signed a new sales agreement with China’s Wanhua Chemical Group to supply up to 1 million tons of LPG per year for 10 years
  • Spain has joined a number of European countries, including the UK and Denmark, in proposing to ban the sale of gasoline or diesel cars by 2040

Natural Gas/LNG

  • Cheniere has produced first LNG at its Corpus Christi LNG project in Texas, with the first of a planned five trains of 22.5 mtpa total capacity coming online following the recent start-up of Train 5 at its Sabine Pass site in Louisiana
  • Cheniere is also looking to make its Final Investment Decision on Train 6 at Sabine Pass by next year, with the firm being bullish about demand in China
  • ADNOC and Saudi Aramco have signed a new gas pact aimed at collaborating in the natural gas and LNG sectors, a move possibly aimed at challenging the status of Qatar as the Middle East’s LNG champion
  • Energean Oil and Gas is now aiming to deliver first gas from its Karish and Tanin developments offshore Israel in the first quarter of 2021
  • ADNOC has agreed to extend its gas supply agreement with ADNOC LNG, its joint venture with BP, Total and Mitsui, to 2040 after it expires in March 2019
  • Total, along with ExxonMobil and Oil Search, has signed a new MoU with Papua New Guinea on gas agreement terms for the 5.4 mtpa Papua LNG project
  • Eni has been awarded a new concession in Abu Dhabi by ADNOC, taking on 25% of the offshore ultra-sour Ghasha Concession gas mega project
  • In a very busy week for ADNOC, the Abu Dhabi firm also signed a framework agreement with Uzbekneftgaz to collaborate on upstream and downstream operations and projects in Uzbekistan
  • Russia’s Novatek has reported a sizable new commercial gas discovery in the giant Nyakhartinsky block in the Yamal-Nenets region

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The United States consumed a record amount of renewable energy in 2019

In 2019, consumption of renewable energy in the United States grew for the fourth year in a row, reaching a record 11.5 quadrillion British thermal units (Btu), or 11% of total U.S. energy consumption. The U.S. Energy Information Administration’s (EIA) new U.S. renewable energy consumption by source and sector chart published in the Monthly Energy Review shows how much renewable energy by source is consumed in each sector.

In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

Wood and waste energy, including wood, wood pellets, and biomass waste from landfills, accounted for about 24% of U.S. renewable energy use in 2019. Industrial, commercial, and electric power facilities use wood and waste as fuel to generate electricity, to produce heat, and to manufacture goods. About 2% of U.S. households used wood as their primary source of heat in 2019.

Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

Biofuels, including fuel ethanol, biodiesel, and other renewable fuels, accounted for about 20% of U.S. renewable energy consumption in 2019. Biofuels usually are blended with petroleum-based motor gasoline and diesel and are consumed as liquid fuels in automobiles. Industrial consumption of biofuels accounts for about 36% of U.S. biofuel energy consumption.

Solar energy, consumed to generate electricity or directly as heat, accounted for about 9% of U.S. renewable energy consumption in 2019 and had the largest percentage growth among renewable sources in 2019. Solar photovoltaic (PV) cells, including rooftop panels, and solar thermal power plants use sunlight to generate electricity. Some residential and commercial buildings heat with solar heating systems.

October, 20 2020
Natural gas generators make up largest share of U.S. electricity generation capacity

operating natural-gas fired electric generating capacity by online year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Based on the U.S. Energy Information Administration's (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source. Most of the natural gas-fired capacity added in recent decades uses combined-cycle technology, which surpassed coal-fired generators in 2018 to become the technology with the most electricity generating capacity in the United States.

Technological improvements have led to improved efficiency of natural gas generators since the mid-1980s, when combined-cycle plants began replacing older, less efficient steam turbines. For steam turbines, boilers combust fuel to generate steam that drives a turbine to generate electricity. Combustion turbines use a fuel-air mixture to spin a gas turbine. Combined-cycle units, as their name implies, combine these technologies: a fuel-air mixture spins gas turbines to generate electricity, and the excess heat from the gas turbine is used to generate steam for a steam turbine that generates additional electricity.

Combined-cycle generators generally operate for extended periods; combustion turbines and steam turbines are typically only used at times of peak load. Relatively few steam turbines have been installed since the late 1970s, and many steam turbines have been retired in recent years.

natural gas-fired electric gnerating capacity by retirement year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Not only are combined-cycle systems more efficient than steam or combustion turbines alone, the combined-cycle systems installed more recently are more efficient than the combined-cycle units installed more than a decade ago. These changes in efficiency have reduced the amount of natural gas needed to produce the same amount of electricity. Combined-cycle generators consume 80% of the natural gas used to generate electric power but provide 85% of total natural gas-fired electricity.

operating natural gas-fired electric generating capacity in selected states

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Every U.S. state, except Vermont and Hawaii, has at least one utility-scale natural gas electric power plant. Texas, Florida, and California—the three states with the most electricity consumption in 2019—each have more than 35 gigawatts of natural gas-fired capacity. In many states, the majority of this capacity is combined-cycle technology, but 44% of New York’s natural gas capacity is steam turbines and 67% of Illinois’s natural gas capacity is combustion turbines.

October, 19 2020
EIA’s International Energy Outlook analyzes electricity markets in India, Africa, and Asia

Countries that are not members of the Organization for Economic Cooperation and Development (OECD) in Asia, including China and India, and in Africa are home to more than two-thirds of the world population. These regions accounted for 44% of primary energy consumed by the electric sector in 2019, and the U.S. Energy Information Administration (EIA) projected they will reach 56% by 2050 in the Reference case in the International Energy Outlook 2019 (IEO2019). Changes in these economies significantly affect global energy markets.

Today, EIA is releasing its International Energy Outlook 2020 (IEO2020), which analyzes generating technology, fuel price, and infrastructure uncertainty in the electricity markets of Africa, Asia, and India. A related webcast presentation will begin this morning at 9:00 a.m. Eastern Time from the Center for Strategic and International Studies.

global energy consumption for power generation

Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)

IEO2020 focuses on the electricity sector, which consumes a growing share of the world’s primary energy. The makeup of the electricity sector is changing rapidly. The use of cost-efficient wind and solar technologies is increasing, and, in many regions of the world, use of lower-cost liquefied natural gas is also increasing. In IEO2019, EIA projected renewables to rise from about 20% of total energy consumed for electricity generation in 2010 to the largest single energy source by 2050.

The following are some key findings of IEO2020:

  • As energy use grows in Asia, some cases indicate more than 50% of electricity could be generated from renewables by 2050.
    IEO2020 features cases that consider differing natural gas prices and renewable energy capital costs in Asia, showing how these costs could shift the fuel mix for generating electricity in the region either further toward fossil fuels or toward renewables.
  • Africa could meet its electricity growth needs in different ways depending on whether development comes as an expansion of the central grid or as off-grid systems.
    Falling costs for solar photovoltaic installations and increased use of off-grid distribution systems have opened up technology options for the development of electricity infrastructure in Africa. Africa’s power generation mix could shift away from current coal-fired and natural gas-fired technologies used in the existing central grid toward off-grid resources, including extensive use of non-hydroelectric renewable generation sources.
  • Transmission infrastructure affects options available to change the future fuel mix for electricity generation in India.
    IEO2020 cases demonstrate the ways that electricity grid interconnections influence fuel choices for electricity generation in India. In cases where India relies more on a unified grid that can transmit electricity across regions, the share of renewables significantly increases and the share of coal decreases between 2019 and 2050. More limited movement of electricity favors existing in-region generation, which is mostly fossil fuels.

IEO2020 builds on the Reference case presented in IEO2019. The models, economic assumptions, and input oil prices from the IEO2019 Reference case largely remained unchanged, but EIA adjusted specific elements or assumptions to explore areas of uncertainty such as the rapid growth of renewable energy.

Because IEO2020 is based on the IEO2019 modeling platform and because it focuses on long-term electricity market dynamics, it does not include the impacts of COVID-19 and related mitigation efforts. The Annual Energy Outlook 2021 (AEO2021) and IEO2021 will both feature analyses of the impact of COVID-19 mitigation efforts on energy markets.

Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

With the IEO2020 release, EIA is publishing new Plain Language documentation of EIA’s World Energy Projection System (WEPS), the modeling system that EIA uses to produce IEO projections. EIA’s new Handbook of Energy Modeling Methods includes sections on most WEPS components, and EIA will release more sections in the coming months.

October, 16 2020