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Last Updated: July 26, 2019
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Market Watch 

Headline crude prices for the week beginning 22 July 2019 – Brent: US$63/b; WTI: US$56/b

  • After a week of weak demand sending Brent crude prices back down towards the US$60/b level, oil prices started the week on a higher note as tensions in the Middle East between Iran and the US heightened once again
  • The US warship USS Boxer downed an Iranian drone that approached the ship in the Strait of Hormuz, sending fears of military escalation in the key Persian Gulf chokepoint soaring once again
  • In retaliation for the British seizing of an Iranian crude tanker in the Mediterranean, the Iranian Revolutionary Guard seized a British-flagged tanker in the Strait of Hormuz; a second vessel – Liberian-flagged but reportedly British-owned – was also seized in the area
  • The fresh reminders of the fragile situation in the Middle East propped crude back up after a week where demand indications had faltered and weakened the trajectory for crude prices
  • But the economic risk is by no means removed; as the US and China return to the negotiating table once again, President Donald Trump once again ratcheted up the pressure by claiming he is willing to escalate the trade war even further
  • Against this backdrop, US crude oil exports reached an all-time high of 3.3 mmb/d as copious amounts of light shale oil enable refineries in Asia to diversify their crude slate
  • With OPEC warning that a supply glut is very much likely in 2020, even with the extension of the current OPEC+ supply deal to March, the only possible upside for crude prices currently lies with supply disruptions and military action
  • With this delicate environment, the active US oil and gas rig count fell for the third consecutive week – losing five oil rigs but gaining two gas rigs to a total active count of 954, or 92 fewer sites than the 1,046 reported last year
  • With the market currently balanced between demand fears and supply risks, crude prices will remain rangebound – with Brent trading at US$62-64/b and WTI at US$55-57


Headlines of the week

Upstream

  • Greece has offered an olive branch to Turkey, pledging to work together to exploit natural resources if Turkey would agree to back down from its drilling campaign offshore Cyprus that has drawn it into a dispute with the EU

Midstream/Downstream

  • Iran maintains that it will invest in the expansion of the CPCL Nagapattinam refinery in India’s Tamil Nadu despite US sanctions resulting in India dropping Iranian crude; the planned investment is part of a US$5.1 billion plan to replace the existing 20 kb/d plant with a new, modern 180 kb/d refinery
  • Tainted crude from Russia’s Druzhba pipeline is now being sent to PKN Orlen’s Mazeikiai refinery in Lithuania, where the Polish firm is ready to dilute contaminated crude with clean oil for processing
  • After two years of failed attempts to find a replacement for PDVSA’s expiring operation of the Isla refinery in Curacao, the island’s government is now evaluating 10 proposals to take over the site, which has lain idled this year
  • Refineries along the US Gulf Coast, including Phillips 66’s Alliance plant in Louisiana, have restarted operations back to full capacity following the threat of Tropical Storm Barry abating
  • Sinopec has set up a new fuel oil company in Sri Lanka in Hambantota with the aim of using it as a fuel supply hub along the major Indian Ocean trading route
  • After blackouts completed halted operations at Venezuela’s Amuay and Cardon refineries, the 645 kb/d Amuay site has been partially restarted

Natural Gas/LNG

  • Total is moving ahead with its plan to turn Oman into a regional LNG hub through the Sohar LNG Bunkering Project as new IMO low-sulfur rules for marine fuels kick in, with Total handing over the FEED contract to McDermott
  • Bolstered by the giant Brulpadda discovery earlier this year, Total is sending the Deepsea Stavanger semi-submersible rig back to South Africa to start on its Block 11B/12B offshore drilling campaign
  • Chevron has applied for permission to modify its 18 mtpa Kitimat LNG project in Canada’s British Columbia into an all-electric design in an attempt to market its LNG as ‘clean’ with the lowest GHG emissions per ton of fuel
  • BHP has completed phase 3 of its deepwater drilling campaign offshore Trinidad, with 3 wells – Bélé-1, Tuk-1 and Hi-Hat-1 – all hitting gas
  • The small Canadian Tilbury LNG terminal in Delta, British Columbia has won its first export contract, supplying 53,000 tons of LNG per year to China’s Top Speed Energy over a two-year contract period
  • Poland’s PGNiG has acquired a 20% stake in the Duva gas field on the Norwegian Continental Shelf, expanding its reach in the North Sea after recently acquiring stakes in the King Lear and Tommeliten Alpha fields
  • Mubadala Petroleum has reached a farmout agreement with the UK’s Premier Oil for a 20% stake in the Andaman I and South Andaman gas blocks offshore the Indonesian province of Aceh, consolidating its presence in the area
  • Total has struck a new deal to supply Benin’s SBEE power firm with up to 500,000 tpa of LNG from its global portfolio for 15 years beginning 2021

Corporate

  • Schlumberger has named Olivier Le Peuch as its new CEO, succeeding Paal Kibsgaard who has overseen the services firm as CEO for 8 years

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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