Easwaran Kanason

Co - founder of NrgEdge
Last Updated: January 3, 2022
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Business Trends

Two things happened in the second half of December that changed the tone that the world talks about oil prices. First, the International Energy Agency announced that global oil market had return to a surplus and the impact of the Omicron Covid-19 variant may lead to an even bigger oversupply in early 2022 as international travel is impeded and demand recedes. And then, a day later, the February Brent crude contract flipped to trade at a discount to the March Brent contract for the first time since March 2020, a contango situation that signals that the market believes the IEA’s statement and that crude oil fundamentals either are or will shift into oversupply soon. That this bear-ish signal is happening in the prompt spread – a heavily-traded and very liquid part of the oil futures curve – shows that the belief is widespread and imminent.

These twin events – which are rooted in the Omicron Covid-19 variant surge – have upended the perceived wisdom that underpinned efforts to rebalance oil supply and demand since November. At that point, crude oil prices had already exceeded US$80/b. On the supply side, the OPEC+ group was not budging from its ‘slowly, softly’ approach of increasing its collective oil supply by 400,000 b/d a month through to April 2022. The group had, however, left its December meeting ‘in session’, to allow it to respond to any short-term signals that the market required more oil than it was prepared to produce. On the demand side, the rise in oil prices was causing inflationary spikes. The US, for example, recorded a 6.8% inflation rate for 2021, the highest level since 1982. Efforts by President Joe Biden, alongside pleas from the leaders of other major consuming nations did not budge OPEC+. So the likes of the USA, China, India, Japan, South Korea and the UK took matters into their own hands, announcing plans to release supply from strategic petroleum reserves to calm the market down.

And then Omicron hit. First recorded in late November, the surge in Omicron cases really began in mid-December, taking root in regions where the pandemic was thought to be under control. In response, European nations have announced strict new restrictions to contain the new outbreak, while existing restrictions that were planned to be eased in Asia and elsewhere look now to be continue indefinitely. The WHO has gone as far to advise that Christmas events be axed, stating that ‘an event cancelled is better than a life cancelled.’ Crude oil prices fell in response, charting one of the steepest one-day falls recently and now hovering in the low US$70/b level. What the major producers or consumers wanted to do, the virus did for them.

From this lens, it seems that OPEC+’s approach – or specifically, Saudi Arabia’s preferred position for the group – was correct. It is, in fact, in line with the predictions of OPEC+’s own technical committee, which forecasted that the supply glut inherited from 2020 would persist over Q4 2021 but be largely eliminated by Q1 2022. The Omicron surge merely brought that timeline forward. Having left its December meeting ‘in session’, OPEC+ is now under less pressure to bow to demands that supply be increased to calm prices. A quickfire decision on supply now looks unlikely; in fact, it could lead to a decision during its January meeting to pause the supply easing in recognition of the ongoing Omicron crisis. This, in our opinion, is unlikely to happen, given that it will not be supported by some key OPEC+ members such as Russia and the UAE. Which should result in a further easing of prices in the short/mid-term.

The Biden administration has gone ahead with the release from its strategic petroleum reserve, in two tranches of 50 million barrels and 18 million barrels. But – apart from China’s own earlier moves – there has been radio silence from the ‘anti-OPEC+’s other members. In the original plan, India was set to release 5 million barrels, Japan about 4.2 million barrels, South Korea about 3.5 million barrels and the UK about 1.5 million barrels; no figures from China but sources suggested a range of 7-15 million barrels. There has been no indication that these countries have followed through. And why would they? The market dynamics have changed up. Strategic releases are a double-edged sword since they are finite and must also be replenished at a later point, possibly at higher prices. The major Asian buyers would also be reluctant to shake their long-standing relationships with major producers just to appease a US president that is up for election in 2024. Curiously, Saudi Aramco raised its January sales price for its crude to Asia and the US, possibly as a subtle punishment for the anti-OPEC+ move and a reminder that Saudi Arabia is still a kingpin.

And the rest of the market has already been acting on the previous price signals. Although generally remaining disciplined, activity in the US onshore shale basins have increased dramatically. The US EIA projects that Permian Basin production will reach 4.96 mmb/d in December, surpassing pre-pandemic highs, and record production is also expected from other plays such as Eagle Ford and Haynesville. Brazilian crude output is also widely expected to have increased over 2021. All of this will have been in response to the price signals sent by the market. After all, which producer doesn’t want to cash in on US$70-80/b crude, especially when breakeven costs are in the US$30-40/b range.

Inflation is real. But political rhetoric did not manage to solve it, given the complexity of oil geopolitics. But, for now, the Omicron variant has calmed down what was an incendiary issue, even if it will be coming at the cost of further lockdowns and restrictions. There is a lesson buried in there somewhere: that the current global situation remains too fragile and too fraught to make definitive projections and plans. OPEC+’s gradual approach has been under fire by many in the second half of 2021, but most would agree now that it has provided a measure of stability and steadiness in a market buffeted by too many dynamic factors. The cost of that is quantifiable – higher inflation – but the market will find a way to balance that. And it has.

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At the same time, the timber pellet maker mold and mildew are likewise one of the most conveniently used parts. Consequently, it is very crucial for wood pellets producers to understand the layout and application of ring die, and also to make the appropriate selection, rational usage, and also reliable upkeep of ring die.

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1, Decision of ring pass away diameter as well as ring pass away efficient pressing size specifications

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According to the global timber pellet equipment parameters and also concern series to figure out the ring die size collection, RICHI mainly has the complying with the collection of timber pellet machines:

MZLH320 Wood Pellet Machine

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According to the proportion of equal practical pushing location as well as an equal power, determine the reliable size of the ring passes away.

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c, Determination of the size of journalism roller

Ring Die of Pelletizing Equipment

The standard pelletizing principle for pellet formation is received in the figure listed below. The timber pellets can get rid of the resistance of the material going through the aperture of the ring die through the shared extrusion force between the ring pass away as well as the pressing roller, so as to attain the function of granulation.

Pelletizing Concept

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wood pellet machine ring die

wood pellet machine ring die

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Alloy Steel-- Warmth treated with a firmness above HRC50. The thorough mechanical buildings are high, as well as the usage rate is the highest possible.

Stainless steel-- Great hardness and also toughness, total quenching, as well as good wear, and also rust resistance. But its high price has actually dragged down general use.

3. Ring pass away hole structure, compression proportion

 ring die hole

ring die opening

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View more content: https://www.pelletingmachine.com/pellet-mill-for-sale/

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