The world’s energy crisis – 5 July, 2022

The world’s energy crisis – 5 July, 2022

Norwegian Strikes Could Sever NatGas Supplies To UK

The European energy crunch is set to worsen this week after Norwegian offshore oil and gas workers went on strike, threatening to sever the Scandinavian country’s energy supplies to the UK and Europe, according to Reuters

As much as 1,117,000 barrels of oil equivalent, or 56% of daily natural gas exports, while 341,000 barrels of oil would be lost by Saturday if strikes continue closing down fields, the Norwegian Oil and Gas (NOG) employer’s lobby warned. 

“The strike has begun,” Audun Ingvartsen, the leader of Norway’s oil workers’ union, Lederne, said in an interview. He added the strike would escalate as workers pressure oil/gas companies to increase wages and benefits amid the worse inflation in Europe in decades. 

Norway is Europe’s second-largest energy supplier after Russia. The timing of strikes comes as European countries rush to inject NatGas supplies into storage ahead of the winter, and Russian energy giant Gazprom significantly reduced Nord Stream flows to Europe. Gazprom plans to halt Nord Stream flows for routine maintenance from July 11 for ten days. 

Norway’s Gassco, a state-owned pipeline operator, explained to Financial Times“in a worst-case scenario, deliveries to the UK could stop totally.” 

“The UK has also become a key conduit for moving supplies on to Europe over the summer, with its export pipelines to Belgium and the Netherlands running at speed to send excess imports of liquefied natural gas and Norwegian supplies into continental storage ahead of the winter,” FT said. 

News of the strikes sent British wholesale NatGas price for day-ahead delivery up 16%. 

Strikes began on Monday and knocked offline 89,000 barrels of oil equivalent a day of production at three fields on Norway’s continental shelf. Three more fields could be closed by Wednesday, affecting even more production. If the labor union and energy companies don’t come to a resolution on wages, a total of 14 sites could be offline by Saturday, representing a 56% reduction in NatGas exports. 

Considering Norway is the UK’s largest source of NatGas in 2021, NatGas and power prices are soaring on supply woes. Prices in Europe are rising as well. 

Tom Marzec-Manser, an analyst at consultancy ICIS, said the UK will receive four LNG cargos between July 10 and July 19 and might be able to weather the acute loss of NatGas supplies from Norway. 

“But for Europe as a whole this couldn’t really be happening at a worse time, outside the depths of winter, as we desperately need to fill storage ahead of the colder months,” Marzec-Manser added.

Besides Norwegian supplies, Europe has been betting on LNG cargoes from the US. However, the closure of the Freeport LNG Terminal in Texas last month due to an explosion will affect roughly 16% of the total US LNG export capacity through late year. 

As the supply crunch worsens across Europe, Goldman Sachs’ Samantha Dart increased her European NatGas price forecast as she “no longer sees” a full resumption of Nord Stream flows. 

“Instead, the lack of resolution around required turbine repairs, and the absence of any Gazprom-driven re-routing of the reduced NS1 flows via an alternative pipeline to mitigate the impact to supply suggest a prolonged reduced flow rate at NS1 is more likely going forward,” Dart wrote in a note to clients on Monday. She bumped her TTF price forecasts to €153 per MWh in the third quarter, up from €104.

Strike developments from Norway, affecting supplies to the UK and Europe, couldn’t have come at the worst time. 

Entire industries in Germany could collapse due to Russian natural-gas supply cuts: union head

Entire industries in Germany could collapse due to natural-gas supply cuts from Russia, said Yasmin Fahimi, the country’s top union official.

“Entire industries are in danger of collapsing permanently because of the gas bottlenecks: aluminum, glass, the chemical industry,” Fahimi, the head of the German Federation of Trade Unions, told Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”

The chemical industry, which employs about 346,000 people, is the third-largest industry in Germany, according to Germany Trade & Invest, the country’s investment promotion agency.

Germany — Europe’s largest economy —  is reliant on piped natural gas from Russia, which accounts for 35% of its imports of the fuel. The industrial powerhouse imports almost all of the natural gas it uses, which accounts for about a quarter of the country’s total energy mix, according to the economy ministry.

Natural Gas Soars 700%, Becoming Driving Force in the New Cold War

One morning in early June, a fire broke out at an obscure facility in Texas that takes natural gas from US shale basins, chills it into a liquid and ships it overseas. It was extinguished in 40 minutes or so. No one was injured.

It sounds like a story for the local press, at most — except that more than three weeks later, financial and political shockwaves are still reverberating across Europe, Asia and beyond.

That’s because natural gas is the hottest commodity in the world right now. It’s a key driver of global inflation, posting price jumps that are extreme even by the standards of today’s turbulent markets — some 700% in Europe since the start of last year, pushing the continent to the brink of recession. It’s at the heart of a dawning era of confrontation between the great powers, one so intense that in capitals across the West, plans to fight climate change are getting relegated to the back-burner.

In short, natural gas now rivals oil as the fuel that shapes geopolitics. And there isn’t enough of it to go around.

Saudis Unwilling To Upset Putin As Biden Begs For More Crude

By Tsvetana Paraskova of

The world’s largest crude oil exporter, Saudi Arabia, continues to keep close ties with Russia while the top oil consumer, the United States, pleads with major producers—including the Kingdom—to boost supply to the market and help ease consumers’ pain at the pump.  While the U.S. and its Western allies are sanctioning Moscow and banning oil imports from Russia, U.S. President Joe Biden is also turning to Saudi Arabia to ask it to pump more oil as Americans pay on average $5 a gallon for gasoline.  

The Saudis prefer to keep close ties with Russia in oil policy as the OPEC+ pact and the control over a large portion of global oil supply has benefited both OPEC+ leaders—the Kingdom and Russia—over the past half a decade. Saudi Arabia, however, could use a little thaw in Saudi-U.S. relations under President Biden, who is no longer talking about the world’s top crude exporter as a “pariah” state.

Oil from U.S. reserves sent overseas as gasoline prices stay high

HOUSTON (Reuters) -More than 5 million barrels of oil that were part of a historic U.S. emergency reserves release to lower domestic fuel prices were exported to Europe and Asia last month, according to data and sources, even as U.S. gasoline and diesel prices hit record highs.

U.S. Strategic Petroleum Reserve Being EXPORTED – We are Being Sold-Out

More than 5 million barrels of oil that were part of a U.S. emergency oil reserves release aimed at lowering domestic fuel prices . . . were exported to Europe and Asia last month, according to data and sources, even as U.S. gasoline and diesel prices touched record highs.

The export of crude and fuel is blunting the impact of the moves by U.S. President Joe Biden designed to lower record pump prices. Biden on Saturday renewed a call for gasoline suppliers to cut their prices, drawing criticism from Amazon founder Jeff Bezos.

About 1 million barrels per day is being released from the Strategic Petroleum Reserve (SPR) through October. The flow is draining the SPR, which last month fell to the lowest since 1986.

U.S. crude futures are above $105 per barrel and gasoline and diesel prices above $5 a gallon in one-fifth of the nation U.S. officials have said oil prices could be higher if the SPR had not been tapped.

The fourth-largest U.S. oil refiner, Phillips 66, shipped about 470,000 barrels of sour crude from the Big Hill SPR storage site in Texas to Trieste, Italy, according to U.S. Customs data. Trieste is home to a pipeline that sends oil to refineries in central Europe.

Atlantic Trading & Marketing (ATMI), an arm of French oil major TotalEnergies, exported 2 cargoes of 560,000 barrels each, the data showed.

Phillips 66 declined to comment on trading activity. ATMI did not respond to a request for comment.

Cargoes of SPR crude were also headed to the Netherlands and to a Reliance refinery in India, an industry source said. A third cargo headed to China, another source said — even though China is buying oil directly from Russia and ignoring US Sanctions upon Russia!

At least one cargo of crude from the West Hackberry SPR site in Louisiana was set to be exported in July, a shipping source added.

“Crude and fuel prices would likely be higher if (the SPR releases) hadn’t happened, but at the same time, it isn’t really having the effect that was assumed,” said Matt Smith, lead oil analyst at Kpler.

The latest exports follow three vessels that carried SPR crude to Europe in April helping replace Russian crude supplies.

Oil tumbles as much as 10%, breaks below $100 as recession fears mount

Oil prices tumbled Tuesday with the U.S. benchmark falling below $100 as recession fears grow, sparking fears that an economic slowdown will cut demand for petroleum products.

West Texas Intermediate crude, the U.S. oil benchmark, settled 8.24%, or $8.93, lower at $99.50 per barrel. At one point WTI slid more than 10%, trading as low as $97.43 per barrel. The contract last traded under $100 on May 11.

International benchmark Brent crude settled 9.45%, or $10.73, lower at $102.77 per barrel.

Ritterbusch and Associates attributed the move to “tightness in global oil balances increasingly being countered by strong likelihood of recession that has begun to curtail oil demand.”

Russian Gas Threat Has German Bankers Fearing Default Spike

Germany’s banks would be forced to put extra funds aside to cover a potential spike in defaults if the country were to get cut off from Russian gas, several senior bankers said.

The scenario would lead to a recession in Europe’s largest economy and require lenders to back up corporate loans with more capital, BNP Paribas (OTC:BNPQY) Germany head Lutz Diederichs said Monday at a conference in Frankfurt. He echoed comments made by Commerzbank (ETR:CBKG) Chief Financial Officer Bettina Orlopp published over the weekend in an interview with the weekly Focus Money.

Lenders are particularly concerned about planned maintenance work on the main gas pipeline connecting Germany with Russia as there is a chance that supplies won’t resume as before once the work is completed, said two top bankers who asked not to be named discussing the deliberations. The pipeline is slated to be shut down between July 11 and 21 for maintenance.

German banks’ provisions for the potential economic consequences emanating from the war on Ukraine have so far been lower than the large reserves they built at the height of the pandemic. But the country is heavily reliant on continuing gas imports from Russia, and a complete loss of access to the energy supply would deal a heavy blow to the economy. 

Deutsche Bank (ETR:DBKGn) Chief Executive Officer Christian Sewing said such an event would force “a deep recession,” at the same event on Wednesday.

Russia is set to switch off the gas for work on a key pipeline — and Germany fears the worst

  • Russia is poised to temporarily shut down the European Union’s single biggest piece of gas import infrastructure, stoking fears of a delayed or only partial return of gas supplies.
  • Some fear the Kremlin could use planned maintenance works to turn off the taps for good.
  • “If it doesn’t come back after maintenance because President Putin plays games or wants to hit Europe while it hurts, then the plan to fill up gas storage by the end of summer will probably not work,” said Eurasia Group’s Henning Gloystein.

Geopolitical Bombshell: Saudi Arabia in Discussion with China to Join BRICS+ Coalition. What Impacts on the Energy Market and the Global Economy?

Is this strategic geopolitical pressure from Saudi leader Mohamed Bin Salman (MbS) ahead of the meeting with Biden; or is this a genuine possibility that looms as likely?  If the former, then Joe Biden is being geopolitically slow roasted by Saudi Arabia for his previous disparagements and ideological hypocrisy in his visit.  If it is the latter, well, then the tectonic plates of international trade, banking and economics are about to shift directly under our American feet.We have been closely monitoring the signs of a global split around the energy sector taking place.  Essentially, western governments’ following the “Build Back Better” climate change agenda which stops using coal, oil and gas to power their economic engine, while the rest of the growing economic world continues using the more efficient and traditional forms of energy to power their economies.

This article from Newsweek is exactly about this dynamic with Saudi Arabia now potentially joining the BRICS team.

US pushes EU to cut energy use as bloc ditches Green agenda

US power companies brace for supply crisis – Reuters

Consumer energy demand is expected to hit all-time highs this summer, and utilities are warning they may lack the equipment to maintain the grid
US power companies brace for supply crisis – Reuters

American power providers are facing supply shortages that stem from increased pressure on the grid due to record-high temperatures, as people boost the use of air conditioning, Reuters reported on Wednesday.

According to Refinitiv data, the weather in the US has already been some 21% warmer than the 30-year average.

Federal agencies responsible for power reliability, like the Federal Energy Regulatory Commission (FERC), have warned that grids in the western half of the country could face reliability issues this summer as consumers crank up air conditioners to escape the heat,” the report states.

Power companies are worried they will not be able to find the spare parts to fix equipment fast enough to avoid outages, with some of them already reporting problems due to the heat. The Electric Reliability Council of Texas (ERCOT), for instance, had to ask customers to cut back on energy use and turn up the temperature on air conditioners after six power plants went offline during a heat wave in mid-May.

A month later, some 200,000 homes and businesses in Ohio were left without electricity after a storm damaged transmission lines throughout the state, and the grid operator was forced to cut power in some areas to prevent the remaining lines from being overloaded.

The report says that grid operators are currently experiencing a dire shortage of transformers, which convert high-voltage energy to the electricity used in homes. And, according to two industry associations, some of them have had to wait a year or more for transformer parts.

You don’t want to deplete your inventory because you don’t know when that storm is coming, but you know it’s coming… If we have successive days of 100-degree-heat, those pole top transformers, they start popping like Rice Krispies, and we would not have the supply stack to replace them,” Ralph Izzo, head of the New Jersey-based Public Service Enterprise Group (PSEG) Izzo, told Reuters.

According to the news agency, in order to preserve spare parts for unexpected weather conditions, utility operators have been changing their maintenance habits.

We’re doing a lot more splicing, putting cables together, instead of laying new cable because we’re trying to maintain our new cable for inventory when we need it,” Nick Akins, head of the Ohio-based grid operator AEP, stated.

Image: Germany’s economic minister warns of catastrophic economic collapse stemming from energy shortage

(Natural News) The European Union is positioning itself to be completely cut off from all Russian energy. And if that happens, Germany and other heavily import-reliant countries in Europe will suffer a Lehman Brothers-type collapse of its energy market.

Economic Minister and Vice-Chancellor Robert Habeck issued a stark warning about how Europe’s largest economy faces total economic destruction should gas supplies run thin this winter, which they are expected to do.

“Companies would have to stop production, lay off their workers, supply chains would collapse, people would go into debt to pay their heating bills, that people would become poorer,” he is quoted as saying.

The Green Party politician actually described what is soon to come as “a king of Lehman Brothers effect in the energy market,” which would quickly spread like a contagion or virus throughout municipal utilities and both the industrial and commercial sectors of the economy.

“And then you have a domino effect that would lead to a severe recession,” he added.

Lehman Brothers, as you may recall, was the lynchpin of the 2008 global financial crisis, which sent Wall Street tumbling until the government decided that taxpayers needed to bail out the culprits whose greed and corruption caused the crisis in the first place.

“The impact of Lehman’s collapse was particularly widespread due to the interconnectedness of its balance sheets with other banks, insurance companies, hedge funds, and other financial institutions,” explains Breitbart News.

“Many believe that the U.S. government made a critical mistake in allowing Lehman to fail and that the failure worsened the crisis and subsequent economic calamity.”

The West is committing economic suicide while blaming Putin for it

Germany already faces a 60 percent reduction in natural gas from Russia, all because it refuses to pay for the energy in rubles demanded by Russia.

Had Germany and other Western powerhouses not imposed crippling economic sanctions against Russia over its “special operation” in Ukraine, Russia never would have changed the requirement that the West pays for gas in rubles – so the West only has itself to blame for what is now unfolding.

Instead of fixing the problem that they helped create, politicians in Germany are calling on the German people to pay for it by drastically reducing their energy consumption.

Germans are now expected to live within a model of extreme scarcity to cover for the failed economic policies of their elected leaders.

“Everyone in industry and in their home life can contribute to this – and yes, this also includes jumpers, shower heads, turning the heating down a bit, all of this helps,” Habeck says.

If Germans refuse to do this, then they will simply have to pay double or triple the cost of energy in the coming months, which will be absolutely devastating once winter arrives.

Should Russian energy stop flowing completely, then Germany will have less than three months of fuel left before a total collapse, warned Klaus Müller, head of the Federal Network Agency (Bundesnetzagentur) energy regulator.

“If the storage facilities in Germany were mathematically 100 percent full … we could do without Russian gas completely … for just about two-and-a-half months and then the storage tanks will be empty,” he is quoted as saying.

Germany was repeatedly warned in the past that its over-reliance on Russian energy could cause problems. Those problems are now emerging at a rapid pace and they threaten to destroy Europe’s largest economy in a matter of months.

Germany also could have avoided going “green,” which would have allowed it to become more energy independent. Instead, it opted to close its nuclear power plants, phase out coal, and hope for the best with just wind turbines and solar panels.

Oil shippers are hiding Russian cargoes by paying in Chinese yuan, exchanging weapons for crude, and ‘going dark’

Oil ship tanker

  • Oil shippers are using several tactics to hide that they’re carrying Russian crude exports, the Guardian reported.
  • Using China’s yuan instead of the dollar in trading and exchanging weapons or food for supplies are just two.
  • Russian oil exports bought by India and then re-exported may end up in European gas stations, analysts say.

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