Oil Market, Exchange Rate and Heating Oil Price Information September 2021.
Brent Crude Dated ($ per Barrel)
Price at Start of Month: $72.45 Price at End of Month: $78.88
Highest Price in Month: $79.40 Lowest Price in Month: $72.45
Pound £ to US Dollar Rate $ Exchange Rate FT:
Start of Month: 1.3786 End of Month: 1.3483
Kerosene (Heating Oil) Cargo Price $ per tonne
Start of Month: $617.50 End of Month: $701.75
Highest Price in Month: $701.75 Lowest Price in Month: $617.50
Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 5.8 ppl
Market Commentary on the Newsfeeds:
World’s Third-Largest Oil Importer Sees Rebound In Demand
India's crude oil demand has been on the mend since mid-summer. It is likely to continue along this same vein for quite a while, with at least one refiner planning to boost refining capacity considerably.
India, the world's third-largest oil importer, has become a key factor for oil prices because of its overwhelming dependence on imported crude. During the latest wave of Covid-19 infections in the country, oil demand suffered an expected slump. But now things are looking up.
Reuters reported last month that in July, Indian refiners increased run rates to the highest in three months in response to strong fuel demand that followed the relaxation of movement restrictions after the worst of the wave. The outlook for demand remains upbeat, too. Gasoline demand in the country is expected to hit a record high during the current fiscal year because of the pandemic. As in other places, people in India are shunning public transport in favor of personal vehicles to reduce their risk of infection.
Sales of passenger vehicles in India soared by as much as 45 percent on the year in July, according to a Reuters report from earlier this month. The report attributed the boom to pent-up demand. Still, it must have also had something to do with the shift to personal transportation at the expense of public transportation.
The resulting surge in gasoline demand could be so strong as to require additional imports, an industry insider from a state-owned refiner told Reuters. Boosting local gasoline production was not an option because Indian refiners were drowning in unsold diesel and had no space for throughput increases until these inventories went down.
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The diesel problem is not confined to India, by the way. Asian refiners are struggling with an inventory overhang seen at 600,000 bpd as of August, per a recent Bloomberg report. Despite lower diesel exports from China, margins for the fuel remain slim, the report said, quoting an Energy Aspects analyst, and prices remain subdued, which is "really telling of how bearish the situation is."
Yet gasoline demand is booming, and refiners are planning capacity increases for the coming years. Indian Oil Corp., for instance, said in August that it planned to boost its refining capacity by 25 percent, or 350,000 bpd, over the next four years. This will bring the total to 1.76 million bpd, Argus reported last month.
The IOC expansion is part of a bigger plan to expand India's oil refining capacity to 6 million bpd in 2025 from 5 million bpd, Argus also reported, citing a junior oil minister. The combined investment in the expansion would come in at $27 billion, the official said.
"Forecasts by various agencies see Indian fuel demand climbing to 400-450 million tonne by 2040 from the present 250 million tonne. This offers enough legroom for all forms of energy to co-exist," IOC's chairman, Shrikant Madhav Vaidya, told Indian media in late August. Demand is already back to pre-pandemic levels, the executive noted.
This fast rebound in oil demand after India became the epicenter of one of the worst infection waves since the start of the coronavirus pandemic suggests it might gain even more importance as a key export market for big oil producers. The suggestion is supported by Saudi Arabia's recent price cut for Asian clients.
On the one hand, the cut could be interpreted as a response to sluggish demand recovery trends in the continent. On the other, however, based on the latest data from India, it may be an attempt to boost market share in one of the biggest consumers of oil, whose thirst for the fossil fuel most expect to continue growing in the coming years and decades.
By Irina Slav 7th Sept 2021 for Oilprice.com
UK's Lindsey refinery joins Humber carbon capture plans
UK-based Prax Group has joined a project seeking to reduce carbon emissions from energy intensive industries in the Humber region of northeast England. As part of the initiative, the firm is targeting the capture of 1.1mn t/yr of CO2 from its 109,000 b/d Lindsey refinery in Lincolnshire by 2027-29.
The project, known as the V Net Zero Humber Cluster, is led by North Sea-focused oil and gas producer Harbour Energy. Besides Prax, its other members comprise US firm Phillips 66's 230,000 b/d Killingholme refinery, which is close to Lindsey, as well as trading firm Vitol's 1.2GW combined heat and power plant in nearby Immingham and power generation firm EP UK Investments.
The V Net Zero Humber Cluster seeks to transport the CO2 emitted at the various facilities by pipeline for storage in the depleted Viking gas field complex in the North Sea off the Lincolnshire coast. Production at Viking stopped in 2016 and Harbour Energy is in the final stages of decommissioning the field.
Prax's initial target is to capture 1.1mn/yr of CO2 from the Lindsey refinery's heaters and process units, with Harbour Energy in charge of transportation and storage. "This project is likely to be implemented in two phases — the first in 2027 and the second phase will follow in 2029," Prax said.
The move is part of Prax's commitment to develop sustainable strategies for Lindsey. The firm completed the acquisition of the refinery from TotalEnergies earlier this year.
The UK government in March this year announced the allocation of £171mn ($236mn) of funding from its industrial decarbonisation challenge scheme as part of its overall industrial decarbonisation strategy. Some £12mn of that was awarded to Humber Zero, a partnership between the Killingholme refinery and the Immingham power plant. A further £21mn went to the Zero Carbon Humber Partnership project, which includes a hydrogen plant and hydrogen and CO2 pipelines.
By Caroline Varin 7th Sept 2021
UK Power Prices Soar To Records On High Gas Price, Lack Of Wind
High natural gas prices and low wind speeds have created a perfect storm for the day-ahead power prices in the UK, which hit a new record on Wednesday, beating the one set earlier this week.
Natural gas still accounts for around 30 percent of the UK’s power generation, and with gas prices surging in recent weeks, power prices have also shot up. In addition, low wind speeds are making wind power generation less efficient, further straining the power supply.
With surging natural gas prices and warm and still weather in the UK in recent days, the country fired up on Monday an old coal plant that was on standby in order to meet its electricity demand, the BBC reports. UK fires up coal power plant as gas prices soar - BBC News
The UK has pledged to phase out coal-fired power generation by October 2024. Coal provided 3 percent of the UK’s power on Monday, compared to 2 percent averages in recent months. The UK has relied on some coal-fired power generation every day since mid-August, when there was a three-day run of coal-free electricity supply, a spokesman for National Grid ESO told the BBC.
The UK, as well as the rest of Europe, are bracing for further spikes in power prices when the heating season begins. The natural gas levels in storage in Europe are significantly below normal because of a cold snap in the spring and surging prices of natural gas amid lower shipments from Gazprom and soaring prices for liquefied natural gas (LNG).
For European consumers, energy prices are a pain point, and this year’s surging prices feed into inflation and the cost of goods.
In Germany, Europe’s biggest economy, higher energy prices pushed the annual inflation to a 13-year high in August, as household energy, motor fuels, and food prices jumped. Spain also saw a jump in inflation to the highest in several years due to surging electricity prices.
By Charles Kennedy for Oilprice.com 9th Sept 2021
Oil Demand Set To Grow Even After 2050, Energy Expert Says
Even after 2050, global oil demand is set to continue to rise because renewables cannot entirely replace fossil fuels, energy markets expert Anas Alhajji said during a recent energy conference hosted by Nigeria.
“The impact of climate change policies on oil demand are highly exaggerated – The impact is mostly on demand growth, not on demand itself,” Alhajji said during a keynote speech at the event focused on the impact of the energy transition on oil-dependent economies, as carried by Nigerian outlet Energy Frontier.
The world will need all energy sources even in three decades, the expert said. While technology will be a key enabler of the energy transition, it has its limits, Alhajji noted.
“African countries can reduce their carbon footprint by focusing on energy efficiency and the low hanging fruits, save oil & gas for exports or value added industries and place solar and wind projects strategically.”
Many analysts and forecasters expect global oil demand to peak at some point in the 2030s, or even earlier.
Last year, even OPEC put a timeline to peak oil demand. In its World Oil Outlook 2020 in October, OPEC said it expects global oil demand to exceed the pre-pandemic levels in 2022 and grow steadily until the late 2030s, when it will begin to plateau, in a major shift in its forecast that put a timeline to peak oil demand.
This year, the energy transition and the fight against climate change have become even more topical than during last year’s crisis. Analysts and forecasters are trying to understand and predict how the world’s still significant need of oil would reconcile with the net-zero targets that many countries have already set for 2050, or 2060 in China’s case.
Global primary energy demand is set to only grow in the future.
This higher energy consumption will need greater efforts to reach net-zero emissions, especially considering the fact even surging renewables capacity is unable to meet rising electricity demand. That’s an assessment of the International Energy Agency (IEA), which suggested in the bombshell report in May that net-zero 2050 wouldn’t need any new oil, gas, and coal investments after 2021.
By Charles Kennedy for Oilprice.com 20th Sept 2021
The Energy Crisis Is Sending Oil, Gas, And Coal Prices Soaring
- The European energy crisis is going global as the lack of natural gas supply begins to influence oil and coal markets
- Oil prices are set to break the $80 market as gas-to-oil switching increases oil demand amid continued supply outages
- Coal prices have hit a 13-year high in Europe and record levels in Asia as more coal is called upon
Just ahead of the winter season, Europe’s natural gas crunch created a snowball effect in global energy markets. What started as very low gas inventories in Europe during the summer is now spilling over into oil, natural gas, and coal prices all over the world, with no quick fix or signs of a major short-term correction in sight.
Brent Crude Prices Near $80
Brent Crude prices topped $79 per barrel early on Monday - the highest level in three years. Prices are now headed for $80 - a level which some analysts had forecast in the summer, but which not many market participants believed would happen because of the Delta variant depressing prices and demand in some parts of the world in July and August.
However, as the winter heating season in the northern hemisphere approaches, gas and power prices in Europe are surging, driving up coal demand and prices in Europe and globally as more coal is used in the power sector. At the same time, economies are rebounding from last year’s COVID-inflicted slump, with energy-intensive industries growing. But as demand rises, supply stays muted due to underinvestment in new energy supply in the past 18 months, the OPEC+ cuts, and weather-related outages such as Hurricane Ida at the end of August, which constrained U.S. Gulf of Mexico oil and gas supply throughout September.
Because the supply of oil, gas, and coal is struggling to catch up with recovering demand, energy prices are rallying around the world.
Consumers and industries in Europe have already started to feel the pinch from record gas and power prices. Industries across Europe are scaling back operations due to record natural gas and power prices, threatening to deal a blow to the post-COVID recovery. Utilities are firing up more coal-powered electricity generation, pushing demand for coal higher, despite the record carbon prices in Europe and the European Union’s pledges to be a net-zero bloc by 2050.
European coal prices have hit a 13-year high as coal supply to Europe remains constrained and utilities fire up more coal power plants amid surging natural gas prices.
The rally in natural gas prices is also spurring on global demand for coal. China and India are replenishing low stocks of coal, driving coal prices in Asia to records.
Goldman Sachs Doubles Coal Price Prediction
Goldman Sachs has recently nearly doubled its price projection for coal prices in Asia, expecting the benchmark Newcastle thermal coal to average $190 a ton in the fourth quarter, up from a previous forecast of $100 per ton, due to sky-high gas prices ahead of the winter heating season.
In China, a power supply crunch may be looming amid soaring coal and gas prices and electricity demand. Chinese authorities are ordering some factories in the heavy industries to curtail operations or shut down to avoid a power supply crisis, Bloomberg reports.
The gas and coal price spikes globally are set to raise demand for crude oil in the winter as a substitute fuel, analysts and OPEC itself say. A gas-to-oil switch and continued recovery in global oil demand have analysts and major oil trading houses predicting that oil will hit $80 and even $90 this winter - and potentially $100 a barrel at the end of 2022.
“Broader concern over tightness in energy markets, particularly for natural gas, is spilling over into the oil market. The Asian LNG market is trading at an equivalent of over US$150/bbl, while European gas prices are not too far off an equivalent of US$140/bbl. These higher gas prices will lead to some gas to oil switching, which would be supportive of oil demand,” ING strategists Warren Patterson and Wenyu Yao said early on Monday.
Oil price hitting $80 a barrel, however, would be a pain point for many crude importers, including large Asian customers such as China and India.
If the current price strength continues, the OPEC+ monthly meeting on October 4 could see the alliance easing the cuts for November by more than the 400,000-bpd supply increase each month, ING noted.
By Tsvetana Paraskova for Oilprice.com 27th Sept 2021
Are Carbon Taxes To Blame For Europe’s Energy Crisis?
- Europe’s energy crisis was, in part, caused by the desire of governments to make fossil fuels ‘prohibitively expensive’
- The common claim that energy can be clean, reliable, and cheap has fallen flat, teaching policymakers a painful lesson
- The harsh reality about carbon taxes is that they increase the cost of living and likely reduce quality of life
The European energy crisis seems to be the only thing anyone is talking about these days. Analysts opine over why it happened and how likely it is to spread globally (very, is the answer). The focus of most analysis has been overwhelmingly on the supply and demand gap that caused the crisis. In contrast, the underlying reason for the crunch hasn’t received nearly as much attention.
The fact is, Europe has been producing a lot less gas of its own in its drive to ‘go green’. It has made sure nobody really wants to produce gas because carbon taxes make fossil fuel production a lot more expensive. And there are more of these taxes coming, taxes which will only exacerbate this problem.
“Europe’s decarbonisation agenda requires making fossil energy use more expensive. That was always going to be a tough sell. Now that higher prices are suddenly here, it is going to be harder still.” This is what FT’s European Economics Commentator Martin Sandbu wrote in a recent article.
Indeed, the price aspect of the energy transition has been kept out of the public eye by government officials and environmentalist organizations who have all been hard at work hammering home the notion of falling costs for wind turbines and solar panels. As the current energy crunch shows, it’s not all about the falling costs of turbines or panels: even if those costs fall to zero, without sun or wind they cannot generate any electricity.
The harsh truth about a global energy transition
Only a few voices have dared warn that the energy transition will be anything but cheap. One of the big reasons for this would be the strategy of making fossil fuel production and use prohibitively expensive.
The noble idea behind this strategy is to discourage fossil fuel use, which would automatically lower emissions. It’s no wonder that carbon taxes are a popular measure for controlling emissions. They are simple and straightforward, and their effect is immediate. However, there are also side effects; these include higher electricity bills and, eventually, higher prices for everything.
“Gone will be that £19 London-Mallorca return flight on Ryanair,” wrote the FT’s Simon Kuper in an article about “real carbon taxes.” “Our clothes, petrol, meat and coffee will all get pricier. We’ll need to send an army of workers around the rich world’s houses ripping out boilers, installing heat pumps and insulating attics.”
According to Kuper, the current carbon taxes in Europe are more virtue-signaling than climate action. Carbon, he wrote, needs to become a lot more expensive to make a difference in emissions. But with it, everything else will become expensive. Politicians are aware of this, and it is the reason why they have not pushed for much higher taxes, especially after European businesses started complaining about the current carbon prices on the European emissions market.
One could look at this as a classic carriage-before-the-horse situation, in which authorities are pushing for what will effectively be a radical change in people’s way of life before they have ensured this change will be affordable for everyone - instead, European governments followed the Paris Agreement blindly.
On the other hand, the situation could be seen as unavoidable, as many critics have argued. The reason it was inevitable is that renewable energy and related technology has simply not been around long enough to become as dirt cheap as coal used to be before demand caused prices to skyrocket despite, one might note, carbon taxes. There is also the uncomfortable fact that renewable energy generation depends on the weather, which adds a substantial cost in terms of alternative backup sources of energy, which is what we are currently seeing in Britain and Europe.
Carbon taxes, according to pretty much everyone, are the only way to make sure our species reduces its carbon footprint. The higher these are, the better, proponents say, because high carbon taxes would speed up the transition to low-carbon energy. What they don’t say, including all those asset managers making net-zero commitments and urging governments to act more aggressively on emissions, is that this transition to low-carbon energy also means a transition to a lower standard of life.
Politicians like to advertise the energy transition as clean, reliable, and cheap. Yet this, as anyone who has ever worked in manufacturing or services knows, is the equivalent of fast, cheap, and good. You can never have all three at once.
You could therefore have clean and reliable, but it wouldn’t be cheap. Or you can have clean and cheap but, as we can see, it’s unreliable. As for reliable and cheap - these would be the detested fossil fuels that some governments are trying so hard to get rid of that they are willing to shoot themselves in the leg with carbon taxes.
By Irina Slav for Oilprice.com 27th Sept 2021
Additional Oil Market commentary & Market Data available from BBC Market Data
The Office for National Statistics record the price of heating oil and publish monthly updates on the average delivered cost of a domestic delivery of 1000 litres of kerosene in the UK . The information held by the ONS is freely available online and can be found here: ONS Price of heating oil
Last month’s oil market report can be found here:
Goff Heating Oil Market Price Information August 2021 - Goff Petroleum