Biden era to blur Latin American fault lines

Spanish Market: Biofuels, Crude oil, Electricity, Emissions, Natural gas, Oil products
09/11/20

Latin America's early reactions to Joseph Biden's US electoral victory presage a blurring of the ideological divide that the incumbent US administration has fostered across the region.

Reminiscent of the Cold War, outgoing US president Donald Trump's administration sought to build a conservative coalition of Latin American countries disposed to investment from the US over China, and united around a Florida-friendly campaign to oust Venezuela's president Nicolas Maduro and further isolate Cuba. Colombia, Brazil and more recently the Dominican Republic were all in. But for most other governments in the region, Trump's rigid "with-us-or-against-us" strategy toward Caracas and Havana never sat well at home, where domestic politics in countries such as Chile were more complicated than the zero-sum US policy would accommodate. And they were uncomfortable with Washington's arm-twisting over China that ignored the reality of Beijing's regional investment, trade and lending in countries like Ecuador and Brazil.

Most now welcome a less confrontational and more nuanced US approach toward the region that will bring Washington into closer alignment with the EU and restore cooperation on pressing transcendent issues — namely the Covid-19 pandemic and climate change — rather than the traditional immigration and anti-narcotics themes that previously shaped US policies.

One concrete manifestation of president-elect Biden's approach will be the resumption of a thaw in relations with Cuba that was spearheaded by former US president Barack Obama with whom he served as vice president in 2008-16. In recognizing the "new course" chosen by the US electorate, Cuban president Miguel Diaz-Canel signaled yesterday an openness to "the possibility of a constructive bilateral relationship that is respectful of differences."

Biden could leverage this tentative relationship to prod Cuba's close ally Venezuela into establishing fair electoral conditions, a process that would be tied to a gradual easing of US financial and oil sanctions. This path would leave little room for Venezuela's hardline opposition that the Trump administration sought to fashion into a credible interim government led by Juan Guaido, who predictably was one of the last in the region to congratulate Biden yesterday.

But the new rapprochement with Cuba could help to improve ties with Bolivia's new moderate socialist president Luis Arce and turn a page with Argentina. "It's the change of an era, which is very important for Latin America because these four years were very difficult in Latin America's relationship with the United States," Argentina's president Alberto Fernandez said in a television interview.

Lookalikes mum

All eyes are now on Trump's populist lookalikes in Mexico and Brazil to see how they will respond to the coming White House shift. Mexico's president Andres Manuel Lopez Obrador and Brazil's president Jair Bolsonaro were conspicuously quiet yesterday, as kudos for Biden poured in from across much of the world. Their silence is an implicit endorsement of Trump's refusal to concede the presidential race in spite of vote counts favoring his rival.

As Latin America's largest economies, Mexico and Brazil have the most at stake in the energy and environmental policies a Biden administration plans to usher in after the January 2021 inauguration. Because of its overwhelming reliance on US fuel and natural gas imports, Mexico is likely to feel an early brunt of Biden's plan to incorporate environmental and labor commitments into trade relations. The pressure could derail President Andres Manuel Lopez Obrador's already dubious campaign to restore Mexico's national oil industry, or force him to reorient energy policy on greener and more financially sustainable terms consistent with Washington's new priorities.

In Brazil, Bolsonaro will face immediate pressure to tackle Amazon deforestation, putting him at odds with his cattle-ranching constituency. But Biden's broader environmental policy plans could also bring greater cooperation with Brazil on renewable fuels and energy. State-controlled Petrobras, already on an aggressive divestment path, could enjoy renewed prominence as a non-Opec oil supplier in a world that is transitioning more quickly away from fossil fuels, so long as China continues to soak up supply.

By Patricia Garip

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07/11/24

US renewable diesel imports fall, spot liquidity stalls

Seattle, 7 November (Argus) — The US renewable diesel import lineup for November is unusually thin as last month's equipment failure in Singapore limits loadings, while broader supply and policy uncertainty constrain both near-term liquidity and incentives to plan beyond the fourth quarter. Just two vessels carrying renewable diesel are currently expected to reach US west coast ports this month, according to tracking data from global trade and analytics platform Kpler. Clearocean Maria reached Los Angeles with about 109,000 bl from Singapore on 2 November, per Kpler, while Leikanger is due to follow on 10 November to Long Beach, California, with an additional 345,000 bl of Singaporean renewable diesel. The November lineup as of Thursday also reflected an atypical lack of both Newfoundland-origin cargoes and Jones Act vessels for domestic volume delivery to the west coast from the US Gulf. Altogether, present waterborne supply totals for this month would represent a 69pc drop from average west coast deliveries — both foreign and domestic — from January-September, to about 455,000 bl. Final October receipts are yet to be confirmed, but data aggregated from Kpler and early-month bills of lading suggest about 1.49mn bl across all west coast-bound vessels. Total volumes are subject to change as more cargoes are scheduled, or if previously listed vessels are rerouted or identified as carrying a different product. But the thinned lineup is likely the first material consequence of an equipment failure that shut down production of US-spec renewable diesel at Neste's Singapore biorefinery last month. Neste's pause in Singapore is likely to continue to stymie the flow of offshore fuel to the US west coast through the end of the year, contrary to long-held market expectation that the scheduled end of the blender's tax credit (BTC) next month would spur a flurry of imports this quarter. There remains no public timeline for a return to normal operations in Singapore, while the BTC is slated to give way to the Inflation Reduction Act's 45Z Clean Fuel Production Credit for 2025-onward, with the latter's effect on future import economics yet unknown. In the meantime, tighter supply has spurred widespread supplier withdrawal from California's spot head of the pipeline (hop) R99 markets, and resultant stagnation in spot differentials has muddled even negotiations for remaining 2024 contracted volume. An absence of hop offers in Los Angeles and San Francisco prevailed across much of October, and scattered bids in the first week of November went entirely unanswered as Donald Trump's re-election introduced new uncertainty for federal incentive programs and, thus, US production and blender economics. In essence, several unknowns cloud the market's present ability to develop forward supply strategy: the fate of the BTC and terms of various proposed extensions, the role the White House's changing of the guard will play in shaping remaining 45Z guidance, and the knock-on effects on both domestic production and imports from Singapore and Newfoundland — together responsible for an average 906,000 bl/month delivered to the US west coast this year so far. By Jasmine Davis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US extends oil service firms' Venezuela waiver

07/11/24

US extends oil service firms' Venezuela waiver

Washington, 7 November (Argus) — The outgoing administration of US president Joe Biden extended authorization for oilfield services companies Halliburton, SLB, Baker Hughes and Weatherford to continue working in Venezuela until 9 May 2025. The waiver allows the service companies to pay their staff and maintain limited operations, but it prevents them from drilling new wells or otherwise contributing to state-owned PdV's production and exports. The Biden administration reimposed sanctions on Venezuela's oil sector in April, after a six-month reprieve. The sole exemption is a waiver for Chevron allowing it to import oil into the US from its joint venture with state-owned PdV. US crude imports from Venezuela averaged 212,000 b/d in January-August, US Energy Information Administration data show. Chevron's Venezuela output has stood at about 200,000 b/d. Neither president-elect Donald Trump nor his campaign addressed the Venezuela sanctions regime or indicated if they would change it. Republicans in Congress ahead of the election called for the Chevron exemption to be revoked. The Biden administration separately extended a prohibition for holders of $3.4bn in PdV 2020 bonds guaranteed by 50.1pc in US refiner Citgo's holding company to exercise their claim, this time until 7 March 2025. The PdV bondholders in theory hold a superior claim to Citgo Holding — a legal entity that directly owns Citgo and, in turn, is owned by Citgo parent company PdVH. A federal court in Delaware recently oversaw an auction of PdVH shares that yielded a $7.3bn bid from a company backed by investors including Elliott Investment Management. Legal wrangling over the bids and the distribution of auction proceeds is likely to keep Citgo ownership unresolved in the near term. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

German energy-intensive industry reduces output

07/11/24

German energy-intensive industry reduces output

London, 7 November (Argus) — Production from Germany's energy-intensive industrial sectors was lower in September than a year earlier for the first time in seven months, driven by lower generation from the chemicals sector. Energy-intensive industrial production fell by about 3.3pc in September from August, according to data from German statistical office Destatis ( see data and download ). This was driven largely by a 4.3pc fall in output from the chemicals industry. And overall industrial output was about 1.8pc lower than in September 2023, falling year on year for the first time since February this year. The chemicals industry has warned of lower business confidence in the sector since the summer . Energy-intensive industrial branches previously showed signs of a slow recovery, but general manufacturing output across Germany has been on a consistent downward trajectory in recent months ( see manufacturing index graph ). Manufacturing output across all industrial sectors fell on the month by about 2.5pc, having risen on the month by 2.6pc in August. Third-quarter output as a whole was about 2pc lower than in the second quarter. Industrial economic activity has remained "very weak" recently, German economy and climate ministry BMWK said. But it expects a bottom to form in about the new year. BMWK has predicted that Germany will be in a technical recession in 2024 , before a return to 1.1pc GDP growth in 2025. The German economy started on a downward trajectory in 2022 , triggered by higher energy prices on the back of a halt to Russian gas deliveries to the country. And it has since been hampered by other structural factors such as labour shortages and a high bureaucratic burden. Higher gas prices could drive output lower A steady rise in gas prices in recent months could lead industrial firms to curtail domestic industrial production or use LPG instead of gas for some industrial processes. Argus assessed the German THE everyday price at an average of €40.68/MWh in October, about 56pc higher than the €25.98/MWh in February, the index's lowest point this year. Much higher gas prices since 2022 have driven a drop in Germany's industrial gas demand. Gas use in German industry of 256.5TWh in 2023 was about 22pc lower than the pre-crisis 2018-21 average of 327.6TWh, according to Destatis data released earlier this week ( see sector demand graph ). Firms either curtailed production in reaction to higher prices or switched to LPG in some processes in which gas is used as an energy carrier. But some processes, such as the production of ammonia through the Haber-Bosch-synthesis, use methane as a feedstock, which means they cannot shift to LPG as easily. Gas used as a feedstock reacted more strongly to the energy crisis than the gas used for energy. Gas use as a feedstock in the chemicals industry fell by 36pc in 2023 from 2021, while gas use for energy fell by only a quarter. Many fertiliser producers curtailed capacity in 2023, and Europe's largest fertiliser producer, Yara, expects its European gas costs to rise on the year this winter . The producer has already indicated it will shift its focus towards cheaper ammonia production in the US and away from Europe. Industrial gas use on track to rise in 2024 German industrial gas demand is on course to be higher this year than in 2023, based on daily data ending at the end of October. Industrial gas use for production processes other than space heating was 746 GWh/d in January-October, about 8pc higher than a year earlier, according to Argus estimates. But if September's industrial output drops extend to a multi-month trend, this would pull down the average for this year as a whole. Industrial demand typically falls in December when the holiday period limits economic activity, which could push down the average further. And the collapsed German governing coalition is unlikely to send strong recovery signals to the German economy. German market area manager THE publishes a combined dataset for gas demand by industry and the power sector. Argus splits out power-sector gas demand data by assuming operational efficiencies of 39-42pc, in line with fuel use data from Destatis, and factors out seasonal demand swings linked to space heating by looking at analogue trends in the residential and commercial sector ( see demand split graph ). Argus' estimates diverge from Destatis' annual demand data by only about 1-3pc, except for a 6pc gap in 2021 ( see Destatis vs Argus estimates graph ). By Till Stehr German manufacturing index index, 2021=100 German industrial gas demand by sector TWh German industry and power demand split GWh/d Destatis data vs Argus estimates GWh/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

German government collapse could delay energy policies

07/11/24

German government collapse could delay energy policies

London, 7 November (Argus) — The collapse of the German coalition government may delay critical energy security policies currently under discussion, with industry and power associations expressing concerns about potential political standstill on such issues in the coming months. Asked in Berlin on Thursday, energy minister Robert Habeck said he does not expect a general agreement between the remaining red-green government and the conservative Union, which would ensure all further projects in this parliamentary period. And "it remains to be seen" if some decisions could be made together with the opposition on a case-by-case basis where the interests of government and CDU align, Habeck said, although energy security could be one topic where bills could be passed during the minority government phase before the end of this year. CDU politicians including on the state level had "constantly" written him letters to ask when some laws would "finally" be passed, he said, highlighting that while he does not expect "a great deal of helpfulness" he hopes the opposition will work with the government on the basis of how beneficial planning security would be for Germany as a whole. Among the energy security laws waiting to be passed is the draft law that abolishes the German gas storage levy on cross-border interconnection points , while the government has not yet passed its power plant strategy nor submitted the second of its two planned "solar packages". Chancellor Olaf Scholz on Wednesday said that among the legislative projects he was trying to pass before the end of the year were "immediate measures for our industry" on which he was currently deliberating with "companies, unions and associations". He said he would quickly try to begin speaking to opposition leader Friedrich Merz around the questions of defence and economic stability, since the economic stabilisation "cannot wait until elections have taken place". The coalition government collapsed after Scholz sacked finance minister Christian Linder , leading the latter to withdraw his party from the ruling coalition. An election looks likely in early 2025. Industry and renewables associations in particular voiced concerns about the timing of the collapse and potential political stagnation, with general leader of chemicals association VCI calling for elections at "the earliest possible time" to avoid "stalemate and political standstill", while the federation of German industries BDI said the country needs a "new, effective government" with a parliamentary majority "as quickly as possible". VCI stressed that Germany needs low energy prices, faster permitting and less bureaucracy, while BDI highlighted that existing market uncertainty is likely to rise with the arrival of the new US administration at the beginning of 2025, when Scholz plans to hold a vote of confidence. And wind association BWE stated that the country "cannot afford to stand still", while solar power association BSW appealed to members of the Bundestag to "make decisions and compromise" on important energy policy issues across party lines. Renewables association BEE called for laws and budget funds already in process for the continuity of energy measures to be adopted by December, stating that "even in a political crisis" the country "cannot afford" stagnation and stalemates. Conservative opposition sister parties CDU and CSU have been polling well ahead across 2024 at around 30-33pc of the vote. While the parties agree with the ruling coalition on several aspects of energy policy — including supporting hydrogen-fired and climate-neutral gas-fired generation — they notably diverge on the topic of nuclear generation. Germany completed its long-awaited nuclear phase-out in April 2023, but the CDU/CSU this week announced it would conduct an investigation into whether the last plants to be decommissioned could feasibly be reactivated. The CDU/CSU also reiterated its support for the development of fourth and fifth-generation nuclear reactors. Nuclear plants are notorious for lengthy construction times, meaning a single parliamentary term may not be enough to see projects through without cross-party support, and the ruling Greens and SPD remain anti-nuclear. The country has also not yet decided on a final storage location for its existing nuclear waste, which will need to be stored there for "one million years", according to the final report from the commission for the storage of highly radioactive waste. But the CDU and SPD have both voiced support for the introduction of a national green gas sales quota , with the CDU/CSU this week highlighting green gas quotas in the gas grid as a way to leverage the market to reach climate goals. By Till Stehr and Helen Senior Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Deforestation in Brazil's Amazon plunges 31pc

07/11/24

Deforestation in Brazil's Amazon plunges 31pc

Sao Paulo, 7 November (Argus) — Deforestation in Brazil's Amazon biome plunged by around 31pc over the 12 months ending in July — the sharpest decline in over 15 years — bringing the country closer to meeting its target of eliminating deforestation in the region by 2030. Brazil lost 6,288km² (2,404mi²) of Amazon rainforest from August 2023-July 2024, a 31pc decline from 9,064km² in August 2022-July 2023, according to the science and technology ministry's national space institute INPE. The fall in deforestation marks the third consecutive decline in deforestation in the Amazon, after devastation in the region reached a multi-year high of 13,038km² in 2020-21. With the decline, deforestation in the biome reached its lowest level since 2015, when the region recorded losses of 6,207km². Deforestation fell steeply in all of the largest states in the legally defined Amazon region — known as Legal Amazon — except for Roraima, according to data compiled by the Amazon deforestation satellite monitoring system (Prodes). The Legal Amazon contains the nine states in the Amazon basin: Acre, Amapa, Amazonas, Para, Rondonia, Roraima and Tocantins, as well as most of Mato Grosso and Maranhao states. It contains all of Brazil's Amazon biome, 37pc of the cerrado tropical savanna biome and 40pc of the pantanal biome. Para state continued to lead in deforestation with 2,362km², accounting for 37.5pc of total deforestation in the biome. But this year's figure was 28pc lower than the 3,299km² in the prior period. Amazonas state posted the second largest deforestation in the period, with losses reaching 1,143km², accounting for 18pc of the total area of forest lost. Deforestation there fell by 29pc in the 2023-24 cycle from a year earlier. Mato Grosso, Brazil's largest grain-producing state, cut 1,124km² of forests, down by 45pc from the 2,048km² in the previous cycle. The government attributed the decline to increased oversight in the region, with the number of fines issued for illegal deforestation nearly doubling from 1 January 2023 — when president Luiz Inacio Lula da Silva took office — and October this year, compared with the period between January 2019-December 2022. The government also highlighted that deforestation was down in 78pc of the 70 municipalities that were declared priority regions by the administration earlier this year. The government announced R730mn ($129mn) in funding to reduce environmental devastation in these municipalities in April. The government also reduced deforestation in the cerrado by nearly 26pc to 8,174km² in the period. That is the lowest level since 2019 and the first time deforestation in the biome has declined in four years. With the reduction in deforestation, Brazil's 2023 emissions fell by 12pc to 2.3bn tons of CO2 equivalent (t CO2e) from 2.6bn t CO2e in 2022, according to Brazilian climate think tank Observatorio do Clima. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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