Oil and gas to play a role for a 'long time': Shell

Spanish Market: Crude oil, Electricity, Natural gas
18/03/24

Oil and gas will play a role in the global energy needs for a "long, long, long time to come," said Shell chief executive Wael Sawan today.

Sawan is working to move beyond a dialogue that "seems to fixate" on the notion one must choose between fossil fuels like oil and gas or renewables like solar and wind.

"It's all. And we need them in abundance," Sawan told participants at CERAWeek by S&P Global conference in Houston today.

Stable oil production is deemed necessary by Shell as it transitions its customers to lower carbon solutions over the course of decades. Energy security in the EU is also top of mind for Sawan, who acknowledges the tough choices government heads must make when choosing where to spend their marginal dollar. But he still sees strategies that do not adequately address long term supply needs.

"I still think we rely too much on chance in that regard," said Sawan, but noted it is "definitely much more pragmatic and much more realistic than maybe a few years ago."

"The positive thing that we've tried to reinforce for Europe is that energy transition and energy security for you and Europe are one in the same, because you don't have too many options," Sawan said, highlighting coal decommissioning, nuclear project lead times and declining oil and gas production.

"Unfortunately, there's still more politicization of energy than there needs to be."

Freight disruption in the Red Sea is having "very little" effect on LNG movements, according to Sawan, largely because of supply and demand being "nicely balanced" on either side of the Suez Canal. Sellers on the east side can swap with counterparties on the west side to minimize disruption to trade flows.

By Brett Holmes

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20/12/24

US House votes to avert government shutdown

Washington, 20 December (Argus) — The US House of Representatives voted overwhelmingly today to extend funding for US federal government agencies and avoid a partial government shutdown. The Republican-controlled House, by a 366-34 vote, approved a measure that would maintain funding for the government at current levels until 14 March, deliver $10bn in agricultural aid and provide $100bn in disaster relief. Its passage was in doubt until voting began in the House at 5pm ET, following a chaotic intervention two days earlier by president-elect Donald Trump and his allies, including Tesla chief executive Elon Musk. The Democratic-led Senate is expected to approve the measure, and President Joe Biden has promised to sign it. Trump and Musk on 18 December derailed a spending deal House speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump lobbied for a more streamlined version that would have suspended the ceiling on federal debt until 30 January 2027. But that version of the bill failed in the House on Thursday, because of opposition from 38 Republicans who bucked the preference of their party leader. Trump and Musk opposed the bipartisan spending package, contending that it would fund Democratic priorities, such as rebuilding the collapsed Francis Scott Key Bridge in Baltimore, Maryland. But doing away with that bill killed many other initiatives that his party members have advanced, including a provision authorizing year-round 15pc ethanol gasoline (E15) sales. Depending on the timing of the Senate action and the presidential signature, funding for US government agencies could lapse briefly beginning on Saturday. Key US agencies tasked with energy sector regulatory oversight and permitting activities have indicated that a brief shutdown would not significantly interfere with their operations. But the episode previews potential legislative disarray when Republicans take full control of Congress on 3 January and Trump returns to the White House on 20 January. Extending government funding beyond 14 March is likely to feature as an element in the Republicans' attempts to extend corporate tax cuts set to expire at the end of 2025, which is a key priority for Trump. The Republicans will have a 53-47 majority in the Senate next month, but their hold on the House will be even narrower than this year, at 219-215 initially. Trump has picked two House Republican members to serve in his administration, so the House Republican majority could briefly drop to 217-215 just as funding for the government would expire in mid-March. Congress will separately have to tackle the issue of raising the debt limit. Conservative advocacy group Economic Policy Innovation Center projects that US borrowing could reach that limit as early as June. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil Bndes invests more in Sao Paulo EV fleet

20/12/24

Brazil Bndes invests more in Sao Paulo EV fleet

Sao Paulo, 20 December (Argus) — Brazil's Bndes development bank approved R94.8mn ($15.6mn) in financing for transport company MobiBrasil to buy 87 electric buses in Sao Paulo city. The environment ministry's climate fund — created to finance climate change mitigation projects and Bndes — will be responsible for R45mn. A federal fund to provide financial security to the unemployed, dubbed FGTS, will be responsible for the remaining R49.8mn. This is Bndes' first operation using FGTS resources. Earlier this month, Bndes said it will invest R2.5bn to buy 1,300 EV-buses in Sao Paulo city . On 9 December, the city's council postponed the bus fleet transition from diesel-powered to EVs to 2054 from the previous 2038 deadline. By Maria Frazatto Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US government agencies set to shut down

20/12/24

US government agencies set to shut down

Washington, 20 December (Argus) — US federal agencies would have to furlough millions of workers and curtail permitting and regulatory services if no agreement is reached by Friday at 11:59pm ET to extend funding for the government. US president-elect Donald Trump and his allies — including Tesla chief executive Elon Musk — on 18 December upended a spending deal US House of Representatives speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump endorsed an alternative proposal that Johnson put together, but that measure failed in a 174-235 vote late on Thursday, with 38 Republicans and nearly every Democrat voting against it. Trump via social media today indicated he would not push for a new funding bill. "If there is going to be a shutdown of government, let it begin now, under the Biden Administration, not after January 20th, under 'TRUMP,'" he wrote. There was little to indicate as of Friday morning that Trump, Republican congressional leadership and lawmakers were negotiating in earnest to avert a shutdown. The House Republican conference is due to meet in the afternoon to weigh its next steps. President Joe Biden said he would support the first funding deal that Johnson negotiated with the Democratic lawmakers. "Republicans are doing the bidding of their billionaire benefactors at the expense of hardworking Americans," the White House said. Any agreement on funding the government will have to secure the approval of the House Republican leadership and all factions of the Republican majority in the House, who appear to be looking for cues from Trump and Musk on how to proceed. Any deal would then require the support of at least 60 House Democrats to clear the procedural barriers, before it reaches the Senate where the Democrats hold a majority. The same factors will be in play even if the shutdown extends into early 2025. The Republicans are set to take the majority in the Senate when new Congress meets on 3 January. But their House majority will be even slimmer, at 219-215, requiring cooperation of Democratic lawmakers and the Biden administration. What happens when the government shuts down? Some agencies are able to continue operations in the event of a funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy, which includes the Energy Information Administration and its critical energy data provision services, expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. The Interior Department's shutdown contingency plan calls for the Bureau of Land Management (BLM) to furlough 4,900 out of its nearly 10,000 employees. BLM, which is responsible for permitting oil, gas and coal activities on the US federal land, would cease nearly all functions other than law enforcement and emergency response. Interior's Bureau of Safety and Environmental Enforcement, which oversees offshore leases, would continue permitting activities but would furlough 60pc of its staff after its funding lapses. The US Bureau of Ocean Energy Management will keep processing some oil and gas exploration plans with an on-call group of 40 exempted personnel, such as time-sensitive actions related to ongoing work. The shutdown also affects multiple other regulatory and permitting functions across other government agencies, including the Departments of Agriculture, Transportation and Treasury. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Investment funds cut net long positions on Ice TTF

20/12/24

Investment funds cut net long positions on Ice TTF

London, 20 December (Argus) — Investment funds have cut their TTF gas net long positions on the Intercontinental Exchange (Ice) by nearly 50TWh from their historic peak at the end of November, while commercial undertakings' positions have moved strongly in the opposite direction. Investment funds' net long position had climbed steadily from 202TWh in the week ending 18 October to an all-time high of nearly 294TWh by 29 November. But in the two weeks since that point, their net position has dropped again by 48TWh ( see graph ), leaving their 246TWh net long position at the smallest since 8 November, according to Ice's latest commitments of traders report. However, only around 30pc of the decrease in the net long position came from closing long positions, with the large majority coming from opening up more shorts. Total long contracts were cut to 445TWh on 13 December from 461TWh on 29 November, but short contracts jumped to 200TWh from 167TWh in the same period. Such a large trimming of the net long position contributed to falling prices over the period — the benchmark Argus TTF front-month price fell from €48.45/MWh at the start of the month to €41.10/MWh at the close on 13 December. The front-quarter, front-season and front-year contracts all fell by roughly the same amount, as the entire price curve shifted down. While investment funds reduced their net long position over these two weeks, commercial undertakings — predominantly utilities — moved in the opposite direction, with their net short position falling to 37TWh from 102TWh. This was driven entirely by opening up more long contracts, which jumped to 947TWh from 877TWh, while shorts increased by just 5TWh between 29 November and 13 December to 984TWh. Commercial undertakings' total open interest therefore soared to 1.93PWh by the end of last week, triple the volume of investment funds' total open interest. Investment funds have in the past two weeks bought "risk reduction" contracts — generally used for hedging purposes — for the first time since May 2021. This suggests that some investment funds hold physical positions that they want to hedge their exposure to, although the volumes are small at around 300GWh for both shorts and longs. While utilities' positions in the futures markets are mostly risk-reducing to offset the risk held in physical positions, investment funds' positions are typically not risk-reducing because they are bets on the direction of prices. That said, utilities and other commercial undertakings such as large industrial buyers have increasingly set up trading desks that compete with hedge funds to capitalise on price trends and volatility in recent years. Risk reduction contracts account for around 69pc of commercial undertakings' open interest, meaning the other 31pc of contracts — amounting to 600TWh — were more speculative in nature. This 600TWh of speculative total open interest is only just below the 645TWh held by investment funds. By Brendan A'Hearn ICE TTF net positions TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: More changes for Dated crude benchmark ahead

20/12/24

Viewpoint: More changes for Dated crude benchmark ahead

London, 20 December (Argus) — The crude market has adjusted to the presence of US WTI in the Dated basket, but the past year has revealed some hiccups, suggesting more changes will be needed to the benchmark's structure. WTI has been a part of Dated for more than a year, in which time it has bought much-needed liquidity to a shrinking amount of physical crude underpinning the benchmark, and has encouraged a return of some old, long-absent market participants and the entry of a few new ones. WTI has introduced more transparency to Dated, making it much more easily accessible. While some traders feared the grade would arrest any volatility, which is necessary for trading companies to thrive, this has not happened. Instead, WTI has effectively tied the European market to the US one, with European Ice Brent futures following WTI Nymex futures very closely. But recent months have exposed some flaws, suggesting some more changes to the benchmark are needed. European refiners run as much as 4.5mn b/d of light sweet crude, Vortexa data show. Dated was designed to represent the price moves of this large market via a few crudes produced, and mostly consumed, in the region. But production of several component grades have shrunk because of natural decline at North Sea fields. Production of Brent, the benchmark's namesake grade, has fallen from above 400,000 b/d in 2001 to just 38,000 b/d this year. Forties' exports dropped from more than 600,000 b/d to 175,000 b/d in the same time. Therefore it seemed fair when Dated was set by WTI nearly half of the time, as it is the single largest crude that European refiners buy, accounting for around 14pc of all their supplies. The situation reversed in the last weeks of 2024. WTI has not set Dated since 11 October, with that duty mostly shared between Oseberg, Ekofisk and Troll. But values of these grades — especially Oseberg and Troll — are rather theoretical, due to low liquidity of just 2-5 cargoes a month. It is not uncommon to see bids for those grades in the window, when the scarce supplies loading on the dates covered by bids are already placed. The same applies to Brent, for which loadings range between just 1-2 cargoes every month. WTI and Forties have greater liquidity, allowing them to be more representative of Europe's light sweet market, but their recent marginal role in setting the benchmark price raises a question if grades like Brent, Oseberg and Troll need to be in the basket at all. QPs an almighty relic of the past It might feel counterintuitive that smaller and more expensive grades affect the price of Dated — which is set by the cheapest grade in the basket. But Oseberg, Ekofisk and Troll, which are typically more expensive on a fob basis than is WTI on a delivered-Europe basis, are adjusted by quality premiums (QPs) for benchmarking purposes. QPs are calculated at 60pc of the difference between each grade and the most competitive of the six benchmark grades in the second month prior to the month of loading. The mechanism was made for a basket of crudes that originate in the North Sea and trade on a fob basis. Inclusion of WTI, which in turn is adjusted by intra-European freight to make it a fob price in the North Sea, has widened QPs for the three grades. With price spreads between pricier and cheaper benchmark grades increasingly dependent on volumes of WTI coming to Europe, such an adjustment does not seem to serve its purpose anymore. By Lina Bulyk Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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