US June inflation slows to 1-year low of 3pc
US inflation slowed in June to the lowest in a year while core inflation hit a more than three-year low, signs of easing price pressures that may prompt Federal Reserve policymakers to begin cutting borrowing costs in the fall.
The consumer price index (CPI) slowed to an annual 3pc in June, lower than economists' estimates for a 3.1pc reading, from 3.3pc in May and 3.4pc in April, the Bureau of Labor Statistics reported today. So-called core inflation, which strips out volatile food and energy prices, rose by 3.3pc in June, the lowest since April 2021, and slowing from 3.4pc in May.
The energy index rose by an annual 1pc in June, down from 3.7pc in May, while the gasoline index contracted by 2.5pc in June compared with a 2.2pc gain in May. Energy services rose by an annual 4.3pc, slowing from 4.7pc the prior month.
After the report, the CME's FedWatch tool signaled an 81pc probability that the Fed will cut its target rate by a quarter point in September from near 70pc odds Wednesday. Probabilities of three quarter point cuts by December rose to 38pc today from 26pc the prior day.
Food costs rose by 2.2pc in June from 2.1pc the prior month. Shelter rose by 5.2pc from 5.4pc the prior month. Transportation services rose by 9.4pc in June following a 10.5pc gain the prior month. Airline fares fell by 5.1pc in June after a 5.9pc decline.
Headline inflation had risen from 3.1pc in January to as high as 3.5pc in March as economic data, especially job gains, had come in stronger than expected. That had prompted the Federal Reserve to delay widely expected rate cuts as it said it needed "greater confidence" that inflation was on a "sustained" path towards its 2pc target.
The Fed hiked its target rate to a 23-year high of 5.25-5.5pc in July 2023 and has kept it there since to rein in inflation that hit a high of 9.1pc in June 2022. The Fed, in its latest policy meeting last month, penciled in one likely quarter point cut this year, down from three penciled in last March.
CPI contracted by a seasonally adjusted 0.1pc in June from the prior month, after a flat reading in May, a 0.3pc monthly gain in April and 0.4pc gains in February and Marhc. Core CPI was up by 0.1pc for the month after a monthly gain of 0.2pc in May.
By Bob Willis
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Polish gas reforms still needed: Energy Traders Europe
Polish gas reforms still needed: Energy Traders Europe
London, 15 July (Argus) — Recent government plans to amend Poland's onerous gas storage legislation are positive, but more serious reforms are necessary to foster increased competition, industry association Energy Traders Europe told Argus . The Polish government last month said it plans to amend the Act on Stocks in November , removing importers' obligation to maintain mandatory gas storage reserves and placing it on state-owned strategic reserves agency Rars instead. Energy Traders Europe welcomed the move but recommended several further steps to bolster competition and liquidity. The Act on Stocks "needs to be revised first and fast" before addressing other issues in the market, the association's gas market manager, Pawel Lont, told Argus . While shifting the obligation to Rars is a positive first step, Poland would still have "state-enforced storage filling with hardly any capacity left for commercial use", which removes an important flexibility source for the market, he said. Ultimately, storage needs to be reformed to a point at which commercial filling becomes not only possible but desired, Lont said. The government needs to ensure that the system provides an incentive for the storage operator to offer products that are attractive to users, Lont said, noting that currently "this incentive simply does not exist, and this set-up can only inflate the costs of gas consumption in Poland". Energy Traders Europe previously suggested that the strategic reserve should be calculated against the demand of vulnerable customers only, as opposed to all consumers, which would significantly reduce the overall burden and free up space for commercial use. It would also be desirable to move the start date of the draft storage legislation to 1 April 2025 and ensure that licence applications declaring the intention to start commercial activity after this date are tested for compliance with these new rules. It can take a year or more for licence applications to be approved, so "the sooner we start, the better", Lont said, adding that the licensing procedure in Poland is "undoubtedly the most problematic in all of Europe". Applications involve a long list of documents that are difficult to complete in a timely manner. There are also issues on the reporting side, with "an impressive list of 20+ positions reported to different bodies at different points in time" on top of standard EU reporting, Lont said. These obligations create exposure and considerable costs for companies, so it would be beneficial to run a critical review on their necessity, he said. And Polish transmission tariffs are high, although this is understandable given Gaz-System's construction of interconnectors with several neighbouring countries over the past few years. Polish tariffs are decided yearly, while entry/exit splits can also be adjusted, which is problematic for trading companies that would like to book longer-term products. The multipliers and seasonal factors "definitely deserve some rethinking as they severely inflate the costs of short-term capacity products, while booking yearly products in Poland can be quite a bet", he said. But even if these other issues are addressed, "We will [still] be looking at a largely monopolised country, with the dominant player having exclusive access to LNG terminals", Lont said. While the gas release programme is positive for the market, it would be beneficial to see whether Orlen's dominance could be challenged at import terminals. Orlen has booked all capacity at the Swinoujscie terminal, as well as at the planned Gdansk terminal, meaning it continues to be the sole beneficiary of the 100pc discount on entry to the grid from LNG terminals. Several measures could be taken to open other companies' access to the terminals, such as secondary capacity trading, use-it-or-lose-it rules or set-aside rules and limits when allocating capacity to a single entity, Lont said. But these measures would be ineffectual without a guarantee that other firms are ready and willing to book this capacity, so the reforms discussed above need to come first so as to ensure that these participants can actively trade in Poland beforehand, Lont said. In general, it is not unusual to have a dominant company in a given country, but "one just needs an environment in which the group cannot abuse its position and its offer can be challenged", he said. Orlen had a 91pc share of the Polish retail market last year, according to regulator URE. Poland has "all the cards" to develop a liquid gas market, but this takes time, so reforms must get going as soon as possible. Since the change of government, it has at least become "much easier to approach the ministries in Poland", which "helps a great deal on the transparency side", Lont said. By Brendan A'Hearn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Waning German products oversupply evens domestic prices
Waning German products oversupply evens domestic prices
Hamburg, 15 July (Argus) — Germany's recent refined products oversupply, particularly in the south, is waning because of higher demand and technical issues reducing availability. Price differences within the country are starting to level out. Availability of heating oil and road fuels at the Bayernoil consortium's 215,000 b/d Vohburg-Neustadt refinery in Bavaria is restricted. At least one of the refinery's stakeholders is restricting loadings of E5 and 98 Ron gasoline and will probably continue to do so until the end of July. Planned maintenance works on a reformer have reduced production. Diesel and heating oil availability for spot sale are also restricted. A unit outage is affecting the refinery's diesel throughput, and a damaged heating oil tank at Vohburg has restricted loading capabilities since June. Term contracts are unaffected. Demand has increased across the board because of lower domestic prices, after Ice gasoil futures dropped week-on-week. Traded heating oil volumes reported to Argus last week rose especially strongly, by 28pc, and fuel demand also went up. By Natalie Mueller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Singapore LNG bunker sales post fresh highs in June
Singapore LNG bunker sales post fresh highs in June
Singapore, 15 July (Argus) — Demand for alternative marine fuels rose further in June at the port of Singapore, with LNG demand for bunkering touching fresh highs. Total bunker sales in June rose by 8.7pc from a year earlier to 4.27mn t, according to preliminary data from the Maritime and Port Authority of Singapore (MPA), lifted by a 2.7pc increase in vessel throughput in Singapore to around 10.11mn in June. But sales slipped by 11pc from a strong May. "It is [lower] LNG prices versus fuel oil prices, along with higher fuel demand, due to the longer passage through the Cape, [and] that is playing an important role," said a key Singapore-based LNG bunker supplier, referring to the increased demand from the rerouting of vessels because of attacks on shipping in the Red Sea region. Demand for bunkering LNG has increased this year, with Singapore recording 175,030t of LNG used to fuel ships in the first half of this year. This is more than a threefold increase from the same period last year when 36,900t of LNG was bunkered in Singapore. Demand for biofuel blends in the first half increased by 46.7pc versus the same period last year. January-June sales were 280,160t compared with 191,000t a year earlier. The blend of 76pc very-low sulphur fuel oil (VLSFO) and 24pc used cooking oil methyl ester, also known as B24, has been the first choice of alternative fuel among shipowners in Singapore, partly because of its drop-in character. Increased enquiries emerged for B24 in Singapore since April-May this year, with short-term tenders going to key shipowners planning voyages to Europe. "There are customers taking more volumes in H2 2024. Volumes wise [for the year, this] might not see a huge increase [but we] will just see more customers," said an international trader. Consumption of conventional bunker fuels has remained largely steady in Singapore, with the exception of high-sulphur fuel oil (HSFO) where sales for June rose by 26pc compared with a year earlier to 1.56mn t. There was a 29pc increase for January-June this year against the 2023 equivalent. Firmer demand has continued for lower priced HSFO, particularly for vessel owners hoping to maximise the use of installed exhaust scrubber systems in handling alternative marine fuels. VLSFO consumption was down by 2pc in the first six months of 2024 versus the same period in 2023, with overall demand largely unchanged. Supplies have been higher in Singapore from this year's second quarter, which is expected to remain in the short term, said industry participants. Red Sea diversions Singapore has absorbed 40pc of the increased demand created by the Red Sea disruptions, data from the International Bunker Industry Association show. Demand in Singapore rose to 4.62mn t/month in this year's first quarter from 4.23mn t/month in 2023. Container terminals in Singapore were congested in the first half of the year because of Red Sea voyage rerouting. Container throughput at the city-state grew by 6.4pc from a year earlier in the first half of 2024 to 20.25mn 20ft equivalent units (TEUs) by June, according to the MPA. Singapore in May recorded a 7.7pc year-on-year increase to 16.9mn TEUs, said Singapore's transport minister Chee Hong Tat. Tonne-mile demand for tanker vessels is expected to grow this year. Greek crude tanker owner Okeanis Eco Tankers forecasts tonne-mile demand to grow by 5.6pc in 2024 and by a further 5.5pc in 2025. By Cassia Teo, Sean Zhuang and Mahua Chakravarty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Snowy, Lochard ink Iona gas storage deal
Australia’s Snowy, Lochard ink Iona gas storage deal
Sydney, 15 July (Argus) — Australian state-owned utility Snowy Hydro has signed a 25-year deal to store gas at the country's largest domestic gas storage in Victoria state to support its gas-fired power stations. The agreement with the 26PJ (694mn m³) Iona site, owned by domestic gas storage firm Lochard Energy, will commence in January 2028. This will be ahead of the permanent closure of the 1,480MW Yallourn brown coal plant, operated by Hong Kong-owned utility EnergyAustralia, in mid-2028. "The gas storage agreement with Lochard Energy will support the operation of our gas-fired power stations in Victoria," Snowy Hydro chief executive Dennis Barnes said on 15 July. Snowy Hydro, which owns and operates three gas-fired power stations totalling 1,290MW at present, is building the 750MW Kurri Kurri gas-fired plant , of which the initial 660MW stage is scheduled to come on line in late 2024. Snowy's 320MW Laverton North and 300MW Valley Power generators are located in Victoria. The deal is expected to underwrite the Heytesbury underground gas storage project , Lochard's chief executive Tim Jessen said, which will expand the capacity of Iona by approximately 3PJ. Australia's southeastern states are expected to face significant shortfalls of gas later this decade as fields supplying Victoria's 1,150 TJ/d (30.7mn m³/d) Longford gas plant deplete. A mixture of pipeline expansions to bring more gas south from Queensland state, LNG import terminals, and reducing demand have been floated to bridge this gap. Two LNG import terminals are proposed for Victoria but both require environmental approvals from the state government. Snowy Hydro is facing significant pressure from the federal government over its delayed Snowy 2.0 pumped hydroelectric project, which has suffered significant cost overruns and delays. Snowy last year said the scheme's costs had doubled to A$12bn ($8.1bn) from a previous A$5.9bn estimate , which was itself higher than the original guidance. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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