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The Great Energy Jigsaw: rising commodity price, rig count and US crude inventories

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  The oil price is on the rise and so is the US rig count – and US crude inventories - yet there are no signs of oil price reaching equilibrium, safeguarding the interests of both the consumers and producers. The rising oil price is affecting the consumers and economists warn about an inflationary storm, engulfing the entire world that has the potential to derail the global recovery. The producers, meanwhile, are worried that the rise in price at this rate is not sustainable. The concerns of the producers stem from a reasonable worry: although most major economies are limping back to normal, rather the new normal, the crude inventories do not reflect an increased consumption by consumers as a whole; on the contrary, it was the exact opposite, clearly indicated by the recent API and EIA data. In short, it looks like a self-induced-customer-restraint. In these circumstances, the oil producers do not want to go through what happened during the period of 2014 – 2016. As of Friday t

Why do US crude inventoreis rise, when oil prices soar?

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  Defying logic, the US crude inventories rose for the third successive week, according to the data released by the EIA, US Energy Information Administration and the API, American Petroleum Institute. The API said on Tuesday that the US crude inventories rose by staggering 5.21 million barrels; the EIA put its figure at 5.3 million barrels, a day later on Wednesday. The inventory build-up, by a significant margin, left analysts scratching their heads searching for answers, as the expectations were quite the opposite. In fact, API’s own estimate for the week ending October 10 was 0.14 million barrels. The news indicating surprise increase in the US crude inventories comes at a time when the traffic is on the roads and aeroplanes are in the air, as if things were as if the world was in the pre-pandemic times. Since it happened at a time when the demand for commodity got a massive boost due to the global crunch in the gas markets, the development adds yet another piece to the crud

The EIA predicts higher fuel bills for US consumers this winter: the energy crunch shows no sign of abating

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There is no sign of let-up in the global energy crunch as of this week, as the chaos in supply chains grows unabated alarmingly. Long standing, sometimes running centuries back, political rivalries hardly help alleviate a catalogue of crises stemmed from the same problem that needs collective global action. The bone of contention between France and Britain over a range of issues, not just one, is a case in point; the French even threatened to cut off the electricity supply to the latter from the former at the heat of the argument. In addition, the diplomatic tussles between the West and Russia do not help get more gas into Europe at its hour of need either. Analysts argue that the European nations were too complacent about the potential contribution to the respective power grids by the renewables, especially wind. Much to their dismay, however, there were unusually long static periods in the atmosphere above the regions, where there are heavy concentration of wind turbines. Des

Floods in Chinese Coal-mining regions: doule whammy is not just for China!

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  China’s energy crisis was dealt a new blow on Monday as two key regions in the north, Shanxi and Shaanxi provinces, experienced heavy floods. The Chinese government, according to media reports, allocated over $12 million for those who had been affected by the disaster. In addition, some major businesses in China make their own contributions to alleviate the suffering of the people in the regions. The flood situation in Shaanxi province has, meanwhile, become a focus for global attention: it is not just the damage to an area over 190,000 hectares of farmland with crops – and over 17,000 houses – that bore the brunt of nature’s fury; on the contrary, it is the significance of this particular province in producing coal that is in unprecedented demand at present, not just in China, but across the world. The Chinese authorities have shut down 60 coal mines in the region due to the floods. A few days ago, China ordered energy firms to go on a buying spree to get enough coal for t

Global energy crisis: no magic bullet in the offing

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  The price of crude oil reached record high on Monday as the worries over the supply of fuel for the winter months in Europe and America are growing by the day. At present, the Western policymakers do not know what to do in order to alleviate the crisis: gas has been in short supply for weeks and that in turn has increased the demand for oil and coal. Coal mining firms did not increase the investments in the past few years as the industry, more often than not, has been singled out for causing the biggest environment damage; in these circumstances, they cannot increase production at short notice. It may not be fashionable yet; the demand for coal, however, is on the increase, in Europe, China and of course, elsewhere. The power shortages in China, meanwhile, are on decline as the authorities were ready to finance the imports, if necessary. It, however, has taken its toll on multiple production lines that could potentially lead to supply chain disruptions.   The Western leader

Rising energy prices: no solution without turning back to fossil fuels - at least in the short-run

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  Although China made it clear recently that China was committed to meets its global obligations, when it comes to curtailing the greenhouse gases, the reality on the ground has forced some regional powers within the country to dealing with the acute power shortages, especially in the northeast regions. The regional governments in question, most probably with the approval of the central government, have turned to Russia, Kazakhstan and Indonesia in order to fill the gap caused by the ban of commodity imports from Australia. In addition, China is encouraging the local coal miners to increase the production too in the coming months in order to avoid a repeat of what certain region experienced in the harsh winter months. China appears to be serious about the energy transition from fossil fuels to renewables in the long run; it has extended its ambition of turning its back on the former at a pragmatic pace to its investments overseas too, which, in turn has caused some countries in t

Crude Oil Markets: Saudi Arabia makes a generous gesture to ease the pain of consumers

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  In a tangible gesture of goodwill, Saudi Arabia has reduced the price of oil for Asia, Europe and the US, as the energy shortages have evolved into a major crisis. The OPEC+ meeting that lasted just over 20 minutes on Monday did not result in an increase in oil production, despite the direct pressure from the US. In the aftermath of the OPEC+ decision, however, the US did not react angrily either. That means Saudi Arabia, the world’s top crude oil exporter, may have told the US that it would do everything in its power to ease the burden of rising fuel prices on masses, both for the developing and developed world. The development also shows that even if oil producers want to increase the production, they have been handicapped by a combination of factors, ranging from years of underinvestment to manpower issues; when oil price hit rock-bottom values a few years ago, even before the pandemic, the producers tried just to stay afloat by cutting down on research and of course, manpow

Crude oil price: all eyes on today's OPEC+ meeting

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  Amidst the growing concerns about the short-term availability of fossil fuels that the world is so eager to ditch unceremoniously in few years, the focus of attention of the crude oil markets is on the OPEC+ meeting scheduled to be held today. Apart from those who are infectiously fond of the renewables, the rest partly blames the crisis on crude oil producers and when they say it, OPEC+ is usually on their radar. Blaming it on OPEC+ alone, however, like accusing the picturesque celestial giant, the Saturn, of polygamy, just because it has many rings. The current crisis does not just stem from lack of production; it’s the accumulation of a multitude of factors which were not taken seriously by the decision makers in time: the distribution issues, heavy local taxes and petty regional politics to name, but a few. In this context, the OPEC has become the convenient scapegoat when there is a herd in a metaphorical meadow that determines the price fluctuations of the vital commodi

Oil Price: US Intervention, falling crude inventories and China's energy woes cause ripples in the crude oil markets

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  The price of crude oil fell again on Friday, having crossed the psychologically significant $80 a barrel for Brent on Wednesday, wiping off the gains of the last two days. As of 09:30 GMT, the prices were at $74.26 and $77.60 respectively. The sentiments that triggered off the fall may have stemmed from the combination of three crucial factors: the explicit US intervention, asking the OPEC+ to produce more oil soon as the prices at this level are damaging to the global economy; rising US crude inventories, despite the forecasts to the contrary; China’s power shortages, coupled with slowing economy and growing political rivalries with its regional neighbours – and beyond. The unusual announcement by Jake Sullivan, the US National Security Advisor that he would take up the issue of rising oil price with Saudi Arabia, the de factor leader of the OPEC, despite that not being in the administrative domain of the top official, immediately affected the crude oil markets. On Thursday, J

Fossil fuels are not going away even after 2045 - OPEC+

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  Having been emboldened, perhaps, by the chaos engulfing the global energy markets, the OPEC+ says the fossil fuels will still be in use through 2045 and beyond and there will not be a perfect substitute for it for decades to come. OPEC+ admits that the tendency to embrace renewable sources will continue unabated. It, however, will be like the digital divide between the poor and wealthy nations in the information age, with the rich nations moving ahead with it much faster than the poorer nations, leaving behind the latter to do the catching-up. OPEC+ made its latest upbeat forecast known on Tuesday in its annual World Oil Outlook. OPEC+ expects 28% growth in energy demand in proportion to an increase in population in 2045, by over 1.7 billion people. The cartel says that in order to meet the expected two-fold growth prospect in a period of 25 years from now, the energy generation must meet a significant increase. Dr Mohammed Barkindo, the Secretary General of the OPEC+, meanwh

Oil Price: Brent crosses the psychologically-important $80 barrier

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  The price of Brent crossed the psychologically important $80 barrier in the early hours, today, undoubtedly causing ripples across the corridors of power across the world. As of 10:30 GMT, the prices of two major benchmarks, WTI and Brent, stood at $76.27 and $80.23 respectively. It is obvious that the demand picked up much faster than analysts anticipated it would and it inevitably led to the rise in crude oil price. The OPEC+ meeting, scheduled to be on October 4, will be the focus of analysts, investors, traders and of course, politicians with the cartel being under enormous pressure to increase the production – or at least to reverse its production cuts, announced last year,   by a significant amount. Even the analyses by OPEC+ did not anticipate a rebound in demand on this scale. That was the reason for them to exercise restrain, when it came to increasing productions. The main importers, meanwhile, resorted to tapping their strategic petroleum reserves in order to ste

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