DAILY ENERGY DAILY
US power generation mix, Russia’s oil output, China’s oil demand, electricity demand in Europe, impact of rising natural gas prices in Asia, Iraq-Turkey talks over crude exports, and more
CHART OF THE DAY: US Power Generation Mix and the Role of Natural Gas
Summary:
Figure (1) above compares sources of utility-scale power generation in the first quarter of 2021, 2022, and 2023, and reveals key trends: the decline in coal use amid an increased utilization of natural gas and renewable energy, while nuclear and hydro energy has remained virtually flat. Although oil is rarely used in US power generation, the situation changed in some areas last year when prices of natural gas and LNG increased substantially as we discussed in our Weekly Newsletter on December 26.
EOA’s Main Takeaway:
Natural gas use in US power generation has been increasing. The growth in Q1 2022, however, was low against the backdrop of rising natural gas prices that forced some utilities to switch back to coal. As prices later decreased in Q1 2023, utilities abandoned coal and reverted to natural gas, and this explains the large decline in coal use in Q1 2023 compared to Q1 2022.
The prices of natural gas will keep determining when coal is back in use in the US power generation. But one thing is clear: Natural gas will continue to play a significant role in the US power mix. As solar and wind energy projects expand, the need for a backup fuel that is environmentally friendly will increase. Our view is that the failure of some green policies will make natural gas the default fuel.
We are more bullish on natural gas than oil for the long term.
STORY OF THE DAY
BLOOMBERG: China Natural Gas Traders Pause Spot Purchases as Prices Surge
Summary:
Bloomberg reported that the sharp spike in Asian natural gas prices has forced buyers in China to pause spot purchases.
Data from S&P Global Commodity Insights shows that benchmark prices increased 19% to $11.58 per million British thermal units on June 14, "the biggest one-day gain since last November," Bloomberg said.
"That surge is dealing a blow to renewed demand for the fuel from price-sensitive emerging economies," Bloomberg wrote citing traders.
EOA’s Main Takeaway
This proves the point we have been talking about for months now: substitution among various energy sources! Higher gas prices would lead to higher consumption of coal, and consequently delay the implementation of climate change policies.
However, coal consumption comes with challenges. An increase in coal use will lead to higher carbon emissions that could become unbearable at one point. Some countries like China have had to shut down some coal-run utilities due to emissions, and this resulted in blackouts and brownouts, forcing a switch to private power generation that relies on diesel and LPG.
NEWS OF THE DAY
1- NIKKEI ASIA: Russia pays Sakhalin dividends in Chinese yuan
Summary:
Nikkei Asia reported today that Moscow has paid dividends from the Sakhalin 1 and 2 oil projects in far east Russia in the Chinese currency, yuan, and due to Western sanctions. The shift in the currency use was expected since Moscow formed last year new companies to manage its interests in these projects, Nikkei Asia said, and the dividend payment methods were expected to change.
EOA’s Main Takeaway: