Weekly energy security summary to 19 April

  • Antonín Beránek
  • 20.4.2017 08:01

Oil

In the last week, oil markets were most significantly affected by the geopolitical situation, especially the escalation between the US and North Korea. The threat of war pushed oil prices up. The mild stabilisation in the Middle East did not help to lower the prices.

Iraqi Oil Minister Jabar Ali al-Luaibi mentioned he would like to see oil prices reach 60 USD per barrel, a proposal supported by Saudi Arabia and Kuwait. These three countries extract more than half of OPEC's share of oil supply. In this context, it is worth noting that the OPEC+ countries (including Russia) have already reached their previous target - pushing prices to around 55 USD per barrel by reducing extraction by 1.2 million barrels per day. Some OPEC representatives believe that 60 USD is the price that will allow coexistence of all suppliers. Aside from the traditional suppliers, it will also allow a reopening of shale oil wells in the United States, but will not allow them too much space to develop new posts.

Verbal support for a rise in oil prices is also growing, a factor that also contributes to the push of prices. The reduction of oil reserves in the US is associated with the growth of petrol demand during the start of the holiday season. We also can not rule out further problems in Syria and North Korea.

On the other hand, the increase in the number of reopened shale oil wells in the United States will work against the growth of oil prices. It is expected that eleven more wells will be opened in the next week, reaching the highest number since April 2015. However, the market flexibility with respect to this data is falling. This is furthermore confirmed by the positions of the above-mentioned three OPEC countries.

Analysts are mainly expecting the prices to oscillate between 55 and 57 USD per barrel.

Natural gas

Deputy Minister of Energy of the Russian Federation Yuri Senturin announced on 12 April that Gazprom will start to deliver 2.5 million tonnes of liquefied natural gas to India per year from 2018. The deliveries will not be limited to the terminal on Sakhalin island. Gazprom claims to be a global player and can arrange for deliveries from anywhere. Subsequently, Russia's role in this sector strengthens.

The warm weather in the US is responsible for a slight decrease in gas prices. Natural gas supplies fell by 416 billion cubic feet year-on-year, reaching a value of 2.016 billion. Supplies of this commodity to the distributors remain stable, consumption decreased by about 7% compared to last week. Export of liquefied natural gas rose by 9% compared to the previous week. Prices are around 3.3 USD per million British thermal units. A price decline is expected at the end of the week. This naturally does not sit well with traditional gas suppliers, such as Russia and Qatar.

Nuclear energy

Toshiba is facing new problems associated with its Westinghouse division, whose auditors had not approved a report on management for the third quarter, which could lead to delisting Toshiba's shares from the Tokyo Stock Exchange. More clouds are gathering over the US nuclear power industry.

On 14 April, the terms for modernisation of the second block of the Armenian Metsamor Nuclear Power Plant were agreed upon at a joint Russian-Armenian meeting. Work will begin as early as in 2018. The position of Russia in Armenia, its traditional ally, is thus confirmed.

Ministry of the Environment of Baden-Württemberg has issued a permission last week to decommission unit 1 of NPP Philippsburg. In addition, decommissioning works on NPP Neckarwestheim have started as well. These are two out of eight oldest nuclear power plant units and their decommission was decided in 2013 after Japan's Fukushima accident. Germany thus fulfils its promises and continues the somewhat controversial diversion to renewable sources.

Alternative energy

According to the Lawrence Livermore National Laboratory in the US, consumption of alternative energy rose, although the total energy consumption has remained approximately at the same level.

Consumption of solar energy rose by 150 trillion BTU from 2015, which represents an increase of 38%. This was caused especially by a significant decline in solar panel prices in the past decade.

Also, consumption of wind power energy increased by another 330 trillion BTU, which is an increase of 19%. For comparison, coal consumption decreased by 9% and natural gas consumption in the US increased by 1%. Therefore, the United States report successful uses of alternative sources of energy as well.

About author: Antonín Beránek

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