China's energy appetite shrinking

Lucky 13

Brent Crude hits a 13 month low as demand expectations continue to weaken and U.S. military action against ISIS is raising hopes that the terror organization will not be a threat to Iraqi oil interests in the southern part of the country. Word that the U.S. military sent 130 additional advisers to Iraq and a report by the International Energy Agency pressured markets.

Prime Minister Nuri Kamal al-Maliki's looks like he lost support to keep power in Iraq as members of his own party abandoned him and Iran congratulated Haider al-badi the new prime minister-designate. The military has sent 130 additional advisers to northern Iraq to plan for the evacuation of refugees under siege by Islamist militants, Defense Secretary Chuck Hagel announced Tuesday.

The International Energy Agency report confirmed market sentiment when it cut its global demand forecasts for 2014 and 2015 and pointing out that despite all of the conflicts going on in the world the market remains well supplied. It might feel even more supplied after China's industrial production growth fell to 9% down from 9.2% in June missing expectations. The data also pushed copper lower. Chinese retail sales came in weaker than expected.

The British Pound is tanking after the Bank of England cuts its forecast for average wage growth in half, predicting average wages to rise by 1.25% this year. Marc Carney said there were still "a lot of uncertainties to contend with" given record participation in the jobs market, "remarkably weak" wage rises and a rising number of threats to the global economy. He said that whenever interest rates did increase, they would still do so gradually. "What we are putting emphasis on, is the path of interest rates, which is limited and accommodative," Mr. Carney said.

Highlights from the Energy Information Agency’s Short Term Energy Outlook!

Gasoline(NYMEX:RBU14): “U.S. drivers could find more savings at the pump in the months ahead as gasoline prices are expected to fall through the end of the year to an average of $3.30 a gallon in December.”

Crude Oil: “Driven in large part by record levels of demand for crude oil by U.S. refineries over the last month, the spot price discount for West Texas Intermediate(NYMEX:CLU4) crude oil to dated Brent crude oil was cut nearly in half since June to $3 a barrel in July. The WTI to Brent discount is expected to increase to an average of $10 a barrel in the fourth quarter of this year as refinery runs decrease heading into the refinery turnaround season and U.S. crude oil supplies continue to grow.” 

“U.S. oil production next year is expected to be the highest since 1972. The United States and Canada will provide most of the increase in global non-OPEC oil production over the next two years.” “After reaching a peak in May, estimated global unplanned crude oil and other liquids production outages fell for the second month in a row to 3.2 million barrels per day in July. An increase in unplanned  production outages of 200,000 barrels per day in Iraq between May and July was more than offset by 200,000 barrels per day and 150,000 bpd reductions in outages in Libya and Nigeria, respectively.“

Natural Gas(NYMEX:NGU4): “Natural gas production growth this year and mild weather have contributed to stronger gas injections into storage and lower gas prices this summer. Natural gas storage injections continue on pace for a record refill of 2.6 trillion cubic feet by the end of October. EIA is raising its forecast for onshore marketed natural gas production this year and in 2015, and lowering its natural gas price outlook. “

Renewables: “For the first time ever, the amount of U.S. electricity generated from wind, solar and other non-hydropower renewables is on track in 2014 to exceed the level of electricity produced from electric-generating dams and other hydropower on an annual basis.” “Renewable sources, including hydropower, biomass, wind, solar, and geothermal energy, are expected to generate 13% of U.S. electricity supplies in 2014.”

Electricity: “High natural gas fuel costs earlier this year encouraged the electricity industry to use relatively more coal for power generation and less natural gas. Natural gas prices have moderated in recent months, slowing the projected shift to coal-fired generation for the rest of the year. Coal's share of U.S. electricity generation in the second half of 2014 will average almost 41% compared with about 39% last year.”

Coal: “U.S. coal consumption is expected to increase this year because of more coal use by the power sector in response to higher natural gas prices.”

 

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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