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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! As many predicted, oil prices have only moved up a little on the back of unexpected cuts from OPEC. The markets are shifting their focus to the U.S. Federal Reserve’s upcoming meeting, but the gas crisis from 2022 precipitated by Russia’s invasion of Ukraine is not being repeated this year. Let’s have a look at that. 

Today’s top headlines:

• Energy crisis not over, warns German energy regulator
• COLUMN: Hydro power hotspots hit by hot and dry weather
• Oil rises as Saudi cut supports and focus turns to Fed

China’s power demand has not been as expected. 

The price of natural gas is far below where it was at this time last year after Europe scrambled last year to fill supply ahead of the winter after its supply from Russia was cut off. And in China, weak factory demand means that country has cut back on imports of liquefied natural gas (LNG). That means the outlook for this winter is a lot less dire than last year at this time.  

In Europe, many utilities have been able to sock away more gas into storage for the coming winter; gas storage levels right now in Europe are about 70% full, and Goldman Sachs analysts say storage could be 100% full by August, which would remove an enormous source of worry given it’s been nearly a year now with next to no supply from Russia, once Europe’s primary supplier of gas.  

Some of the reason for this is because of reduced economic demand, which isn’t a positive. Germany was considered to be in a recession early this year, and in China, factory demand has also slumped, with analysts saying they also do not see coal prices rising or spot LNG imports picking up due to a generally sluggish domestic recovery, as Reuters reports here. “Weak industrial demand is the root cause, with key gas consumers like ceramics and glass makers operating at low rates as they face poor external demand,” said a senior Chinese trader. 

Soybean plants grow at Benson Hill crop accelerator facility in Creve Coeur, Missouri. REUTERS/Karl Plume

It’s not enough to just produce soybeans these days. Now, people are enhancing them with more protein to feed human diets – and that planting will also meet growing demand for biodiesel, as Karl Plume and Rod Nickel report here. U.S. renewable diesel production could more than double by 2025, reaching 5.9 billion gallons, driven in part by tax credits for renewable fuels after legislation passed by President Joe Biden – and higher-protein soy varieties are part of the picture.  

Increased demand for protein is driving growth in soy meal and canola oil, but “crop accelerators” are also resulting in more product that can be turned into biodiesel. “We’re going to utilize the full genetic potential of the plant to produce things that are more meaningful and valuable,” said Matt Crisp, Benson Hill’s co-founder and CEO, in Missouri, where Reuters visited. 

Why is this man smiling? Why, it’s UAE’s Oil Minister Suhail Mohamed Al Mazrouei, and his country saw its OPEC quota increase. REUTERS/Leonhard Foeger

OPEC’s surprising cut to production has lifted oil prices, but only a bit – and many analysts are skeptical that there will be anything more than a nominal boost to the price of crude. That’s not necessarily great for Saudi Arabia, which is bearing much of this burden on its own, by cutting overall production by 1 million barrels per day to levels not seen since the COVID pandemic.  

On the other hand, the United Arab Emirates was allowed to bump up its quota by 200,000 bpd to 3.2 million from 2024 – the one major producer of oil that is likely to see a notable increase in output in the coming year. Some nations like Angola and Nigeria lowered their quotas to reflect current production. And analysts point out as well that the weakened demand, more supply from the U.S. and lower growth out of China could stem real gains. Citigroup analysts say prices aren’t likely to boost oil to a high $80s-low $90s range, and indeed while Brent crude has risen from prior to the meeting, it is still sitting at $77 a barrel.  

For the past few months, Bangladesh has enforced power cuts almost every day. 

Bangladesh is in the middle of its worst electricity crisis since 2013, as a Reuters analysis of government data shows here, as the country has been hit by the need for imports while its forex reserves drop along with the value of its currency. So far, the country has been forced to cut power for 114 days in the first five months of 2023. Earlier this week, about a quarter of the country’s gas-fired power plants and about two-thirds of its coal-fired capacity were shut because of lack of fuel. 

The thing is, the heat isn’t getting any better. The peak use time for power is in the coming months, and so the outages are expected to continue. Bangladesh is home to 170 million people, making it the eight-largest in the world in terms of population. More than half of its power generation comes from natural gas, and another 27% from biomass and waste, followed by coal.

“The situation remains stable and under control.”  

Energoatom, Ukraine’s nuclear energy company, on the status of the Zaporizhzhia nuclear power plant following the destruction of the Kakhovka Hydroelectric Station and dam

The European Commission is investigating the flow of allegedly fraudulent biofuels into the EU after complaints from Germany, as Noah Browning reports here. The European Union has big incentives for biodiesel production made with waste oils and fat to boost renewable energy use – but they’re worried that companies in Asia are mixing biofuels with cheaper oils and pawning them off as renewable.  

The EU is looking to increase its oversight of the biofuels trade, after certain imports had been potentially mislabeled as more profitable biofuels, per sources. Last week, the top European biofuels body said potentially “dubious” biodiesel imports into Europe from China could cause the EU biofuel industry to collapse. 

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