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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! It’s June, and oil prices just keep falling. We’ll look at just how the big oil producers are taking the weakness in crude as the summer driving season kicks into high gear. And with OPEC’s big meeting coming this weekend, Reuters NEXT is holding a briefing on “OPEC’s big decision” this coming Tuesday. If you want to listen in, the link is right here! 

Today’s top headlines:

• New global renewables capacity additions to rise by a third this year – IEA
• Petrobras eyes global expansion as Brazil hopes fade – sources
• China, India receive record Russian crude in May

That’s Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman, who has been complaining a lot lately about short-sellers. OPEC+ still isn’t likely to cut output this coming weekend anyway. REUTERS/Maxim Shemetov

There’s been some saber-rattling from oil ministers of late in the key producing countries, aimed not at their usual targets like consumers like the U.S., but at short-sellers. That said, this coming weekend’s meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+, as the parlance goes) isn’t likely to produce additional cuts to production from the big players, as Ahmad Ghaddar and Maha El Dahan report here.  

The expectation for no cuts comes even as Brent crude has slumped to the low $70s while U.S. crude is below that figure. OPEC+ surprisingly cut output in April, responding to a weakened global outlook, but that hasn’t stopped the oil market from dipping further. Shortly after that, crude jumped to $87 a barrel – but hasn’t held those gains, moving Saudi Energy Minister Prince Abdulaziz bin Salman to warn short-sellers that they should “watch out.” But the market hasn’t paid much attention, responding instead to the lackluster economic outlook from China and other spots.

Climate change what now? (That’s Exxon CEO Darren Woods.) 

What a difference two years make. Shareholders of Exxon Mobil and Chevron this week overwhelmingly rejected calls for stronger measures to mitigate climate change, and the votes weren’t terribly close, with most garnering somewhere between 10% and 20% of shareholder support (a measure on direct methane measurements hit 36%), as Sabrina Valle reports. The U.S. giants are still far away from their European peers who have accepted tougher emissions reductions goals, and those meetings were also disrupted by climate-change protestors.  

Exxon and Chevron had their meetings online, which, well, doesn’t leave as much room for protest. Still – it’s quite a turnaround for Exxon, which two years ago was forced to accept two new board members with a focus on climate issues at the fore of the arguments from a small hedge fund that won over major shareholders like big pension funds. Since then, Exxon shares have soared, and they’ve retrenched, doubling down on oil-and-gas investment.  

Battery storage projects are all the rage in Texas.

A number of big companies, including BlackRock, Korea’s SK, and Switzerland’s UBS, are investing heavily in battery storage plants in Texas, in part because of the state’s lingering power grid problems, as Nichola Groom and Laila Kearney report here. The projects are generating big returns – in the 20% range – compared with other renewable projects, making investment more attractive.  

The big expansion of battery storage could help the state avoid the grid collapse that followed a 2021 ice storm that killed 246 people. Private equity firms, utility companies and energy storage providers are rushing to take advantage of big returns right now as companies building the storage facilities see it as a way to protect themselves against more grid problems and to offset the wild swings in power prices in the state.  

Projects coming online are generating returns of around 20%, compared with single digit returns for solar and wind projects, according to Rhett Bennett, CEO of Black Mountain Energy Storage, one of the top developers in the state. “Resolving grid issues with utility-scale energy storage is probably the hottest thing out there,” he said. 

This is a still from drone footage released by Freedom of Russia Legion showing what they claim is destruction of Russian military targets near Shebekino, taken off social media on June 1. Freedom Of Russia Legion/via Reuters

Two oil refineries in Russia were hit by attacks this week, a signal that major energy facilities in that country could be at risk as that nation starts to get hit more frequently by artillery attacks, as Guy Faulconbridge and Vladimir Soldatkin report. The drones attacked two oil refineries 40-50 miles (65-80 km) east of Russia’s biggest oil export terminals on Wednesday, according to Russian officials, who did not attribute blame. A fire at one of the terminals was later extinguished. 

Russia is one of the biggest exporters of crude and natural gas, so any interruption to its facilities could strain supply. One refinery, the Afipsky, is about 50 miles east of the Black Sea port of Novorossiisk, one of Russia’s most important oil export gateways, and process about 44 million barrels of oil a year (about 120,000 barrels per day). The Novorossiisk port, along with the Caspian Pipeline Consortium (CPC) terminal, brings about 1.5% of global oil to market. 

Another drone hit the Ilsky refinery, around 40 miles east of Novorossiisk, per Russian state-owned news agency RIA. 

“There is no single oil major that really wants to transition.”  

Mark van Baal, founder of activist group Follow This, which suffered resounding losses at Exxon and Chevron annual meetings. 

Mexico’s President Andres Manuel Lopez Obrador came into office with the goal of weaning the country off foreign gasoline and diesel supplies – but state refiners are producing more and more fuel oil rather than gasoline because of Mexico’s heavy crude that is hard to process in refineries, as Ana Isabel Martinez reports here.  

In April, Pemex fuel oil production averaged over 322,000 barrels per day (bpd), highest since July 2010, even though the country’s crude output is more than 20% below its 2016 outlook. Gasoline output is at 291,000 bpd, or 4% lower than a year ago and 10% lower than in 2016.

“The (growing) production of fuel oil is a problem that really extends from the deterioration of the refineries to their crude diets,” a Pemex executive said. The country’s refiners were more used to lighter crudes – and would need to upgrade to add facilities like coking plants that can further refine fuel oil into other fuels.  

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