View in Browser

Sign up for Reuters newsletters

By David Gaffen, Editor, Energy Markets

Hello Power Up readers! The world spent the weekend watching something of a mutiny in Russia, but the oil market is nonplussed, with Brent crude up a bit less than 1 percent on Monday and U.S. crude still a shade under $70 a barrel at this point. In the meantime, let’s look at renewable production, which in 2022 did not account for a heck of a lot more in the energy mix than it did the year previous. It also doesn’t help that Siemens Energy, one of the biggest producers of wind turbines, is facing massive problems with many it has installed, as we’ll discuss. 

Today’s top headlines:

• Oil markets shrug off Russian political turmoil
• COLUMN: Oil bulls sidelined by economic uncertainty
• Texas power demand again forecast to peak this week amid heat wave

That’s a giant metal spider at the Glastonbury music festival during the Chemical Brothers set this past weekend. The stages were powered by renewable energy. However, gigantic metal arachnids account for very little of the world’s power use, so fossil fuels are still overwhelmingly dominant in terms of energy consumption. REUTERS/Jason Cairnduff

As it turns out, in 2022, fossil fuels accounted for 82% of global energy consumption, as renewable energy growth remains slow. And where renewables are gaining in terms of the energy mix, they’re taking away from nuclear, which does not emit greenhouse gases. That data comes from the UK-based Energy Institute, who, with consultancies KPMG and Kearney, put together what was for decades BP’s statistical review of world energy. 

Renewable capacity grew by a combined 266 gigawatts – led by solar, as Shadia Nasralla reports here. But greenhouse gas emissions rose, coal demand hit its greatest rate since 2014, and renewables only account for about 7.5% of energy consumption and 12% of power generation – taking away from nuclear, with coal, still making up 35% of power generation, in first place. 

“We are still heading in the opposite direction to that required by the Paris Agreement,” said Juliet Davenport, president of the Energy Institute. That may keep happening if the next item means anything. 

That’s the logo of the Energy Asia conference in Kuala Lumpur on Monday. REUTERS/Hasnoor Hussain

Numerous oil giants worldwide have retreated in their commitments to cutting emissions, and as such, there have been more voices proclaiming the ongoing need for fossil fuels, citing the risks to economic growth without them. Malaysia Prime Minister Anwar Ibrahim told a conference on Monday that net-zero emissions targets should not come “at the expense of economic growth or vice versa”, as Muyu Xu and Mei Mei Chu report from the inaugural Energy Asia conference hosted by Malaysia’s state oil firm Petronas. 

Asia has some of the world’s largest greenhouse gas emitters, beginning with China, which accounted in 2021 for about 30% of the world’s total emissions, although its per-capita figure is still lower than the United States. Among other nations in the top 10 are Indonesia, Japan and India, according to the EU’s Emissions Database for Global Atmospheric Research. Anwar said natural gas will continue to be a big part of the mix for Malaysia, and numerous other nations have been ramping up their capabilities to import the super-cooled fuel to replace coal output.  

Saudi Aramco CEO Amin Nasser at the event warned against all “transition eggs in the new energy basket.” 

Naphtha margins have sunk as Chinese refiners ramp up output. Graphic by Mohi Narayan.

China’s refiners have been amping up their ability to produce petrochemicals – similar to oil giants worldwide who see the sector as one for tremendous growth as overall fuel demand starts to plateau.

But the swift increase in refining capacity is looking like it’s going to cause a glut of production capability that is already sapping margins for processing naphtha – a partially refined oil used primarily for chemical production – into ethylene. Those margins sunk into negative territory last week as the graphic shows.  

China is the world’s biggest maker and user of petrochemicals, but with demand sluggish, producers are still operating these plants due to worries that shutting units would lose them money, as Mohi Narayan and Andrew Hayley report here. But that is happening anyway – Asia’s biggest refiner, China’s state-run Sinopec, said its chemicals business was facing pressure from new supply, while the independent refiner Hengli Petrochemical said its net profit slid 76% in the first quarter.  

Sawanga Antoine, an informal fuel retailer, waiting for customers in front of his stall in Garoua, Cameroon. Nigeria’s end to a fuel subsidy has had a ripple effect throughout the region. REUTERS/Desire Danga Essigue

Nigeria’s recent decision to end a longtime fuel subsidy has had ripple effects throughout the region, as drivers in nearby nations find they are paying a lot more for fuels since they can no longer rely on the cheap petrol that was smuggled out of Nigeria for use in places like Cameroon, Benin, and Togo.

The biggest victim? Motorcycle taxis, the most ubiquitous form of transport in the region, which used that fuel and now drivers are faced with having to raise prices for customers who are balking at paying such rates, as Desire Danga Essigue reports here.  

There is no good data on how much is smuggled out of Nigeria. The state-run petroleum company, NNPC, estimates that 66 million liters (about 415,000 barrels) of petrol leaves its depots every day, while independent energy experts say the country consumes about 4 million liters a day – leaving a lot of room for smuggling.

In Cotonou, the commercial capital of Benin about 60 km (37.3 mi) from Nigeria, there are big lines at official petrol stations – including “zemidjan,” the local word for motorcycle taxis. “The zemidjan-men are even fighting to get served,” said Janvier, a worker at a fuel station there. 

“We believe in second-half of this year we will still see weak demand, and that will be extended to part of next year.”  

Vitol CEO Russell Hardy at an event in Kuala Lumpur, on the outlook for oil markets 

One of the biggest makers of renewable components, Siemens Energy, hit the market with bad news at the end of last week, saying problems at its wind turbine business would take years to fix, as Sabine Wollrab, Maria Sheahan and Christoph Steitz report here. The company’s stock has been hammered after its wind division said problems are affecting 15% to 30% of its roughly 132 gigawatts worth in turbines worldwide.  

The issues could cost more than $1.1 billion to fix – which includes problems with rotor blades and bearings. The wind industry has been growing in recent years as it takes up more energy output, but the industry has also been hit with big delays in part availability and overall costs. Global wind capacity has doubled since 2016, according to the Statistical Review of World Energy.  

Sponsors are not involved in the creation of newsletters or other Reuters news content.

Power Up is sent twice weekly. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this newsletter? Unsubscribe here.

To manage which newsletters you’re signed up for, click here.

Reuters Terms & Conditions and Privacy Statement