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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! We’re headed into earnings season shortly, and while the global oil giants should have done well in the most recent quarter, demand remains a concern. The market is still hanging in there but hasn’t found the same juice it expected after OPEC’s latest production cut. Here’s what’s going on.  

Today’s top headlines:

• EXCLUSIVE: Kazakhstan has ramped up exports bypassing Russia
• U.S. Supreme Court rebuffs Exxon, Chevron in climate litigation
• Russia on track for 2023 output of 9.6 mbpd – sources

Here’s the deal, Jack. Solar panels.

The Inflation Reduction Act was hailed upon passage in 2022 as a big step to boost U.S. manufacturing of renewable components and increase renewables spending. Now, though, solar companies are waiting to see what the Biden administration does to lay out what qualifies as “American” equipment, as Nichola Groom reports here.  

The issue is that solar makers haven’t kicked off a big boom because they’re waiting to see if they qualify for subsidies if the panels are assembled in the United States using components made overseas; the Treasury Department plans on releasing those details this month. The U.S. does not include solar cells necessary for making panels. 

The IRA contains a 30% tax credit for renewable energy facilities – but the U.S. makes very little in the way of actual solar components, so if the rule is narrowly defined, that could limit the benefits of those subsidies. “The average project size that we do is $300 (million) or $400 million. So you’re talking about a lot of money,” George Hershman, CEO of solar contractor SOLV Energy, said in an interview. 

India has been diversifying away from OPEC and toward Russia.

India, one of the largest importers of oil worldwide, has been diversifying away from the Middle East over the last couple of years, and right now is pulling in more oil from Russia than in a long time – and dropping their reliance on OPEC to the lowest it has been in about 22 years, as Nidhi Verma reports here.

The cheaper Russian oil is the primary reason, as the nation is now importing about 1.6 million barrels per day (bpd) in Russian crude grades – taking advantage of a discount on Urals stemming from Western-led sanctions against Moscow.  

But India has had its differences with Saudi Arabia, the world’s biggest crude exporter, in the past, and had sought out other sources for purchases in the past few years. The nation was notably upset with OPEC when it elected not to raise output in 2021 despite a doubling of oil prices, during that time, and it had since asked its refiners to diversify away from the Middle East. Russia’s been able to fill that gap, as its crude is heavily discounted.  

The Middle East still accounts for 55% of India’s imports, but the activity suggests that before long, India may follow the path of the United States, which was once reliant on the Middle East as well.   

Exxon Mobil’s Beaumont oil refinery in Beaumont, Texas. REUTERS/Bing Guan

U.S. refiners are expected to post a strong quarter of results, but domestic demand remains slack, and profit margins are declining because new capacity is coming online, as Laura Sanicola reports here. Refiners raked it in over the last few quarters as the crack spread – the margin to make key fuels like gasoline and diesel – widened out with demand still high and capacity down, but those spreads have come back in a bit now. 

Right now, the overall crack spread is about $29 a barrel, down from about $40 at this time a year ago. Spreads kept widening last summer in the wake of Russia’s invasion of Ukraine, which strained capacity and sent markets into a tizzy. But a bunch of long-awaited facilities are expected to come online by the end of the year, as Bank of America reports – roughly 2.7 million bpd, in fact – compared with demand growth of about 1.7 million bpd, per BofA.  

That’s going to make supply a bit less tight around the world and could help restrain product prices in the future. 

Immigration inspection officers in protective suits check a tanker carrying imported crude oil at the port in Qingdao, Shandong province. China Daily

Tankers coming into China’s Shandong ports are being delayed, as Chen Aizhu, Trixie Yap and Muyu Xu report, because it looks like some of those cargoes coming from Iran were crude oil but being declared as diluted bitumen. That’s a no-no: crude oil has strict import quotas, but bitumen does not, and so those strict inspections are going to wreak havoc on supply for refiners in that region.  

Shandong’s independent refiners account for about one-fifth of China’s crude oil imports. Right now, there are about 1.6 million barrels of oil in bonded tanks in Tianjin and Shandong, while authorities are also holding up another 8 million barrels in customs. The Iranian oil is prized because it yields more gasoline and diesel than Venezuelan heavy, which is more like a bitumen and has been labeled as such. 

“If the next decade is to see the adoption of floating offshore wind, and its growth into a leading market, the work that we do in 2023 will dictate just how successful this is.”  

Felipe Cornago, commercial director offshore wind at BayWa, which is developing a wind farm off Scotland. 

Leaders from European countries surrounding the North Sea are looking to expand renewable generation in the region, they said on Monday, as Kate Abnett reports. Those nations include France, Germany and the Netherlands, Norway and Britain, as they plan on developing connected renewable generation sites at sea.  

The move is meant to augment existing supply of renewables and make the group a bit more tied regionally, even more so after Norway last year became Europe’s biggest gas supplier after Russia cut deliveries to Europe following its invasion of Ukraine. In total, nine countries say they want to build a combined 120 gigawatts (GW) of North Sea offshore wind capacity by 2030, and 300 GW by 2050. Currently, that area has 25 GW.  

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