EA Podcast: Recent Episodes
Energy Aspects
In this podcast our refining specialists Raul Alcamo (Head of Refining) and Rob Campbell (Head of Oil Products) discuss how the refining sector will manage the upcoming challenges posed by a recovery in main product demand amid expected tight crude supply, what this will mean for margins and trade flows, and implications for runs and potential refinery closures.
Refining margins are recovering more slowly than the main product demand recovery would suggest, with many factors continuing to weigh on the refining sector.
European refineries will continue to struggle, weighed down by the excess of capacity, by refinery configurations that do not allow them to maximise the strength of gasoline to the same extent as US refineries, and by constant export of middle distillates products from the east of Suez.
We see the east of Suez region dictating the agenda for the refining sector in the period to 2025. Asia has been adding an average of 0.87 mb/d of refining capacity each year since 2017. It will add 0.78 mb/d in 2021 and a total of 1.40 mb/d through 2024 (just considering firm projects).
To keep this capacity at 80% of utilisation, we expect an incremental crude flow towards Asia of around 2 mb/d (compared to the last three years), but this could easily jump to 4 mb/d should Asia decide to run at 85% capacity.
US margins are clearly outpacing those from the rest of the world. We anticipate that the US refining sector is the one best placed to handle the challenges set to materialise in the coming two years. This is mainly due to the US being a net exporter of crude, which allows US refineries to access crude at the FOB price, while the rest of the world has to add freight costs to US crude—even though freight rates remain relatively low.
In episode eight of Back to Fundamentals, Energy Aspects’ Head of Oil Products Rob Campbell is joined by Assistant Vice President of Oil Products Sandra Octavia and Oil Products Analyst Koen Wessels to discuss key recent developments in global oil products markets as well as our latest views across the barrel for the coming months.
Freeze-offs in Texas have removed 3.24 mb/d of US refinery runs over 13–20 February, triggering a massive rebalancing process across the entire barrel—and especially within the gasoline markets—and impacting not just the Atlantic basin but the east of Suez as well. European runs will stay subdued in H1 21 on weak margins, while Asian products markets started the year on solid ground, earning strong margins for conversion units even as a colder-than-expected winter tightened the bottom of the barrel. We discuss these issues alongside developments in global vaccination programmes, improving Chinese export margins and strong conversion unit profitability, as well as these events’ impact on product supply, demand recovery and trade flows.
In this episode of our Long-term podcast series, EA Founder and Director of Research Amrita Sen is joined by Head of Long-term Matthew Parry, Head of Natural Gas Trevor Sikorski, and Head of Oil Products Rob Campbell to discuss our long-term view of energy markets.
Energy markets are transitioning to cleaner fuels. The main changes in energy demand will come from greater electrification and the rapid uptake of renewables in power supply. Scale is the greatest hurdle facing the energy transition. Demand for none of the primary energies will peak in the next five years, with coal and oil demand only peaking in the late 2020s and early 2030s respectively. This underscores the challenge of sustaining economic growth while substituting energy output from existing sources and the need for market mechanisms such as the price of carbon to send the right signals for investment.
In episode seven of Back to Fundamentals, Energy Aspects’ Head of Power Peter Rosenthal is joined by North American Natural Gas Analysts David Seduski and Ashwin Ravichandran to discuss the recent freeze-offs and their impact on the US power and gas markets.
Heating degree days throughout the US Midcontinent were significantly above normal levels during the week beginning 15 February, leading to five days of power outages in ERCOT and parts of the Southwest and Midwest power markets. The big freeze also led to gas supply curtailments that will take weeks (if not months) to recover from and were a major driver behind the multiple days of generation shortfalls in Texas. The near–record-low temperatures- in some cases a five-standard-deviation departure from 10-year normal -will have a significant impact on short-term gas balances andwilldrive both market and policy results in power and gas over the next few months at least.
In this episode of our Long-Term podcast series, Liz Russel, Head of Americas Sales, is joined by Head of Natural Gas Trevor Sikorski to talk about carbon.
Decarbonisation is all the rage in the global economy, and in more places across more sectors, policymakers are turning to carbon pricing as a tool to help meet their net-zero emissions goals. However, the fragmented nature of these markets and the real-world complications with implementing emissions pricing schemes mean setting a global price on carbon is far away.
Still, carbon markets like the EU ETS are catching the eye of investors that want to gain exposure to the energy transition, while ESG concerns are driving renewed interest in offsets. In this podcast, Liz and Trevor clear the air on the outlook for these markets.
In this episode of our Long-term podcast series Energy Aspects’ Chris Rivinus is joined by Head of Upstream, Virendra Chauhan, and Head of Geopolitics, Richard Bronze, to discuss the outlook for oil and gas supplies over the next two decades.
International oil companies are pursuing strategies to diversify away from oil and gas production, driven by investor pressure and the rise of the ESG agenda, leading them to scale back their upstream Capex and appetite for new projects, even in geologically promising territories. Even publicly-listed US shale producers are entering a new era defined by prudence and restraint rather than the headlong pursuit of higher volumes.
Where will the market find the supply needed to meet the post-pandemic demand recovery? We expect OPEC producers to increase their market share, but this is subject to political risks and depends on the capabilities of national oil companies. Even if these supplies do materialise, we see a supply crunch looming that will push oil prices higher.
In this episode of our Long-term podcast series, Trevor Sikorski, our Head of Natural Gas and Carbon, is joined by Long-term analysts Stefan Ulrich and Caroline Still to discuss the role played by natural gas and power in the energy transition over the next twenty years.
We expect global electricity demand to grow by an average of 2.6% annually over the next 20 years as electrification takes on the burden of decarbonisation while over a billion people join the middle class. Can renewable energy capacity additions alone meet the demands of this expanding power sector? What role will dispatchable thermal generation play as the share of renewables increases? While natural gas is displaced by electricity in several sectors, its role in power generation remains undisputable, especially in emerging markets. But as fossil fuel investments fall out of favour, there is a risk of a supply short fall before 2030.
We discuss where we think supply will most likely come from and how the gas balance will be strained over the forecast period.
In episode six of Back to Fundamentals, Energy Aspects’ Head of Natural Gas and Carbon, Trevor Sikorski, and analyst Ben Lee discuss our outlook for European carbon markets in 2021 and beyond.
The EUA market has been volatile so far in 2021 and prices have hit record highs. We discuss our view that this speculator-driven rally in February will likely end with a retracement in prices in the short-term. But the upcoming review of EU ETS legislation later in 2021 means the bulls will never be far away. We delve into our expectations of what changes the market will face in response to the Green Deal.
High volatility is also likely to feature in the new UK carbon market, with trade set to begin before the end of Q2 21. We talk about why UK allowance prices should initially trade at a premium to EUAs.
In episode five of Back to Fundamentals, Energy Aspects’ Head of Research, Amrita Sen, is joined by Head of Oil Products, Robert Campbell, and Head of Geopolitics, Richard Bronze, to discuss what lies ahead for oil markets in 2021.
While demand may rise materially only by H2 21, the market will likely price in this development long before then. The first signs of this occurring are already visible, with Brent crude flirting with $60/bbl. Refining margins are also showing some signs of life—even if extremely modest—as conversion unit economics are strengthening.
Can this rally sustain? And will OPEC+ maintain its cohesion in the face of rising prices? Iran’s return in the second half of the year may cause markets to weaken momentarily, but the later that Iran supply returns, the easier it will be for the market to absorb it.
In episode four of Back to Fundamentals, Energy Aspects’ Head of Natural Gas, Trevor Sikorski, is joined by senior analysts, James Waddell and David Seduski.
We look at how the summer LNG market balance will evolve and what it means for Europe’s balances, as well as how Gazprom might flow over the summer given its low winter delivery. We also discuss what has lowered the Henry Hub curve and if it is sustainable, whether the Biden administration’s greater environmental focus will rein in supply, and where the volatile LNG freight market can go from here.
In episode three of Back to Fundamentals, Energy Aspects’ Head of NGLs, Samantha Hartke, is joined by oil products analyst, Ciaran Tyler, to discuss the feverish near-term dynamics that kicked off 2021’s LPG markets with a bang.
As the market undergoes some price corrections, we look at what awaits the March restocking period and discuss the risks to feedstocks and downstream petrochemical markets from ongoing—and possibly extended—lockdowns. We also look at the dominance of VLGC freight rates in dictating price action and how long that influence will last.
In episode two of Back to Fundamentals, Energy Aspects’ Founder and Director of Research, Amrita Sen, is joined by Head of Refining, Raul Alcamo, to discuss what awaits refiners in 2021. Refining margins have picked up in the new year but remain below breakeven levels in most parts of the world, particularly Europe. We see the need for greater rationalisation in Europe, especially as new Middle Eastern refineries start up. These new refineries will also reduce the export of heavy crudes at a time when further upgrades to Asian refineries will increase the demand for heavy grades. Even as mobility starts to increase in H2 21, the challenges facing refineries will be far from over.
In episode one, Founder and Director of Research, Amrita Sen, is joined by Yasser Elguindi and Daniel Sternoff from our Macro Energy team to discuss what the macro backdrop means for energy markets, whether the recent jump in oil prices is justified, what a weaker dollar and easy monetary policy means for risk assets and what awaits us in terms of the COVID-19 vaccine distribution. Additionally, Daniel breaks down how the Democrats’ victory in Georgia opens the door for an ambitious tax, health, climate and infrastructure agenda.
In the forth episode of season two of Back to Fundamentals, we are pleased to have B Anand, CEO of Nayara Energy, join Robert Campbell (Head of Oil Products) and Raul Alcamo (Head of Refining) from Energy Aspects to discuss the challenges currently faced by complex refiners.
Mr Anand discusses the Indian oil market, how to manage a growth-oriented business amid the pandemic, and the way to plan for the future of refining amid tremendous change.
Join us next week for another episode of Back to Fundamentals, where we will be in conversation with another senior energy executive to discuss markets and the energy transition.
In the latest episode of Back to Fundamentals, we welcome Vicki Hollub, President and CEO of Occidental. Vicki is joined by Energy Aspects’ Amrita Sen, Founder and Director of Research, and Ram Parikh, Senior Crude Analyst, to talk about the future of the US shale industry and how it’s adapting to this new, green world.
Vicki shares her views on long-term oil demand and how she believes US shale oil production has peaked, as well as Occidental's strategy to address climate change and its role in helping communities to establish local businesses.
Join us next week for another episode of Back to Fundamentals, where we will be in conversation with another senior energy executive to discuss markets and the energy transition.
In the latest episode of Back to Fundamentals, we are pleased to have Mr Chen, Deputy General Manager at Rongsheng Singapore, share his views. Mr Chen is joined by Energy Aspects’ Amrita Sen, Founder and Director of Research, and Raul Alcamo, Head of Refining, to discuss the need for rationalisation in the Chinese refining sector, the country’s recovery from COVID-19, the future of petrochemicals, broader Asian demand and products market oversupply.
Mr Chen speaks of Rongsheng’s ability to generate high profits, even as the rest of the world’s refineries are recording heavy losses. He also discusses what Rongsheng’s Phase II refining project, due to start in October, will do to sweet-sour crude differentials, the company's views on whether other independent refiners will also get product export quotas and how many refinery closures will be required to balance the market.
Join us next week for another episode of Back to Fundamentals, where we will be in conversation with another senior energy executive to discuss global energy markets.
We are pleased to launch the second season of our Back to Fundamentals podcast series. This season will each week feature a senior energy executive discussing markets and the energy transition.
In the first episode of the season, we welcome Lorenzo Simonelli, Chairman and CEO at Baker Hughes. Lorenzo is joined by Amrita Sen (Founder and Director of Research) and Virendra Chauhan (Head of Upstream) from Energy Aspects to talk about oil’s role in the energy transition, future supply trends and changes to the energy mix.
In the final episode of season one of Back to Fundamentals, Energy Aspects' Global Gas Analyst James Waddell discusses our outlook for the North American natural gas and power markets this summer and into 2021 with Nina Fahy, our Head of North America Natural Gas, and Head of North American Power Peter Rosenthal.
There are a lot of moving parts in this summer’s gas balances, from LNG export curtailment to production volatility following oil well shut-ins from April, and all this is happening amid the continued overhang from the coronavirus on both industrial demand and overall power usage. Prices ratcheted lower to pick up excess power demand, at least until temperatures spiked this summer. These will help push end-of-season inventories toward record highs.
Power demand continues to claw back consumption lost to factory and office closures, but we expect the recovery will be lumpy as the spread of COVID-19 persists in the US, and the overall economy may take years to reach output levels seen in 2019. This, along with upcoming capacity auctions and the November presidential election, will determine if coal retirements will increase further.
In this episode, Energy Aspects' oil analyst Christopher Haines discusses our outlook for NGLs and naphtha markets with Head of NGLs Samantha Hartke and oil products analyst Ciaran Tyler.
The outlook for LPG and naphtha demand looks bullish. Feedstock demand is recovering from its April trough, and new petrochemical capacity and a lighter maintenance season y/y are set to feature in H2 20. Tighter naphtha supplies from low refinery runs and the inching upward of US and Middle East field production will put a floor of support under prices in Q3 20, while the onset of heating demand in Q4 20 will further constrict LPG balances.
However, a tsunami of new downstream petrochemical capacity is likely to weaken downstream prices, compressing petrochemical margins and forcing firms in this sector—which were already struggling due to COVID-19—to make some hard decisions to secure revenue.
In this episode, Energy Aspects' Chief Oil Analyst Amrita Sen discusses our outlook for oil supply with Head of Geopolitics Richard Bronze and Head of Upstream Virendra Chauhan.
The market is focussing on the demand fallout from COVID-19 but it is supplies that have entered a new paradigm. Not only are both OPEC and non-OPEC supplies falling at a record pace, the return of some of these supplies will also be challenging, as some shuttered wells may be lost forever. This is particularly true for North America and regions with high water cut, so the years of 1+ mb/d of US shale growth are behind us. Not all of the 12 mb/d of current spare capacity globally can return. This means higher OPEC production and exports at a higher price in the medium term.
In this episode, Energy Aspects' Head of Power Peter Rosenthal, accompanied by Head of Natural Gas and Carbon Research Trevor Sikorski and Global Gas Analyst James Waddell, discuss several key themes influencing the global gas market over the next 12 months.
The traditional supports for global gas prices have given way this year, with European and Asian markets now governed by the economics of shutting in LNG production, mainly at US export facilities. In this podcast, we question whether this pricing reference has extended too far along the curve. TTF winter 2020–21 prices appear to be signalling both an increase in Europe’s appetite for US LNG and decrease in gas demand in Europe’s power sector.
We also explore the ways in which this year’s reconfiguration of LNG, oil and coal prices have affected Asia’s supply–demand balance. The incentives for taking oil-indexed LNG are changing, while LNG is also looking competitive in Asia’s generation mix for the first time. Finally, we discuss the timing and significance of Russia’s Nord Stream 2 pipeline coming online within the greater European market as this controversial project is increasingly being targeted by US sanctions.
Recent developments have increased the odds of a partial return of Libyan supplies, but the political situation remains fluid meaning any recovery is likely to be volatile. Looking further ahead, a Biden victory in the upcoming US presidential election could provide a catalyst to restart diplomacy with Iran. Negotiators are likely to seek a broader agreement than the previous Iran nuclear deal, which will be a slow process especially as Iran will want any new deal agreed by the US Senate.
Still, some waivers for Iranian oil exports granted at an early stage in the talks. This may complicate Saudi efforts to maintain cohesion and compliance among OPEC members with the OPEC+ agreement. Saudi Arabia may also have to face further erosion of the US-Saudi alliance, forcing it to reconsider its strategic approach to alliances in the Middle East.
In this episode, Energy Aspects' Head of Oil Products Research Robert Campbell discusses the outlook for oil products markets in 2021 with Head of Refining Raul Alcamo and Senior Oil Products Analyst Sandra Octavia.
Products markets will struggle in 2021 as refining capacity will continue to exceed demand, limiting the upside for margins. Additionally, jet fuel consumption is not going to return to pre-COVID-19 levels, adding further complications to the outlook.
The coming 18 months are likely to see increased refinery rationalisation, which will result in the long run in greater integration of oil products markets than before as longer-haul flows become more embedded in many markets, particularly Europe. But getting there may require enduring a bumpy road.
In this episode, two of our most senior analysts—Raul Alcamo and Amrita Sen—discuss the outlook for refinery margins, the challenges facing the entire refining landscape and the impact on crude differentials.
Thanks to the gradual recovery in demand, refining margins may have found a floor this year but as crude markets continue to tighten, the fight for barrels will mean refining margins will remain under immense pressure.
Ultimately, over 5 mb/d of refineries will have to close with the brunt of the closures likely to be in Europe. Indeed, Europe will likely have to import the bulk of its products needs going forward.
Welcome to the first episode of Energy Aspects' Back to Fundamentals podcast series, which will explore different energy markets topics.
In this episode, three of our most senior analysts—Amrita Sen, Robert Campbell and Richard Bronze—discuss the launch of our 2021 oil market balances. As the market continues to grapple with the upheaval to both global demand and supply caused by the COVID-19 pandemic, the early signs are that next year will bring a substantial tightening in market fundamentals, even with a slow and uneven recovery in global oil demand. Indeed, this is very much a supply-led rebalancing.
This episode is complimentary for Perspectives subscribers.