China's Coal Boom -- Daily Newsletter -- Bloomberg -- January 17, 2025

Locator: 44702COALCHINA.

Link here.

This is not a surprise to anyone following the global energy story. 

The figures run contrary to hopes that China may have begun to reduce emissions last year, more than half a decade ahead of its 2030 target, after massive additions of wind and solar power and a rebound in output of hydropower.

But all that extra clean energy wasn’t enough to cope with the expansion in electricity consumption, which was set to outpace overall economic growth for the fifth straight year in 2024 due to strong demand for computing, and as sectors from heating to transport electrify.

The trajectory of electricity demand will be key to determining whether fossil fuel generation begins its decline in 2025. At the same time, China is maintaining its world-leading pace of renewables deployment, and is spending more on power lines and energy storage equipment to ensure the clean energy isn’t wasted.

LOL, taking the same road that Germany took:

It’s increasingly possible that renewable sources can meet all of the country’s new electricity consumption this year, and pave the way for China’s power sector to achieve peak emissions in 2025, said Gao Yuhe, a Beijing-based analyst at Greenpeace East Asia.

But lying through their teeth. LOL.

Peak Oil? Yup. In Asia -- January 17, 2017

Quick: what do Malaysia and China have in common? It's been posted on the blog several times.

From CNBC:

Oil production in Asia-Pacific is declining at a rate not seen elsewhere in the world, with around half of losses coming from China alone, Wood Mackenzie has warned.

China, Indonesia, Malaysia and Thailand are among the biggest producers in Asia but the near halving of crude oil prices since 2014 has hit the industry and resulted in an annual average base decline rate of around 7 percent within existing oil fields, Rodger pointed out.

"Lower oil prices and the severe cuts to upstream capex (capital expenditure) to mature assets has increased decline rates," he explained in a new video published on Wood Mackenzie's site.

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Chicago Homicides

This could become a regular feature, sort of like the monthly atmospheric CO2 numbers.

Previously posted:

Downtown is getting safer! Chicago homicides already dropping significantly after Trump election. The 24 homicides over the year's first 15 days (a dynamic link) extrapolates to 584 Chicago homicides in 2017, compared with 797 in 2016. If that holds, that represents a decrease of 27% homicides in the Windy City, one year after the shocking Trump election. 

Today, January 17, 2017: Over the MLK weekend, ten homicides. Now, 26 homicides over 16 days extrapolates to 593 for the year.

Break-Even Costs For Chinese Oil Production -- January 16, 2017

Regular readers and anyone paying attention are aware that with regard to oil and natural gas, China is in a world of pain. From a December 12, 2016 post:

Peak oil? This may be the most important story all week. From Bloomberg, China is cutting about 300,000 bopd this year, more than the combined cuts announced over the weekend by non-OPEC countries excluding Russia. China's decline in production will continue into 2017 (next year) at about 200,000 bopd. By the way, this was reported by The WSJ back on August 25, 2016:

China’s struggling oil sector has entered a challenging new phase: long-term decline of its domestic production.

Oil production in China likely peaked last year at around 4.3 million barrels a day, according to new data and interviews with industry executives. The development has significant implications globally, including the potential for higher crude prices over time as China steps up imports to meet rising demand at home.

“The turning point that we’ve been searching for, for years, is happening now,” said Kang Wu, vice chairman for Asia at energy consultancy FGE. As an oil producer, he said, “China is entering long-term stagnation and decline.”

I think this is why some analysts suggest there could actually be a "deficit" in global oil production in 2017.

Now, tonight from Bloomberg:

• China's crude oil production will drop as much as 7% this year
• output is declining at aging fields amid capital spending cuts
• that's despite automobile sales surging in China
• the "cut" in Chinese production is about the same size as the output cut agreed to by Iraq

From the article:

While China consumes more oil than almost any other country, it’s also one of the world’s biggest producers, with fields stretching from offshore its southern coast to the far north east. The collapse in prices that began in 2014 is taking its toll, and the nation’s output suffered a record decline last year. That plays into the hands of OPEC as it seeks to prop up the global oil market, forcing China to depend more heavily on imports.

Brent crude, benchmark for half of the world’s oil, averaged about $45 a barrel last year, more than 50 percent below levels in 2014, the year OPEC decided to tackle a global glut by keeping the taps open. The crash in prices triggered a rethink by the group, which banded together with 11 non-member countries late last year and agreed to a collective cut of almost 1.8 million barrels a day. Prices have since rallied above $58 a barrel.

China’s output slumped in 2016 as state-owned firms shut wells at mature fields that had become too costly to operate after the crash. Crude production fell 6.9 percent in the first 11 months of 2016 to about 4 million barrels a day, the first decline since 2009 and the biggest in data going back to 1990.

We never talk about breakeven costs for oil production in China, do we?

Do you remember all the acquisitions China was making during the Bakken boom? That was tracked here. As recently as: October 26, 2015: Chinese company pays $1.3 billion for shale in the Permian.

California: Bovine Fart Backpacks -- December 12, 2016

Futures? WTI up over 4.4% overnight -- $53.77 right now. Dow futures up 20 points; S&P down 0.02%. At  opening: CVX surges; EOG surges; SRE, not so much; COP surges; even BRK-B is up a bit. 

Peak oil? This may be the most important story all week. From Bloomberg, China is cutting about 300,000 bopd this year, more than the combined cuts announced over the weekend by non-OPEC countries excluding Russia. China's decline in production will continue into 2017 (next year) at about 200,000 bopd. By the way, this was reported by The WSJ back on August 25, 2016:

China’s struggling oil sector has entered a challenging new phase: long-term decline of its domestic production.

Oil production in China likely peaked last year at around 4.3 million barrels a day, according to new data and interviews with industry executives. The development has significant implications globally, including the potential for higher crude prices over time as China steps up imports to meet rising demand at home.

“The turning point that we’ve been searching for, for years, is happening now,” said Kang Wu, vice chairman for Asia at energy consultancy FGE. As an oil producer, he said, “China is entering long-term stagnation and decline.”

I think this is why some analysts suggest there could actually be a "deficit" in global oil production in 2017.

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All that cash: judge rejects Pennsylvania recount. 

The JV Team update. ISIS re-takes Palmyra, Syria.

Filloon's oil update: the OPEC/non-OPEC deal and 2017 investment opportunities in the oil patch.  This was posted earlier; note the comments.

Saudi cutting more than expected: another contributor at SeekingAlpha. 

For those who like graphs: natural gas short sellers left in the cold. The headline is all you need to know. I can't imagine 1 out of 100 reading this. Seriously. From Richard Zeits over at SeekingAlpa.

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Climate change reality in California. From The Los Angeles Times, the state may have not thought this through very well (or not at all). The "state" has mandated a 40% cut in CO2 emissions from 1990 basis. No one really knows what that means. It will require the state to "go back" to sometime in the 1960s with regard to transportation and industry.

California will be the only state with such an ambitious agenda. They will go it alone. The 40% cut in emissions will have a 1% effect on global emissions. 

With regard to the dairy industry and cow farting:

At a heated meeting in June, dairy officials pleaded with the Air Resources Board that they already reduced methane emissions. Air board scientist Ryan McCarthy suggested that new technology could help, and the discussion turned to an experimental system from Argentina that would capture gas in a backpack on each cow through a hose inserted into their digestive system.

They will use space-suit technology from the US moon landings in the 1970s. Bovine fart backpacks.

I can't make this stuff up.

The article suggests that this was a shot across the bow, a warning shot, that the legislature's top priority this year and next: re-do their plan.

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Active rigs:

	12/12/2016	12/12/2015	12/12/2014	12/12/2013	12/12/2012
Active Rigs	40	65	181	191	184

RBN Energy: Mexico's increasing reliance on US motor gasoline and diesel.

Mexico’s consumption of motor fuels is rising, its production of gasoline and diesel continues to fall, and U.S. refineries and midstream companies are racing to fill the widening gap. The export volumes are impressive: deliveries of finished motor gasoline from the U.S. to Mexico averaged 328 Mb/d in the third quarter of 2016, up 41% from the same period last year, and exports of low-sulfur diesel were up 29% to 194 Mb/d. And there’s good reason to believe that U.S.-to-Mexico volumes will keep growing. Today we look at recent trends in gasoline and diesel production and consumption south of the border, and at ongoing efforts to enable more U.S.-sourced gasoline and diesel to reach key Mexican markets by rail and pipeline.

Mexico is still among the world’s largest energy producers, but its output of crude oil, natural gas and natural gas liquids (NGLs) has been falling for several years, as has the country’s ability to meet its own, internal need for key fuels: natural gas, liquefied petroleum gas (LPG), gasoline and diesel among them. This has caused a lot of angst for the Mexican government and for Petróleos Mexicanos (Pemex), the state-owned energy company, to the point that the country’s entire energy sector is being reformed, starting with a constitutional amendment in December 2013 to allow more foreign and private sector investment, and more competition. 

Most relevant to our discussion today is the fact that Pemex until April 2016 was the only entity that could import gasoline and diesel to Mexico, and that until early 2017 independent/third-party importers still cannot use Pemex’s existing pipeline distribution network (more on this in a bit). In other words, the Mexican motor fuels market is gradually opening up.

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The Market

Now that Trump has been elected president (well, maybe), the Fed is now free to "hike" the Fed rate.

Boeing seals $17 billion Iran deal; 80 jetliners. No link; story everywhere.

For the archives: a very, very bullish sign.