The Phil Flynn Energy Report
Peak or valley?
Energy prices are holding up pretty good even as the IEA tells us that the best days of demand are behind us. Libya's largest oil field will flood the world with oil, and somehow oil is higher. Maybe it's because it’s turnaround Tuesday. Perhaps because the markets are digesting Libyan oil's real impact, or perhaps it is because Chinese oil imports continue to sizzle.
Some traders thought that China hit peak oil demand. Ok, maybe not peak oil demand but at least a near-term peak in oil imports. Yet, as reported by S&P Global Platts, China's crude oil imports ended their downtrend to gain 5.5% at 11.85 million barrels per day in September from a 4-month low of 11.23 million barrels per day in August, but the recovery looked temporary amid less new arrivals in October, port sources and refiners said on October 13.Ok, temporary, maybe like peak oil was. Remember when the IEA back in 2010 said that global oil production had topped out ago in 2006? Well, they’re at it again, but this time on the other end of the spectrum.
The IEA'a "The World Energy Outlook 2020,” its annual flagship publication, focuses on the pivotal period of the next 10 years, exploring different pathways out of the crisis. The new report provides the latest IEA analysis of the pandemic's impact: global energy demand is set to drop by 5% in 2020, energy-related CO2 emissions by 7%, and energy investment by 18%. The publication’s established approach – comparing different scenarios that show how the energy sector could develop – is more valuable than ever in these uncertain times. The 2020 EIA outlook presents 4 four pathways.
In the Stated Policies Scenario, which reflects today's announced policy intentions and targets, global energy demand rebounds to its pre-crisis level in early 2023. However, this does not happen until 2025 in the event of a prolonged pandemic and deeper slump, as shown in the Delayed Recovery Scenario. Slower demand growth lowers the outlook for oil and gas prices compared with pre-crisis trends. But broad declines in investment increase the risk of future market volatility.
Renewables take starring roles in all our scenarios, with the solar center stage. Supportive policies and maturing technologies are enabling very cheap access to capital in leading markets. Solar PV is now consistently less expensive than new coal or gas-fired power plants in most countries, and solar projects now offer some of the lowest-cost electricity ever seen. In the Stated Policies Scenario, renewables meet 80% of global electricity demand growth over the next decade. Hydropower remains the largest renewable source, but solar is the primary source of growth, followed by onshore and offshore wind.
"I see solar becoming the new king of the world's electricity markets. Based on today's policy settings, it is on track to set new records for deployment every year after 2022," said Dr. Fatih Birol, the IEA Executive Director. "If governments and investors step up their clean energy efforts in line with our Sustainable Development Scenario, the growth of both solar and wind would be even more spectacular – and hugely encouraging for overcoming the world's climate challenge.”
Yet despite this, the outlook for crude oil is somehow higher. Maybe it is because this is a long-term outlook, and we know that these predictions are sometimes wildly wrong in oil.
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