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China’s Worrying Oil Vulnerability


1. China’s Middle East vulnerability


– China is the largest oil importer in the world and its vulnerability lies in its dependence on oil flows from the Middle East. China’s oil imports from the region have surged from 0.33 mb/d in 1998 to 4 mb/d in 2018.

– The Abqaiq attack highlighted the stakes. “With over 1 mb/d of Chinese refining capacity designed with Saudi crude as baseload, and imports from Saudi at 1.6 mb/d between January and July 2019, Chinese buyers had reason to panic,” the Oxford Institute for Energy Studies wrote in a report. And “yet on the whole, they remained relatively sanguine.”

– Aramco went to lengths to restore capacity and ensure that shipments were not interrupted. “Perhaps counter-intuitively then, the attacks also highlighted the importance of demand security as large oil producers are opting to supply their biggest client,” OIES said.

– If Saudi shipments were interrupted, China has a strategic petroleum reserve that it could draw upon, as well as commercial stocks. While precise figures are not disclosed by Beijing, OIES estimates that China has 800 million barrels in combined SPR and commercial stocks.

2. Gas glut hits gas stocks hard


– Energy stocks have performed extremely poorly this year, but natural gas-focused drillers are in particular danger.

– Natural gas futures have suffered their longest losing streak since 1990, according to Dow Jones Market Data. Front-month gas futures declined in 12 consecutive trading sessions through October 2, the Wall Street Journal reported.

– “We are viewing today’s selling as the beginning of a more sustained price decline,” trade advisory Ritterbusch & Associates told clients in a note.

– While low prices affect all producers, the Permian-focused gas producers are really designing their businesses around more lucrative oil production. Gas is a byproduct.

– Appalachia-focused companies are in a bind. Gulfport Energy (NASDAQ: GPOR) is down by nearly two-thirds year-to-date; EQT (NYSE: EQT) has fallen by half; Antero Resources (NYSE: AR) is off by 75 percent.

– EQT is the largest gas producer in the country, and it recently announced that it would layoff 800 people.

– U.S. natural gas production has never been higher. Rising Permian output may delay and complicate any market balancing, forcing Appalachian drillers to cut back.

3. U.S. oil production stagnates, but maybe only temporary?


– U.S. oil production declined by 276,000 bpd in July, but the drop was largely due to the disruptions to offshore oil fields from a hurricane.

– The EIA said the decline was “temporary and geographically isolated” to the Gulf of Mexico, and that U.S. oil production would continue to increase through the remainder of the year.

– However, the agency also lowered its forecast for WTI prices for 2020 by a whopping $5 per barrel in its latest outlook. WTI is expected to average $51.19 in the second quarter of 2020, down from over $56 previously.

– Interestingly, the agency only lowered its 2020 production forecast by 60,000 bpd, expecting an average of 13.17 mb/d next year. The cut seems rather modest given the pronounced reduction to its pricing forecast.

4. Demand concerns dominate


– OPEC supply outages are at multi-year highs, but the softening global economy is the only thing that seems to matter right now.

– Top executives at Vitol and Trafigura, the largest oil traders in the world, predict that oil prices will be stuck in the $50s in 2020 due to softening demand.

– “Particularly with the current trade environment and a strong U.S. dollar, I would say there’s further downside in the short term,” Trafigura CEO Jeremy Weir said at the Oil & Money Conference this week.

– Still, a shortfall in upstream investment could cause a rebound in prices in a few years as the pipeline of new projects dries up. But it is remarkable how low the “rebound” might be.

– Gunvor CEO Torbjorn Toernqvist said that prices might rebound to only $70-$80 per barrel within five years.

5. Bitcoin rally loses steam


– After crashing late last year and remaining in the doldrums for the first quarter of 2019, Bitcoin slowly began to stage a rally, which really accelerated in June.

– One problem for Bitcoin is that it has become almost entirely a speculative asset, and not a real form of currency. “Bitcoin economic activity continues to be dominated by exchange trading,” Kim Grauer, senior economist at Chainalysis, told Bloomberg earlier this year. “This suggests Bitcoin’s top use case remains speculative, and the mainstream use of Bitcoin for everyday purchases is not yet a reality.”

– Its price movements are speculative as well, and news coverage of the cryptocurrency market mainly center on technical aspects of price movements – testing key technical resistance points and the like.

– Bitcoin is down by a third since August, but is up 25 percent since the start of the year.

6. Ethanol markets lukewarm to Trump’s biofuels fix


– A week ago, the Trump administration unveiled its highly-anticipated fix for ethanol markets, which the government had damaged by issuing a slew of waivers to oil refiners, absolving them of their federal ethanol blending requirements.

– The Trump administration announced a plan that would keep volumetric standards at 15 billion gallons for 2020, but would also keep the waivers given to small refiners. In other words, larger refiners would be required to pick up the slack.

– The move should shore up ethanol demand, but after an initial rise, prices for renewable identification numbers (RINs) fell sharply. By Monday, RIN prices were trading at 20 cents per gallon, down 16 percent from the previous week, reflecting “disappointment” in Trump’s proposal, according to the FT.

– 18 of around 200 ethanol plants have closed within the last year.

7. California’s solar “duck curve” grows


– As California adds increasing amounts of solar to the grid, the “duck curve” continues to grow more pronounced. This is when demand for electricity plunges during midday when solar generation is at its peak. Demand then rises at the end of the day when solar generation falls.

– The “belly of the duck” has grown faster than anticipated. As the IEA notes, five years ago California thought midday demand would fall by 40 percent by 2020, but in reality, demand fell by two-thirds by 2018 as more solar was added.

– As a result, other electricity generation needs to be curtailed during midday.• Deeper decarbonization will require integration of energy storage, EVs, smart grid technologies and dynamic pricing.

– If the world is to meet the targets laid out in the Paris Climate agreement, it would require nearly $8.5 trillion invested in renewables.


20 Comments on "China’s Worrying Oil Vulnerability"

  1. makati1 on Sat, 12th Oct 2019 3:00 am 

    For all you Sinophobes…

    “China Will Shake the Whole World: About Farmers and Artificial Intelligence’

    Get educated.

  2. REAL Green on Sat, 12th Oct 2019 6:48 am 

    “Getting Real About Green Energy” peak prosperity

    “An honest analysis of what it can’t promise…I want to be optimistic about the future. I really do. But there’s virtually no chance of the world transitioning gently to an alternative energy-powered future. These Are The ‘Good Old Days’…Math So, what would it take to replace those 12,000 Mtoe with alternative fuels by 2050? Pilke answers that for us: Another useful number to know is that there are 11,051 days left until January 1, 2050. To achieve net-zero carbon dioxide emissions globally by 2050 thus requires the deployment of >1 Mtoe of carbon-free energy consumption (~12,000 Mtoe/11,051 days) every day, starting tomorrow and continuing for the next 30+ years. Achieving net-zero also requires the corresponding equivalent decommissioning of more than 1 Mtoe of energy consumption from fossil fuels every single day…Human Behavior One huge reason that an easy, seamless transition to alternative energy won’t happen is because our biological wiring is terrible at responding to such big, complex, long-range predicaments…Each country is currently struggling with its own brew domestic social and political problems (of their own making, I should add). They have neither the appetite or ability to take on the much more challenging task of a 30-year global energy infrastructure re-build. Making this energy transition will require an enormous diversion of effort – away from this and towards that. It will be hard. It will take a lot of political capital and expert leadership. Huge pain and suffering will result as entire industries are shut down and new ones are started up. Just drive through any former mill or mining region and you can still see the bitter remnants of its abandoned industries. Some have not yet recovered, even hundreds of years after the initial loss…Time, Scale and Cost Similar supply constraints arise if we calculate out the amount of resources required to build the amount of wind towers or solar panels that could replace these nuclear plants. The costs are staggering, the global resources too limited. There aren’t enough new hydro dam sites to even make a dent. Also complicating things, each of these so-called alternative energy systems requires a huge amount of fossil fuels to mine, manufacture, install and maintain. The world has yet to see a single windmill or solar panel that was mined, manufactured and installed without using fossil energy…Conclusion Given the math, human tendencies, and the issues pertaining to time, scale and cost, the current green energy movement currently is little more than hot air. It’s just not going to happen in time. We’re nowhere close to being able to build out the massive energy projects required. The equivalent of 3 nuclear plants every two days for the next 30 years? That’s a total pipe dream. We lack the political will, the cultural readiness, the proper narrative. Even the appropriate resources. Beyond those concerns, nearly everything about how we heat, move, cool and manufacture the components of our modern lives will have to be refashioned (and possibly jettisoned) as part of that project. Such an ambitious undertaking has no historical analog. It’s a ridiculously complex set of problems (which have solutions) and predicaments (which don’t). It’s exactly the sort of situation that politicians will avoid as long as possible, after which it will be too late to do very much about it. Which means you need to adjust your expectations and investment of your money and energy, accordingly. The entire world — which is utterly dependent on infinite growth — is only years away from grasping the impossibility of that approach. When it does, everything will change. Quickly.”

  3. REAL Green on Sat, 12th Oct 2019 6:49 am 

    I have repeatedly covered this topic in REAL Green. A carbon neutral world by 2050 is a complete pipe dream. It is more than that it is a dangerous way of misleading people into believing they can have their cake and eat it. This means people think we can continue to live as we do and even progress technologically and go carbon neutral. This is what I call FAKE Green. This is the platform extremist liberals are pushing. This along with socialism is going to solve our problems. What a joke that is, a pipe dream of industrial build out to be carbon neutral and it will all be paid for by wealth transfer and money printing. Where do extremist liberals get educated? This is a position many in the best of academia and the scientific community are embracing. This FAKE Green position is science denial almost as bad as science denying conservatives take. Both sides are a joke. One side just disregards the science or deny it. One side embraces the science and then denies the reality of the solutions.

    Very few are REAL Green. REAL Green says acknowledges failure as the starting point. The very beginning of the science, behavior, and the consequences is failure. The Kübler-Ross stages then kick in for those who have been deceived either by disregard, science denial and or solutions/consequences denial. This pretty much covers most of the human population. Doomers and preppers are considered fringe. Does that give you an idea of just how bad it is going to get at some point when holistic results of net energy depletion strike? This net energy decline will be from declining net energy of fossil fuels that meets the physically impossible task of energy transition to renewables while maintaining the growth paradigm? This is the nature of the carbon trap and path dependency. We have the physical trap and the behavioral trap. REAL Green says this means failure is assured. REAL Green has solutions for this macro condition that will never be embraced but should be considered to understand the best it can get.

    REAL Green solutions are a hybrid world with lots of triage, salvage, and relocalization. The cost is still staggering but the difference is behavior starts from failure and proceeds to life boats and hospices. Life boats and hospices is another description of degrowth, mitigation, and adaptation. This will involve economic abandonment and that means dysfunctional networks and irrational policy will be inevitable even with the best of intentions. This is because we will have to embrace the chaos of decline that is often swift and unpredictable. We will need to accept pain, suffering and death that declining affluence will ensure. This means a mammoth educational effort would be needed to prepare a mass of dellusionals people smart and challenged for an equivalent of an asteroid of damage to this late stage civilization.

    The way REAL Green would approach this is first the behavior would be embraced. We then would have a hybrid world of new and old ways. Deadwood would be cleared out to make room for a new way. This would also be a hybrid of capitalism with socialism as the gate keeper. In fact, we might have to get even more authoritarian but since this is REAL Green fantasy for demonstration anyway let’s keep it to enlightened tough love socialism. The reason you still need capitalism is the productive elements of the global economy of just-in-time, free capital/knowledge flows, comparative advantage specialization, and global transport would be needed to produce the tools to go back to the old ways and maintain the sinking ship. The best of the new ways with all that knowledge must be maintained. The Infrastructure fabric that keeps all of us fed, warm, and productive is in place an cannot be discarded without great loss and or cascading failure.

  4. REAL Green on Sat, 12th Oct 2019 6:50 am 

    REAL Green is about managed failure or in medical terms terminal illness maintenance. Triage of the worst of the current system with consumerism and modern high energy leisure being eliminated as an example of draconian moves. Population would be managed in a draconian way. A two-tier society of a greatly reduced core that controls, manufactures, and delivers tools for a relocalization of most of the rest is a must. This means people would be taken back to the land and made to again inhabit it in seasonality, intermittency, and low net energy living. This means back to animals, small farms, and biomass collection revolving around the natural planetary carbon, nitrogen, and hydrological cycles. Unfortunately, this now must occur on a planet in decline and localized failure of a succession process of extinction and pollution. For those who can manage it would be permaculture and knowledge driven. For those who can’t it is subsistence living on the margins. Ideally REAL Greens says the upper tier of the status quo would protect and support these nodes of return for reasons of survival. The upper tier would understand it is going down and it will want a place to go. The collapse process requires that seeds of rebirth must be planted and nurtured and the top tier living in the status quo has this as its primary function. This relocalization then would be the upper tiers main focus of effort and policy.

    The best of the old ways would be combined with the new knowledge and technology to make again inhabiting locals in low energy living more bearable. This means renewables “lite”. It means maintaining some basics of lighting, food preservation, and climate control. It means a new education revolving around relocalization into food production, animal husbandry, and home economics. These things were once part of the normal fabric and now they would have to be rebirthed in a massive education effort. The upper tier would begin a decommissioning process. Here salvage strategies would be employed to save those items with high embedded potential for use in a post collapse world. Valuable resources collected to be used later. Many industries and ways of life would be shuttered immediately and others maintained as long as possible. In the military this is called a managed retreat. All this would have to proceed in as slow and deliberate of a pace as can be managed that pushes the edge of the systematic conditions as long as possible. The survival of any system is dependent on the degree and duration of the impulse of change. This means we would have to understand at some point the system even with managed degrowth, deliberate adaptation of the fabric of civilization and the reprograming of human behavior will surely fail. So, what we would do is open a door of no return into managed collapse with life boats with every one understanding pain suffering and death is ahead. That is the hospice part.

  5. REAL Green on Sat, 12th Oct 2019 6:51 am 

    Of course, this is a REAL Green vision of the impossible for the world but not for the individual and the local. This is where the above can work. When I say work, I mean until civilization collapses in from above but you will have beaten the rush to hopefully be ahead of the curve. You will have taken the ingredients of mitigation and adaptation and through the use of the status quo built up the equivalent of a modern-day monastery of preparation. You will have done the Kubler Roth with adapted behavior and attitudes of survival. Denial of death can then be negotiated. Few can face death daily but many can face the acceptance of it in regards to one’s overall situation similar to terminal illness. You will of course face collapse like everyone else but you will have in place tools and strategies to negotiate the day to day of collapse. We have no idea how things are going to come apart. We do know there are now locations that will come apart quickly and others will have reliance. Science and intuition tell us this. If possible, get out of these places. There will be nothing worse than being caught up in forced migrations. Of course, those places that do have good strategies will be where these migrants go so part of your strategy must include negotiating hostile and more likely needy people. You will have to have security strategies and procedures in place. You will also need to be able to help some but not all. Most people will have to be denied help. A good strategy is taking in those with skills and resources and tell the rest to head down the road. The hostile ones you may have to fight and you may lose.

    REAL Green start with the understanding of failure and realizes these are the best of days now and it will only get worse so you begin a deliberate and focused effort to change now. Yet, you do this in a relative way so you do not fail in the status quo that is providing the means to change. You leverage the status quo with localism. You will have to maintain your status quo living as you try to leave delocalization of the failing global system. You will likely at some point do this in increasing pain, suffering and death. A situation of increasing deprivations is assured to you think about this daily in preparation. A good strategy is fasting to feel hunger as an example. You will try to get ahead of the collapse process intelligently. Of course, the degrees of adaptation will have to be relative in context of family, friends, and community who may still be in denial and disregard to this systematic process of failure. This means your efforts will be hampered by external forces of irrationality and denial of change by social convention. Very few will have the ingredients to make a bold transition. For most the best that can be done is behavioral changes and the husbandry of basics. Most have the money and time to take care of the basics. Those who can should and must get bold because they will be the storehouse of knowledge with tools to establish a return to localism. At some point when the walls come crashing down it will be resilient and sustainable locals that will pick up the pieces of a reboot of some kind of civilization.

    REAL Green acknowledges this might mean a bottleneck or extinction but it is also about a process that is a journey. For sanity REAL Green orientates its higher power to understand life is now a journey not a destination so meaning and happiness come from the journey to pain suffering and death. That might sound like an incongruous juxtaposition and it is because the paradox of this new life means finding success must mean embracing failure. REAL Green does this individually and in small groups because the top is hopelessly flawed and must by planetary definition fail. In fact, the health of the planet requires modern man will die as we know him and be rebirthed to a smaller scale. Again, it must be remembered this may be extinction but because extinction is a process this is about the journey not the destination.

  6. JuanP on Sat, 12th Oct 2019 6:51 am 

    troll that bitch

  7. Davy on Sat, 12th Oct 2019 7:05 am 

    I no, nobody reads my word salads or even gives a shit what I think. Y’all probly figgered out by now i’m A mentle case. That won’t stop me from wasting my time on this lame unmoderated forum when I told y’all I was concentrating on my own blog.

    So there.


  8. Explaining reality to the troll juanp on Sat, 12th Oct 2019 7:11 am 

    Nobody read’s your supremo muzzle jerkoff sock shit or your multiple Davy ID thefts, Mr. Troll JuanP. So what is the difference? LOL mine offers meaning and substance and yours is stupidity and low IQ stab at funny and clever. The above REAL Green stuff will end up on my blog someday, juanP troll. Thanks for being my muse. You give me the reason to be here so much. Thanks again troll

  9. Davy on Sat, 12th Oct 2019 7:11 am 

    troll that bitch


  10. JuanP the hacker on Sat, 12th Oct 2019 7:13 am 

    JuanP, I thought you said you were going to hack my blog? LOL what a wise guy asswipe. Please JuanP hack my blog. I want you too. You really are a FUCK NUT

  11. More Insane Davy Babbling on Sat, 12th Oct 2019 7:17 am 

    REAL Green on Sat, 12th Oct 2019 6:48 am

    REAL Green on Sat, 12th Oct 2019 6:49 am

    REAL Green on Sat, 12th Oct 2019 6:50 am

    REAL Green on Sat, 12th Oct 2019 6:51 am

    Explaining reality to the troll juanp on Sat, 12th Oct 2019 7:11 am

  12. REAL Green the hacked on Sat, 12th Oct 2019 7:23 am 

    You have no way of knowing when your blog was hacked. Your personal info is already being logged..

  13. JuanP the failed hacker on Sat, 12th Oct 2019 7:34 am 

    juanP there is no personal info. It is all a set up so people like you have nothing to steal. LOL. juanp hack me please!

    Like everything you do you are a failure. Please juanp give us more supremo muzzle jeckoff for morning entertainment on how low IQ your GED 3rd world education is.

  14. Deport JuanP on Sat, 12th Oct 2019 7:36 am 

    We need to deport you because you are a criminal and for no other reason than you are so stupid and boring. What a fuck nut spends months and months on his supremo muzzle jerkoff sock puppet

  15. Davy on Sat, 12th Oct 2019 7:39 am 

    Sorry y’all.

    I can’t help myself.

  16. lame troll lol juanP on Sat, 12th Oct 2019 7:48 am 

    That is the best the 3rd world GED thief can do. JuanP, did you have a GED graduation party? Did your 3rd world family sneak into Miami for to celebrate such a wonderful event?

    Davy said Sorry y’all. I can’t help myself.

  17. lame troll lol juanP AKA Dumbass Davy on Sat, 12th Oct 2019 8:08 am 

    Sorry y’all.

    I can’t help myself.

  18. Davy on Sat, 12th Oct 2019 8:42 am 

    Today is what happens when my H. P. #9 Red Alert failed to produce ebony and clover over and over.

    H. P. #9 Red Alert TONIGHT Rolla, MO Pronto “Lucky” Stall #7 Glory Hole.

  19. Poor JuanP is depserate on Sat, 12th Oct 2019 8:46 am 

    Davy said Today is what happens when my H. P. #9 Red Alert f…
    Cloggie said “ Did I mention I’m moving to Italy when the SHTF…
    Davy said Hay wait a minute. Isn’t Italy in euroland? I’m no…
    lame troll lol juanP AKA Dumbass Davy said Sorry y’all. I can’t help myself.
    Davy said Did I mention I’m moving to Italy when the SHTF he…

  20. REAL Green on Sun, 13th Oct 2019 5:52 am 

    “Unprecedented momentum for green hydrogen” renewable energy world

    “Hydrogen from renewable energy could play a central role in the global energy transformation, according to the latest report by the International Renewable Energy Agency (IRENA). ‘Hydrogen: a renewable energy perspective’ estimates that hydrogen from renewable power, so called green hydrogen, could translate into 8 percent of global energy consumption by 2050. Sixteen percent of all generated electricity would be used to produce hydrogen by then. Green hydrogen could particularly offer ways to decarbonize a range of sectors where it is proving difficult to meaningfully reduce CO2 emissions. Decarbonization impacts depends on how hydrogen is produced. Current and future sourcing options can be divided into grey (fossil fuel-based), blue (fossil fuel-based production with carbon capture, utilization and storage) and green (renewables-based) hydrogen. Blue and green hydrogen can play a role in the transition and synergies exist. With falling cost of renewables, the potential of green hydrogen particularly for so called ‘hard-to-decarbonize’ sectors and energy-intensive industries like iron and steel, chemicals, shipping, trucks and aviation is rapidly becoming more compelling given the urgency to limit CO2 emissions. This includes direct hydrogen use but also the production of liquid and gaseous fuels such as ammonia, methanol and synthetic jet fuel from green hydrogen. Electrolyzer deployment is currently ramping up from MW to GW-scale as witnessed by dozens of projects worldwide. However, deployment of hydrogen-based solutions will not happen overnight, IRENA’s report cautions. Hydrogen might likely trail other strategies such as electrification of end-use sectors, and its use will target specific applications. The need for a dedicated new supply infrastructure may also limit hydrogen use to certain countries that decide to follow this strategy. Existing natural gas pipelines could be refurbished, but implications must be further explored.”

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