2024-06-12 06:59

LONDON, June 12 (Reuters) - Europe’s gas storage has got off to an unusually slow start to the refill season, narrowing the record seasonal surplus inherited from last winter and boosting prices back well above the long-term average. Inventories in the European Union and the United Kingdom have accumulated by just 148 terawatt-hours (TWh), or 2.1 TWh per day, since March 31, data from Gas Infrastructure Europe (GIE) show. The refill was the second-slowest since 2012 and well below the prior ten-year seasonal average of 206 TWh, or 2.9 TWh per day. Europe emerged from the warm winter of 2023/24 with a record amount of gas still in storage, so a relatively slow refill was required to ensure space did not run out before the onset of winter 2024/25. But the unusually slow start to the refill season has already whittled away some of the surplus and reduced the probability of space running out. Stocks were 219 TWh (+37% or +1.57 standard deviations) above the prior ten-year average on June 9, but the surplus had narrowed from 277 TWh (+70% or +2.03 standard deviations) when winter ended on March 31. Storage was already 72% full on June 9, which was 17 percentage points above the ten-year average, but the surplus had narrowed from 22 percentage points on March 31. Based on seasonal patterns over the last decade, inventories are on course to reach 1,223 TWh before the end of the refill season. This exceeds the technical capacity of the system, which is around 1,145 TWh, so refilling will have to remain slow for some weeks or months more. But the projected end-of-summer fill has already fallen steadily from 1,280 TWh on March 31 and the probability of overfilling has declined sharply. Chartbook: Europe gas storage and prices New Tab, opens new tab The reduced risk of overfilling has filtered through into higher futures prices for summer 2024 and tighter calendar spreads for the end of the refill season. Front-month Dutch TTF futures prices have risen to an average of 34 euros per megawatt-hour (MWh) so far in June, putting them in the 77th percentile for all months since 2010 after adjusting for inflation. Front-month prices have climbed from an average of just 26 euros in February, which was in only the 43rd percentile in real terms. The calendar spread between October and November 2024, spanning the end of the refill season and start of the winter drawdown, has tightened from a contango of almost 3 euros in December and January to 2.20 euros so far in June. Lower international gas prices have encouraged more liquefied natural gas (LNG) purchasing by price-sensitive buyers in south and east Asia, diverting cargoes away from Europe and helping erode the surplus. Severe heatwaves across India, Bangladesh, southeast Asia and south China have also boosted gas consumption by generators to meet air-conditioning and refrigeration demand, pulling more LNG away from Europe. Since the summer of 2023, northeast Asia’s LNG buyers have been prepared to pay a premium over their counterparts in northwest Europe, but the premium has increased significantly since the end of winter 2023/24. LNG futures prices for gas to be delivered to northeast Asia in July 2024 have been trading more than 3 euros per MWh above European benchmark prices since the start of April. So far, Europe’s surplus has kept it on the sidelines and allowed more LNG to be diverted to gas-hungry buyers in south and east Asia. Europe’s buyers are likely to remain relatively inactive for several more months given that inventories are still well above normal. But as the surplus gradually erodes, competition between Europe and Asia for LNG is likely to re-emerge before the end of 2024, and prices could rise sharply if a cold winter across both ends of Eurasia leads to a scramble for the last remaining uncommitted cargoes. Related columns: - Europe's limited storage space will push gas into Asia(April 9, 2024) - Europe gets lucky with a mild, windy winter(March 13, 2024) - Europe's mild winter leaves gas stocks at record high (March 7, 2024) John Kemp is a Reuters market analyst. The views expressed are his own. Follow his commentary on X https://twitter.com/JKempEnergy New Tab, opens new tab Sign up here. https://www.reuters.com/markets/commodities/europes-gas-surplus-narrows-lng-redirected-asia-2024-06-11/

2024-06-12 06:48

KYIV, June 12 (Reuters) - When the power goes down and the elevator stops working, Ukrainian couple Maryna and Valeriy Tkalich leave the pushchair on the ground floor and carry their two-month-old son up the 12 flights of stairs to their apartment instead. And once authorities in Kyiv have notified residents of upcoming scheduled electricity outages, the Tkaliches rush to bathe little Marian and prepare food for the family before the lights go out and taps run dry. Such disruptions are becoming increasingly common for the city's population of about three million people, after Russia began pummelling the country's energy system in late March, cutting out half of its generating capacity. In scenes reminiscent of the winter of 2023, streets are frequently plunged into darkness, the hum of private generators can be heard again across Kyiv streets and people carry flashlights to get around. "The main challenge is the lack of water," said Valeriy Tkalich, 34, speaking to Reuters at his Kyiv home where water pumps can't reach the higher floors without electricity. "For cooking, we also had to adjust and purchase a small gas camping stove to heat stuff up," said the IT product manager. "With the baby, it seriously complicates our reality." Many Ukrainians fear things will get worse as winter approaches, with Russian forces seizing the initiative on the battlefield and intensifying missile and drone attacks on thermal and hydropower stations. Moscow says Ukraine's energy infrastructure is a legitimate military objective and denies targeting civilians. Thousands of Ukrainians have been killed in attacks on residential buildings, schools and hospitals since early 2022. Marian spent his first nights at home sleeping in the apartment hallway instead of a bedroom, to reduce the risk of harm should the building be struck. "Even the air strikes, which we have got used to and which present huge risks for the family - made worse by the presence of the baby - bother me less than the blackouts do," Tkalich said. "Blackouts are the worst." Warnings about upcoming power cut set off a flurry of activity in the household: "You have to fill up the water bottles, wash the baby, and cook food." He and his wife, who has a jewellery business, are planning for the fall and winter in case the power cuts continue, but they are also considering moving further to the west where disruptions from missile attacks are typically less frequent. LONG-TERM DAMAGE Just as Russia has stepped up its assault on Ukraine's power generating capacity, Kyiv has struggled to secure enough air defence systems from its Western allies to protect itself. As the country eagerly pleaded for additional air defences and awaited delayed military aid from the United States, Russian drones and missiles caused over $1 billion worth of damage. Ukrainian authorities say the spring attacks have taken out about half of the country's generation capacity - 9,000 out of 18,000 Mwh - and that they have caused long-term damage that may mean power cuts for years to come. Some Kyiv residents went without power more than five hours a day last week due to deficits in the energy system, the worst situation in the capital since last winter. For artist Yevhen Klymenko, a friend of the Tkaliches who also lives in Kyiv, power outages have brought a change in the way he works. The 29-year-old now wakes up at dawn in order to paint in natural light, ditching his nocturnal working hours now that disruptions are so frequent. He recently returned to an unfinished portrait of Ukraine's popular former commander-in-chief Valeriy Zaluzhnyi, and hopes the proceeds from it will help raise funds to buy equipment to support the country's military. On visits close to the front lines, Klymenko said he had met Ukrainians who lived in far worst conditions than him. "You understand everything here is insignificant," he said. "(At the front), it is far more difficult. So you come back, see that there is no power, and you say 'screw it'." Sign up here. https://www.reuters.com/world/europe/russian-barrage-leaves-kyiv-residents-without-power-water-2024-06-12/

2024-06-12 06:00

NEW YORK, June 12 (Reuters) - The S&P 500 and the Nasdaq scored record closing highs for the third consecutive session on Wednesday and U.S. Treasury yields pared earlier declines as investors weighed a market-pleasing inflation report against lowered interest rate cut expectations. The dollar shed some weakness after the U.S. Federal Reserve concluded its two-day policy meeting by leaving interest rates unchanged, and released its accompanying policy statement and Summary of Economic Projections (SEP). The S&P 500 and the Nasdaq ended sharply higher, while the blue-chip Dow turned slightly negative toward the end of the session. The more-hawkish-than-expected SEP seemed to contradict the Labor Department's closely watched CPI report released earlier in the day, which showed core prices growing at their slowest annual pace in over three years. "It's a little disappointing to see this continued hawkishness, especially on the same day where you get one of the softest inflation reports in probably a couple of years," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "The market is going to struggle a bit with how hawkish the Fed is in light of all of not only this morning's data, but last week’s as well." In his press conference following the decision, Fed Chair Jerome Powell acknowledged that inflation has eased substantially but remains too high and rate-cut expectations have been pushed out due to slower-than-expected progress in bringing price growth down to the central bank's 2% goal. "I think the main takeaway will be that the market was probably expecting the Fed to shift the dot plot from three cuts to two cuts," Mayfield added. "Instead it was shifted from three cuts to one cut, which on margin is a hawkish surprise." Still, financial markets are pricing in a 61.5% likelihood of a 25-basis-point rate cut in September, up from 46.8% on Tuesday, according to CME's FedWatch tool. The Dow Jones Industrial Average (.DJI) New Tab, opens new tab fell 35.21 points, or 0.09%, to 38,712.21, the S&P 500 (.SPX) New Tab, opens new tab gained 45.71 points, or 0.85%, to 5,421.03 and the Nasdaq Composite (.IXIC) New Tab, opens new tab added 264.89 points, or 1.53%, to 17,608.44. European shares closed sharply higher after the CPI report and prior to the Fed's rate decision. The pan-European STOXX 600 index (.STOXX) New Tab, opens new tab rose 1.08% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) New Tab, opens new tab gained 0.86%. Emerging-market stocks rose 0.39%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) New Tab, opens new tab closed 0.5% higher, while Japan's Nikkei (.N225) New Tab, opens new tab lost 0.66%. U.S. Treasury yields slid after the data, but retraced a bit after the SEP release. U.S. benchmark 10-year Treasury notes last rose 19/32 in price to yield 4.3277%, from 4.402% late on Tuesday. The 30-year bond last rose 27/32 in price to yield 4.4846%, from 4.535% late on Tuesday. The dollar pared its losses against a basket of world currencies after the central bank cut its 2024 rate-cut expectations. The dollar index (.DXY) New Tab, opens new tab fell 0.46%, with the euro up 0.61% to $1.0804. The Japanese yen strengthened 0.14% versus the greenback at 156.88 per dollar, while Sterling was last trading at $1.2793, up 0.42% on the day. Oil prices settled higher, supported by simmering tensions in the Middle East, and by forecasts that global inventories will fall in the latter half of the year. U.S. crude rose 0.77% to settle at $78.50 per barrel, while Brent settled at $82.60, up 0.83% on the day. Gold gained ground but lost some shine in the wake of the Fed's updated economic projections. Spot gold added 0.2% to $2,320.76 an ounce. Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-06-12/

2024-06-12 05:46

SHANGHAI, June 12 (Reuters) - Chinese solar panel manufacturers said they are seeking immediate government intervention to curb investment and industry collaboration to arrest a plunge in prices of solar cells and modules, as the industry faces overcapacity. Financial incentives and a government push have helped China become the solar panel factory of the world, accounting for about 80% of global module capacity. Analysts expect Chinese manufacturers to add up to 600 gigawatts (GW) this year, enough to meet global demand through 2032. However, with no end in sight for the plunge in prices, industry officials and analysts said intense competition was threatening to drive smaller producers into bankruptcy. Rapid capacity additions drove down prices of China's finished solar panels by 42% last year. "Survive - that's the goal," Li Gang, chairman of Seraphim Energy Group said at the International Solar Photovoltaic and Smart Energy conference on Tuesday. Between June 2023 and February 2024, at least eight companies cancelled or suspended more than 59 GW of new production capacity, equivalent to 6.9% of China's total finished panel production capacity in 2023, according to the China Photovoltaic Industry Association (CPIA). "We need to join our forces together to avoid overinvestment," Gao Jifan, chairman and CEO of Trina Solar and honorary president of CPIA told the conference. Gao sought government regulation of new investment in the sector to plug further losses, while SiNeng Electric's president Duan Yuhe asked the Chinese state planner to intervene. Gongshan Zhu, chair of the Asian Photovoltaic Industry Association, warned new companies against rushing into the sector, saying industry profits had plunged 70% due to overcapacity and falling prices, while exports were curbed by trade barriers imposed by the United States. "If you're just a copycat, it will not be sustainable for you," Zhu said, adding that the situation has been exacerbated by local governments investing for the sake of boosting employment. Industry executives speaking at the conference also called for an end to race-to-the-bottom price competition, and suggested bidding processes take into account levels of research and development, instead of just pricing. Some company officials, such as Wuxi Suntech Power Chairman Fei Wu, said consolidation had already begun. The industry's prospects were expected to worsen this year and more small companies were likely to go out of business, he added. Sign up here. https://www.reuters.com/business/energy/china-solar-panel-manufacturers-seek-government-action-halt-freefall-prices-2024-06-12/

2024-06-12 05:43

COPENHAGEN, June 12 (Reuters) - Renewable energy group Orsted (ORSTED.CO) New Tab, opens new tab will install a Tesla (TSLA.O) New Tab, opens new tab Megapack battery storage system linked to Britain's Hornsea 3 offshore wind farm, the Danish company said on Wednesday. Energy storage is becoming increasingly important as production of renewable energy rises, because the wind might not blow or the sun shine during the peak hours when most consumers turns on their lights and appliances. "The battery will help ensure that renewable energy is used in the best possible way by storing it when demand is lower and then releasing it back into the system when it's really needed," Orsted's UK and Ireland chief Duncan Clark said in a statement. This would help reduce price volatility for consumers by making more power available, including during peak periods when energy is traditionally more expensive, Orsted said. The system, set to be operational by 2026, will be co-located with the onshore converter station at Swardeston in eastern England, and will have a capacity of 600 MWh, equivalent to the daily energy usage of 80,000 UK homes. Orsted did not disclose the size of the battery investment. Sign up here. https://www.reuters.com/sustainability/climate-energy/orsted-install-tesla-battery-uk-offshore-wind-farm-2024-06-12/

2024-06-12 05:38

NEW YORK, June 12 (Reuters) - The dollar dropped on Wednesday after data showed that consumer prices in May rose less than economists expected, but pared losses after updated interest rate projections by Federal Reserve officials showed an expectation for only one rate cut this year. The headline consumer price index (CPI) was flat on the month, below expectations for a 0.1% gain. Core prices rose by 0.2%, below economists' projections for a 0.3% increase. That bolstered expectations that the U.S. central bank will make two 25-basis-point rate cuts this year, with the first likely coming in September. But the Fed's "dot plot" showing only one cut this year has clouded that view. "Fed members clearly weren't swayed by today's CPI report, or were reticent to make a last-minute change to their forecast," said Adam Button, chief currency analyst at ForexLive in Toronto. Fed policymakers as of March had projected three rate cuts this year. The U.S. central bank on Wednesday also pushed out the start of rate cuts to perhaps as late as December. Fed Chair Jerome Powell said after the meeting that the interest rate forecast is "fairly conservative" and may not be borne out by coming data, and is subject to revision. But he was not as forthright about the possibility of a rate cut in September as some investors had expected. "Many in the market thought Powell might begin to tee up a September rate cut, and instead he hasn't offered any kind of fresh hint on easing," Button said. "That's led to some U.S. dollar buying." The dollar index was last down 0.5% on the day at 104.73, after earlier falling to 104.25. It reached a four-week high of 105.46 on Tuesday. The greenback was also pulled lower as the benchmark 10-year Treasury yield briefly hit its lowest level since April 1 at 4.25%. Fed funds future traders are now pricing in a 63% probability of an interest rate cut by September, down from more than 70% earlier on Wednesday, according to CME Group's FedWatch Tool. Rate-cut expectations have been volatile in the past week, with traders reducing bets on a cut in September after Friday's U.S. jobs report for May showed that employers added more jobs than expected during the month. Wage inflation also rose more than was anticipated. Producer price data on Thursday is the next focus for clues on the likely trajectory of the personal consumption expenditures price index (PCE), the Fed's preferred inflation indicator. "A soft number there could tilt risks towards a low core PCE number at the end of the month," said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto. The euro gained 0.63% to $1.0807 and got as high as $1.0852. It had fallen to $1.07195 on Tuesday, the lowest level since May 2. The single currency has been under pressure after far-right parties gained ground in European Parliament elections, prompting French President Emmanuel Macron to call a snap election in his country, to be held in two rounds on June 30 and July 7. Macron reaffirmed on Wednesday that he would not resign if his camp does not win the election. Marine Le Pen's National Rally is France's most popular party ahead of the parliamentary elections. The Bank of Japan also meets this week, and it is widely expected to keep interest rates steady and consider whether to offer clearer guidance on how it plans to reduce its huge balance sheet. The dollar fell 0.17% to 156.8 yen after trading at a one-week high of 157.40 on Tuesday. The yen's decline to a 34-year low of 160.245 per dollar at the end of April triggered several rounds of official Japanese intervention totaling 9.79 trillion yen ($62 billion). In cryptocurrencies, bitcoin gained 1.85% to $68,527. Sign up here. https://www.reuters.com/markets/currencies/currency-market-steadies-ahead-us-inflation-test-fed-decision-2024-06-12/