Energy This Week: Oil soars , Ukraine's drones hit Russia refineries, Adnoc boosts German LNG, & Dr Al Jaber wins at CERAWeek

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Oil soars as IEA boosts demand estimates

Opec has raised its forecast for economic growth this year slightly and maintained its bullish oil demand estimates. It expects 2.2 million barrels per day of demand expansion this year.

However, the International Energy Agency changed its tune and upped its demand figure for this year to 1.3 million bpd, from about 1.2 million bpd, slightly closing the gap with Opec. It now sees the market in deficit this year, assuming Opec+’s cuts remain in place throughout the year. However, analysts suggest the producer alliance may consider relaxing its output cuts by mid-year.

The IEA attributed the forecast raise to higher ship fuel use because of the Red Sea disruptions, and elevated US use of ethane for petrochemicals. It also increased its view of Iranian production by 280,000 bpd this year.

The US Energy Information Administration expects global oil demand to grow by 1.4 million bpd in both 2024 and 2025.

Both the IEA and EIA, however, expect a sharp drop in Chinese demand growth because of a slowing economy, lower petrochemical output and slowing fuel use linked to higher electric car adoption.

Oil prices dipped on Friday but still recorded a gain of more than $3 a barrel over the week. They were supported by an unexpected drop in US crude stocks and improved economic data.

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Ukraine’s drones could strike beyond Russian refineries

Ukraine’s drone campaign against Russian refineries, which began in January, intensified last week. As much as 10 per cent of Russia’s refining capacity is now offline after a string of attacks against complexes as far as 1,000km from Ukraine. Most of European Russia now appears in range. But Kyiv’s ability to strike Russian oil refineries might be even more influential in the calculus of its western backers.

Houthi forces in Yemen have said they will widen their anti-shipping campaign to attack vessels heading from the Indian Ocean towards the Cape of Good Hope.

Adnoc signs up to boost German gas supplies

Germany has been scouring the world for alternative supplies to replace Russian gas. On Monday, its state company Securing Energy for Europe (Sefe) signed a 15-year deal to import one million tonnes of liquefied natural gas from Adnoc’s new Ruwais plant, which is expected to begin operations in 2028.

Qatar’s massive planned expansion in LNG exports could help wean large Asian economies off coal, saving carbon dioxide emissions. LNG prices have hit their lowest in three years and are expected to drop further later in the decade as new production comes online, making the fuel more competitive against coal.

LNG does come with associated emissions of methane, a powerful greenhouse gas. The International Energy Agency found that methane releases from the energy industry last year remained close to record levels, but that regulations and investment of $170 billion could cut this by 75 per cent by 2030.

Renewables: Harnessing the tornado

The world must harness the “tornado of good news” following Cop28, German Foreign Minister Annalena Baerbock told climate talks in Berlin. Renewables made up 87 per cent of all new power systems installed last year. A record 473 gigawatts were installed. But there is still a long way to go to reach the target of 1,000 gigawatts annually by 2030, and to spread the boom beyond China, the US and Europe to Africa.

Cop28 President Dr Sultan Al Jaber has been recognised at the prestigious CeraWeek conference currently under way in Houston, Texas. He was awarded the Leadership Award for Building Global Consensus towards a Sustainable Energy Future. Previous recipients of special awards include Indian Prime Minister Narendra Modi, Canadian Prime Minister Justin Trudeau and former Mexican President Enrique Pena Nieto.

Dr Al Jaber is also chairman of Abu Dhabi-owned clean energy company Masdar. Masdar will acquire 50 per cent of Terra-Gen, one of America’s biggest independent renewable energy producers, for an undisclosed amount. The corporation operates about 2.4 gigawatts of wind and solar power and 5.1 gigawatt-hours of energy storage, mostly in California and Texas.

On a net basis, this therefore represents more than 1 per cent towards Masdar’s target of 100 gigawatts of capacity by 2030, and nearly doubles its current US portfolio.

Heat pumps stumble while shipping sets sail to lower carbon

Heat pumps, which use electricity to move heat and which can be three to five times as efficient as direct electrical heating or a gas boiler, are a key climate-friendly technology. But sales in the US and Europe dropped last year after a decade of growth, hit by inflation and higher interest rates. Six in 10 Norwegian homes use them, compared to only 1 per cent in the UK. New technological advances could broaden their use in industry too if users can stomach the higher upfront costs.

Shipping is one of the hardest industries to decarbonise. Big cargo vessels emit collectively about one billion tonnes of carbon dioxide annually from burning fuel oil and diesel. A new twist on an old technology – sails – could help change that. A bulk carrier chartered by agricultural commodities company Cargill has completed a six-month voyage, saving up to 15 per cent of fuel using WindWings, two foldable auxiliary sails.

China’s electric vehicle industry has leapt to prominence. A new entrant, smartphone company Xiaomi, will deliver its first battery car by the end of this month. But former electric vehicle market darling Tesla may drop out of the “Magnificent Seven” tech stocks, having lost about 34 per cent of its value since the start of the year. The company is struggling to maintain its growth trajectory, crucial to its previously sky-high valuation, which hit $1.23 trillion in 2021.

The green initiative Dubai Can has reduced single-use plastic consumption by the equivalent of more than 18 million bottles. The campaign provided water fountains and encouraged the use of refillable bottles. And UAE “Dreamers” are highlighting environmental innovation at the International Horticultural Expo in Doha. This includes transforming food waste into animal feed, setting up vertical farms and generating freshwater from the ocean.

Climate indicators breaking all the wrong records

Climate change last year was “chart-busting”, according to the World Meteorological Organisation. It highlighted record greenhouse gas levels, temperatures, ocean heat and acidification, sea-level rise and the loss of glaciers and Antarctic sea-ice.

As the Earth swelters, Princess Abeer Al Saud writes that the retreat of Antarctic glaciers that once seemed permanent is a sign of the real-time unfolding of the climate crisis. Extreme weather events are threatening crops – particularly coffee.

Exposure to excessive heat damages the body’s immune system and when combined with fine particulate pollution, it raises the risk of heart attacks. India, Bangladesh and Pakistan have the world’s most polluted air. Middle Eastern countries also ranked badly, harmed by particulate matter from dust storms.