Oil & Energy

Date Issued – 12th April 2024

Courtesy of?Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

EU Permits Member States to Ban Russian LNG

This week, the European Parliament enacted regulations that empower individual EU nations to prohibit imports of Russian liquefied natural gas (LNG) by restricting Russian companies from reserving gas infrastructure capacity. Despite these measures, Europe's dependency on Russian LNG has been on the rise, with record imports reaching 15.54 million tonnes last year, according to Kpler data. In 2024, Russian LNG's share of Europe's total supply increased to 16%, up from 12.75% in the early months of 2023. The majority of this LNG originates from Russia's Yamal LNG plant, which has long-term supply contracts with European energy giants like TotalEnergies and Naturgy, extending up to 2045.

AI Demand Strains US Electricity Grids

Global electricity use by data centers is set to double from 460 TWh in 2022 to over 1,000 TWh by 2026, matching Japan's total power consumption. Northern Virginia now leads the world with more than 2,500 MW of data center capacity, with Dominion Energy connecting over 80 data centers to its grid since 2019. Despite this growth, potential delays are anticipated due to grid capacity challenges. Data centers currently account for 1-1.5% of global electricity usage, emitting around 330 million tonnes of CO2 annually.

Global Coal Capacity Continues to Grow

Global coal power generation capacity climbed by 2% last year to 2,130 GW, marking the most substantial annual increase since 2016. This growth was predominantly driven by China, which added 47.4 GW—representing 70% of the global increase—and began construction on an additional 70 GW, far outpacing the rest of the world. Meanwhile, outside of China, coal-fired capacity also expanded as 23 GW of new capacity exceeded the 21.1 GW that was decommissioned. The International Energy Agency (IEA) asserts that to limit global temperature rises to below 1.5° C, all coal power should be phased out by 2040, necessitating the closure of an average of 126 GW annually.

EU Challenges Chinese Dominance in Renewable Sector

The EU has initiated an investigation into Chinese investments in wind parks in several European countries due to concerns that Chinese companies might be receiving unfair subsidies from Beijing. This move could lead to blocking Chinese takeovers or suspending tenders if these subsidies are confirmed. Europe is attempting to protect its manufacturers against Chinese competitors, who dominate the market with significantly cheaper wind turbines. Despite Europe's strong exports of wind turbines, China's massive production capacity poses a continuous challenge to European producers.

Supply Concerns Drive Tin Prices to Two-Year High

Tin prices on the London Metal Exchange (LME) soared to a near two-year peak this week, driven by dwindling inventories and potential supply disruptions from regional conflicts. The closure of Myanmar’s Man Maw mine and the seizure of North Kivu province in Congo by M23 rebels—who control the Bisie mine contributing 5% of the global tin supply—have heightened concerns in the metals market.

Despite no current delays in Congolese tin shipments, the apprehension of potential disruptions propelled three-month LME tin futures to $31,675 per metric tonne, marking a 14% increase since early April. With LME tin inventories dropping 46% since January to 4,145 metric tonnes, speculative interest has surged, with hedge funds' net positions at their most bullish since March 2022.

Latin America to Ramp Up Geothermal Investment

Rystad Energy forecasts a significant increase in geothermal investments in Latin America, projecting a rise from $570 million in 2023 to $1.3 billion by 2027, tapping into just 6% of the continent's geothermal capacity. Leading this clean energy expansion, Mexico’s state-owned utility CFE is spearheading projects exceeding 1 GWe, surpassing initiatives in Central America's Costa Rica and El Salvador.

In the Andean region, geothermal energy is poised to transform lithium production by enabling direct lithium extraction (DLE) methods that minimize land, water use, and emissions. Additionally, oil companies with drilling expertise, such as Colombia’s Ecopetrol in partnership with Baker Hughes in the Caldas pilot project, are beginning to venture into geothermal investments, leveraging their knowledge in traditional drilling for renewable energy purposes.

Cocoa Prices Surge, Leading 2024 Commodity Gains

Cocoa futures have soared more than 125% in 2024, recently surpassing $10,000 per metric ton for the first time, driven by supply disruptions and adverse weather in the Ivory Coast and Ghana. Both countries, the world's leading cocoa producers, have faced issues like a shortage of beans and the spread of the cocoa swollen shoot virus. Market analysts from Citi suggest that if demand remains strong, prices could climb as high as $11,000 to $12,000 per metric ton in the coming months.

[Disclaimer: This article provides financial insights & developments for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]

Explore investment opportunities with our dedicated relationship managers. Schedule a face-to-face and/or video meeting to help you achieve your financial goals. Visit our Website