Oil & Energy: Recent Events

Date Issued – 15th February 2024

Courtesy of?Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

U.S. House Votes to Overturn Biden Administration's LNG Export Restriction

The U.S. House recently voted to revoke the Biden Administration's power to halt new LNG export approvals, transferring sole authority to the Federal Energy Regulatory Commission. Position aimed at streamlining LNG export processes, faces significant hurdles in the Democrat-controlled Senate. Initiated in response to the Administration's January pause on LNG project approvals for environmental and economic review—a decision criticized by Republicans and major oil firms—the measure's Senate prospects remain slim. However, it sparks potential for broader discussions on LNG exports and their global implications, particularly concerning Europe's efforts to diversify energy sources away from Russian gas.

JP Morgan Withdraws

JP Morgan has exited the Climate Action 100+, a $68 trillion coalition aimed at reducing greenhouse gas emissions, to focus on its own climate risk framework, signaling a potential trend of withdrawals amid increasing legal and political pressures. Despite the bank's departure, the coalition emphasizes its members' commitment to climate risk management.

This move reflects a broader dilemma within the financial sector, where firms face the challenge of aligning immediate political concerns with long-term environmental goals. The withdrawal highlights the tension between short-term political dynamics and the persistent need for climate action, amidst warnings that today's decisions may need revisiting as future climate regulations tighten.

EU Declines to Prolong Gas Transit Agreement

The European Union expressed a definitive lack of interest in renewing the gas transit agreement that facilitates the supply of Russian natural gas to EU countries via Ukraine, set to expire at the end of 2024. EU Energy Commissioner Kadri Simson highlighted alternative solutions for supplying gas to affected countries, underscoring the EU's commitment to reducing reliance on Russian energy sources, especially in light of the ongoing conflict in Ukraine.

This stance is part of a broader strategy to diminish Russian gas imports, which have significantly decreased from over 33% to less than 10% since the invasion. Despite the dwindling imports, certain European nations, notably Austria, are actively seeking ways to further cut their dependence on Russian gas. Ukraine has firmly stated it will not negotiate an extension of the transit deal, while Russia mentions the possibility of exploring alternative routes for gas delivery to Europe if the current agreement lapses without renewal.

Stringent sanctions against Russia

The U.S., EU, UK, and allies discussed implementing further stringent sanctions against Russia in Brussels. These talks focused on enhancing current sanctions' effectiveness and combating evasion. The U.S. has already increased its sanctions efforts, affecting Russian oil exports.

The EU is also considering sanctions against specific Chinese and Indian companies for their dealings with Russia, a move that could mark a first in penalizing firms from these countries for Russian connections. This development coincides with a significant shift in Russia's oil market, with China and India becoming major buyers as the EU reduces its Russian oil intake, illustrating a notable shift in global energy trade dynamics.

Europe’s battery storage boom

Expected to increase grid-scale capacity sevenfold by 2030, creating an $84 billion investment opportunity through 2050, per Aurora Energy Research.This surge supports the transition to renewable energy, with Great Britain, Italy, and Ireland leading in investment attractiveness due to favorable policies and market conditions.

The UK stands out with the largest capacity and a burgeoning project pipeline, highlighted by RenewableUK with operational capacity at 3.5 GW and potential projects totaling 78.6 GW in development stages. This growth in battery storage marks a pivotal development in Europe's energy sector, driving forward renewable integration and offering significant investment prospects.

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

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