Editor’s note: This is a free numerical report for Oilprice.com readers. Global Energy Alert members receive the numerical report, plus the latest geopolitical intelligence and vetted energy stock picks from our top traders. Click here to sign up for a 30-day risk-free trial.
In the latest version Numbers ReportHere we take a look at some of the most interesting numbers released this week from the energy and metals sectors. Each week we’ll take a closer look at some of the data and provide a little explanation for what’s driving the numbers.
Let’s take a look.
1. Tesla beats market expectations and regains investor confidence
– A 40% rally in Tesla shares has eased concerns about the company’s future, leaving options investors more bullish than ever in more than three years and believing the automaker’s valuation still has room to rise.
– Tesla shares accelerated their gains after the world’s second-largest EV automaker reported a smaller-than-expected year-over-year decline in quarterly vehicle shipments.
– The three-month call skew, which measures the premium of call options over put options, has turned positive again and is hovering around 2.75 percentage points, according to Bloomberg data.
– Tesla’s stock price surge last month has reportedly cost short sellers $3.5 billion in losses, and short interest in the company now stands at 3.5% of its shares outstanding, with a notional value of $22 billion.
2. Unprecedented heatwaves heat up U.S. gasoline stocks
– The U.S. natural gas storage surplus fell for the seventh straight week against the five-year inventory average, dropping to 528 million cubic feet at the end of June, on the back of robust gas-fired power generation demand and production cuts.
– Average U.S. power sector natural gas consumption rose to 45.3 BCf per day by the end of June, a staggering 14% increase from the same period last year, fueled by a hotter-than-usual summer.
– The July 1 opening of the Mountain Valley Pipeline is expected to restore natural gas production across the Appalachian Basin, increasing production from the Marcellus and Utica shale formations to 35 billion cubic feet per day.
– Hedge funds have already maintained a net long position in Henry Hub futures for six consecutive weeks, currently standing at around 35,000 contracts, putting an end to the extremely bearish market positioning that took place from January through May.
3. Aging power grids in Europe and the Americas are bad news for the expansion of AI
The rush to invest in building infrastructure for generative AI data centers will test the resilience of power grid operators in Europe and North America, as both nations struggle to upgrade their aging electricity systems.
– According to Goldman Sachs analysts, the average ChatGPT search consumes 10 times more electricity than a Google search, and the cost of building a data campus is estimated at $10 million per MW of capacity.
– Europe’s power grids are the oldest in the world, with an average age across the region of around 50 years. In a world where geographic proximity and reliability to data centers play a key role in consumption, power grids are under increasing strain.
– Demand for conveniently located data centers is expected to drive up real estate prices, with demand for data center space already outstripping supply in Europe’s top five markets (London, Paris, Frankfurt, Amsterdam and Dublin).
4. China embarks on next stage of rare earth industry integration
– Shares in Chinese rare earth producers surged this week after the Beijing government launched regulatory reforms to the mining sector that should ease pressure from oversupply.
– China’s State Council said a new unified development plan will take effect on Oct. 1, preventing smelters from using more imported ore than government-set quotas.
Currently, about 25% of China’s rare earth demand is imported (mainly from neighbouring Myanmar), and government control is expected to increase profits for domestic producers.
“The Middle East has its oil, and China has its rare earths,” as Deng Xiaoping put it in 1992, and the Chinese government has sought to control the oil industry, consolidating major producers and fighting illegal extraction.
5. WTI prices rise as U.S. crude exports to Europe fall to two-year low
– U.S. crude exports to Europe fell to a two-year low as refiners in the region bought cheaper local and West African crude, with flows falling to 1.45 million barrels per day, Kpler data showed.
This was a 14% month-on-month and 27% year-on-year decline as the US benchmark WTI rose against the European benchmark Brent during May, limiting profitability in the transatlantic trade.
– The spread between Brent and WTI crude oil hit an eight-month low of -$3.95 per barrel on May 30, after the discount to Brent crude, the light sweet U.S. benchmark, narrowed for 15 of 23 trading sessions due to weakness across Europe.
– Barring any major hurricane impacts, US crude oil flows into Europe should recover over the summer as reduced WTI flows support Brent crude prices and make arbitrage trades viable.
6. Tin remains firm as base metals prices ease off
– Most base metals have fallen from record highs hit in May when hedge funds flooded into metals futures, driven by high inventories in China and weak demand, with one notable exception: tin.
– Tin futures contracts traded on the LME have risen by more than 30% since the start of the year and are trading at around $33,250 a tonne, while tin stocks stored in LME warehouses have plummeted by 38% over the same period.
– In contrast to nickel, supplies of refined tin from Indonesia have been disrupted due to delays in the approval of new licences, while exports from Myanmar have been restricted after militias seized tin mines in Wa State.
– Hedge funds’ positions in tin contracts are the strongest since the LME began publishing trader commitment reports in 2018, with them net long 3,726 contracts as of last week’s close.
7. Labour’s landslide victory in the UK elections accelerates exodus of major companies
– The landslide Labour victory in the UK parliamentary elections, ending 14 years of Conservative rule, does not bode well for the future of North Sea production and exploration.
– The new Chancellor, Keir Starmer, has consistently promised to halt the issuing of North Sea licenses if Labour wins, while at the same time increasing the unfavourable 75% temporary tax by a further three percentage points and extending its deadline clause until the end of the next parliament.
– UK oil production is falling by an average of 8-10% per year and of the approximately 280 oil and gas fields currently operating in the UK North Sea, 180 are expected to cease production by the end of the century.
– US oil giant Chevron sold its UK North Sea assets in May after holding them in the country for 55 years, while Exxon Mobil also sold its stake to a local upstream company, and a Labour victory could see others join in the exit.
