Global oil supply under threat

Oil Price
Global oil supply under threat

The global “war on single-use plastics” is “gaining pace,” according to Barclays. Bans on single-use plastic bags and plastic straws in the U.S. are proliferating at the municipal and state level. The European Parliament passed a ban on 10 single-use plastic items, to take effect in 2021. Roughly 40 percent of plastics end up in landfills, and another 30 percent escapes collection systems, Barclays estimates. Only a small percentage is actually recycled. Single-use plastics account for 3 to 3.5 mb/d of global crude oil demand. Barclays says that figure could swell to 5.5 to 6 mb/d by 2040-2050. However, as Oil Price reports, as bans on these plastics multiply, the forecast is in doubt. Ultimately, 6 mb/d, or about 5 percent of global oil demand, could be erased by these policies.

Libya could lose 1 mb/d

Over the past year, Libya has been a bearish factor for oil prices, restoring long-disrupted output and reaching multi-year production highs at over 1.2 mb/d as recently as March. But the reignited civil war could put an end to all of those gains. The restoration of production hinged on a delicate but important division of the oil sector: The government in Tripoli controlled the legal authority to export oil, while the LNA provided the security. Now, at war, it’s much more likely a winner-take-all mentality will emerge, leading to disruptions. “[W]e think it unlikely that the arrangement can survive a protracted stalemate and the associated weakening of the LNA. In our view there is a high risk that Libyan outages could add another 1mb/d loss to the 1.9mb/d y/y reduction from Iran and Venezuela,” Standard Chartered said in a May 7 report.

Bitcoin prices fall on security

Binance, one of the world’s largest cryptocurrency exchanges, announced that hackers took and withdrew 7,000 Bitcoins, valued at about $40 million. It was a “large scale security breach,” the exchange said. Shortly after, Bitcoin fell about 3 percent, although recovered some of those losses. The broader Bloomberg Galaxy Crypto Index also declined. It was “not the best of days, but we will stay transparent,” Zhao Changpeng, Binance’s chief executive officer, said in a tweet. Bitcoin and other cryptocurrencies have been plagued by fears of security and hacking.

Iran’s oil exports plunging

Iran’s oil exports are plunging, following the full implementation of U.S. sanctions and the expiration of waivers. Bloomberg reports that not a single ship has been seen leaving Iran’s oil terminals for foreign ports. Oil exports fell below 1 mb/d in April, but in early May, there is no sign of exports. However, Iran will likely manage to keep exporting through a variety of clandestine tactics, such as turning off transponders on tankers. Bloomberg said that there has been no sign of a tracking signal on 10 very large crude carriers for 16 days. Estimates on the impact on Iranian oil exports vary, but only differ on different magnitudes of decline. WoodMac says exports could fall to 0.7 mb/d by the summer.

Solar installations top 2 million in U.S.

U.S. cumulative solar installations surpassed 2 million only three years after reaching 1 million. California alone has just under 1 million installations. The next doubling of installations, to 4 million, will be reached by 2023, according to the Solar Energy Industries Association and Wood Mackenzie. “We believe that the 2020s will be the decade that solar becomes the dominant new form of energy generation,” SEIA CEO Abigail Ross-Hopper said in the statement. By 2024, there will be a solar system installed at a rate of one per minute in the U.S., according to WoodMac. Solar is now a $17 billion industry. Solar and wind together account for 11 percent of U.S. electricity generation.

Grain prices crash on Trump’s trade war

Soybean and corn futures plunged after President Trump announced tariff hikes on China via twitter. The Bloomberg Grains Subindex Total Return fell to its lowest level since 1977. As Bloomberg noted, July soybean futures fell to a record low, falling to $8.1675 per bushel at the start of the week. Meanwhile, U.S. farmers are still drying out from record floods, which damaged crop land and infrastructure, and delayed plantings. The prospect of a major hike in tariffs on China, and the anticipated retaliatory trade actions on the U.S., could depress agricultural commodities further.