Baker Hughes posts Q4 profit as higher oil prices spur drilling demand

By Arunima Kumar and Liz Hampton

(Reuters) -Baker Hughes Co on Thursday reported an adjusted quarterly profit compared with a year-ago loss, as producers took advantage of a rise in crude prices that has fueled demand for oilfield service equipment.

Oil prices surged more than 50% last year amid a global economic recovery from the COVID-19 pandemic and as OPEC+ cut supplies, despite a continued surge in COVID-19 cases.

Higher crude prices have encouraged U.S. producers to ramp up drilling activity, with the U.S. rig count rising to 586 at the end of the fourth quarter, compared with 348 at the close of the December quarter in 2020, according to Baker Hughes data.

U.S. crude futures are trading around $86.2 a barrel, while Brent futures are around $88.12 a barrel. U.S. crude futures were roughly flat Thursday morning.

“We believe the broader macro recovery should translate into rising energy demand for 2022 and relatively tight supplies for oil and natural gas,” said Lorenzo Simonelli, the chief executive officer of Baker Hughes, in a release. However, he warned that the pace of economic growth would moderate slightly in 2022 compared with last year.

Wall Street analysts said the report was positive, praising Baker’s $645 million in free cash flow, which topped forecasts. Investment firm Tudor, Pickering, Holt & Co called the earnings “a very nice way to rebound,” pointing to revenue and operating across three of Baker’s four reporting segments that beat expectations.

Shares of Baker Hughes were up 0.8% in pre-market trading to $26.50.

Adjusted net income for the fourth quarter was $224 million, or 25 cents per share, missing analysts’ estimates by 3 cents, according to data from Refinitiv IBES. The same quarter last year, Baker reported a loss of $50 million, or 7 cents per share, last year.

Revenue for the quarter was $5.52 billion, which beat Wall Street forecasts of $5.49 billion.

For the full year, the company reported a loss of $219 million, versus a loss of $9.94 billion in 2020.

(Reporting by Arunima Kumar in Bengaluru; editing by Amy Caren Daniel and Chizu Nomiyama)

Economic Data from the Eurozone Deliver Mixed Results for the EUR

It was a busier day on the Eurozone economic calendar. Finalized December inflation figures for Eurozone and German wholesale inflation figures were in focus.

Eurozone Inflation

In December, the Eurozone’s annual rate of inflation picked up from 4.9% to 5.0%, which was in line with prelim figures.

Month-on-month, consumer prices increased by 0.4%. This was also in line with prelim figures. In November, consumer prices had also risen by 0.4%.

According to Eurostat,

  • A year earlier the Euro area’s annual rate of inflation was -0.3%.
  • The lowest annual rates of inflation were registered in Malta (2.6%) and Portugal (2.8%).
  • Estonia (12.0%) registered the highest annual rate of inflation, followed by Lithuania (10.7%).
  • The highest contribution to the annual euro area inflation rate came from energy (+2.46 percentage points), followed by services (+1.02 pp), non-energy industrial goods (+0.78 pp), and food, alcohol, & tobacco (+0.71 pp).

German Wholesale Inflation

In December, Germany’s annual wholesale rate of inflation accelerated from 19.2% to 24.2% versus a forecasted 19.4%.

Month-on-month, Germany’s PPI jumped by 5.0% versus a forecasted 0.8%. In November, the PPI rose by 0.8%.

According to Destatis,

  • Year-on-year, the increase was the highest ever.
  • Compared with December 2020, energy prices were up 69% and up by 15.7% compared with November 2021.
  • Strong price increases of natural gas (distribution) and electricity drove energy prices.
  • Excluding energy, the overall index was up 10.4% up on December 2020.
  • Prices of intermediate goods increased by 19.3%, while prices of non-durable consumer goods rose by 4.7% compared with December 2020.

Market Impact

Ahead of today’s stats, the EUR had fallen to a pre-stat low $1.13456.

In response to Germany’s stats, the EUR rose to a post-stat and current day high $1.13690. Following the release of the Eurozone’s inflation numbers, however, the EUR fell to a post-stat and current-day low $1.13331.

At the time of writing, the EUR was down by 0.05% to $1.13372.

EURUSD 200122

Next Up

The ECB’s monetary policy meeting minutes will be in focus ahead of jobless claims and Philly FED Manufacturing numbers from the U.S.

From the minutes, the markets will be looking for any chatter on inflation and interest rates.

Global energy transition to cause short-term economic pain -report

WASHINGTON (Reuters) – The transition to clean energy required to prevent temperatures from rising swiftly could shave 2% off global GDP by 2050 but is likely recoverable before the end of the century, a report by natural resources consultancy Wood Mackenzie said on Thursday.

While investments in technologies like solar and wind farms, advanced batteries will generate jobs, the transition will also likely cause a loss of jobs and tax revenues in fossil fuel production, said the report called “No Pain, No Gain: The economic consequences of accelerating the energy transition”.

“It’s by no means a way to say that we shouldn’t pursue transition or slow it down,” said Peter Martin, WoodMac’s chief economist. “This pain in the short-term will pay off in the long-term.”

Benefits from limiting the rise in temperatures to 1.5 degrees Celsius, as called for by the United Nations, could boost global GDP, on aggregate by 1.6% in 2050, the report said. But actions required to spur the transition to keep temperatures from going above that level could cut 3.6% from GDP in 2050, resulting in the 2% hit, the report said.

The impacts will not be felt evenly. China will feel about 27% of a cumulative $75 trillion economic hit to global GDP by 2050, while the United States will see about 12%, Europe will experience 11% and India about 7%.

Economies such as Iraq that do not have financial reserves to invest in non-fossil fuel sectors could suffer the biggest losses in economic output, it said.

Wealthy economies with deep capital markets that already have big investments in energy transition technologies, or a propensity to invest in new technologies, will be better positioned. France and Switzerland, for example, will likely enjoy a modest boost to economic growth.

The economic benefits of the energy transition should start to show after 2035 and lost economic output would be eventually recouped before the century’s end, the report said.

(Reporting by Timothy Gardner; Editing by Himani Sarkar)

Moldova introduces state of emergency in energy sector

CHISINAU (Reuters) – Moldova’s parliament on Thursday approved the government’s request to introduce a state of emergency in the energy sector over difficulties with gas payments to Russia’s Gazprom.

Prime Minister Natalia Gavrilita said on Wednesday the cabinet needed to expand its powers to manage the energy sector, such as switching gas supplies from industry to households and using budget funds to pay for gas.

“The introduction of a state of emergency is necessary for the energy security of the state, for all citizens of Moldova to spend the winter without problems and have gas,” Gavrilita told the parliament.

The new regime will last 60 days.

Gavrilita said the move would allow the government to defer VAT payments for the Moldovagaz company and transfer funds from the state budget to the company which had been intended to compensate the population for high tariffs.

The government said on Wednesday that Gazprom rejected Moldova’s request to reschedule its January gas payment and the small ex-Soviet republic has to find $63 million for the supply.

Gavrilita said late on Wednesday Moldova would pay its January gas advance to Gazprom on time.

(Reporting by Alexander Tanas, writing by Pavel Polityuk; editing by Jason Neely)

XLE: You can Trust this Energy ETF, Both for Growth and Dividends 

Looking over a longer period comprising the March 2020 market crash, it is evident that the S&P 500 Energy sector as shown in the yellow chart below still trails the broader S&P 500 index. For its part, the SPDR Energy Select Sector ETF (XLE) has delivered an 11.56% gain during the last two years with most of the upside occurring in 2021.

Source: Trading View

Looking ahead, according to the U.S. Energy Information Administration (EIA), spot Brent crude prices are expected to average $79 this quarter. This is down from the current value of $87.7, but the EIA further adds that “developments in the global economy and the many uncertainties surrounding the pandemic” in the coming months could push oil prices up or down from its price forecast.

These uncertainties need to be understood in the context of the supply-demand paradigm.

The supply-demand paradigm

Here, the EIA’s statement that “U.S. natural gas consumption in 2021 was nearly the same level as 2020, and this will remain virtually flat in 2022 and 2023” is noteworthy as it means that there will be less oil-to-gas switching to clear any excess in the amount of oil produced. Thus, in addition to Brent’s spot price itself, the demand for natural gas also constitutes a tailwind for XLE. This said the ETF’s share price is also influenced by two other factors.

First, there is the ongoing sector rotation into energy, finance, and consumer sectors which have started in the second quarter of 2021 and gained momentum from November, which should also determine energy stock returns throughout this year.

Second, the global economic recovery after the drop in activity during the Covid-led confinements created a strong demand from September last year, while inventories, especially in Europe were low. These factors were responsible for the prices of natural gas skyrocketing in Europe as from October 2021 with the fuel-substitution effect being contagious to spot oil prices. This explains the bounce seen in energy sectors’ ETFs including the Vanguard Energy Index Fund ETF (VDE) from that period.

Gauging the supply side, a series of problems weighed on capacity including some countries seeing their production drop due to maintenance delays caused by the pandemic as well as failure to make timely investments in aging upstream infrastructure. This supply shortage was exacerbated by governments, (especially in China and Europe) giving priority to renewables projects and carbon credits while their “green energy” experts failed to foresee the imbalance between supply and demand.

The imbalance to persist

This imbalance is likely to persist in 2022, despite OPEC’s continued production increase and uncertainty associated with the Omicron variant impacting travel. Understandably, some smaller oil companies have been reticent to pump out more oil.

There may be some temporary respite in oil prices as from the start of February when China, together with the U.S. and some other major consumers, will release crude oil from their national strategic stockpiles. This coordinated action aimed at reducing global prices will induce some volatility in XLE, but this will be only for a limited period.

The reason is that the imbalance will persist with one of the reasons being the recovery in international travel.

In this respect, according to Statista, the total fuel consumption of commercial airlines worldwide which increased each year from 2005, reached a maximum of 98 billion gallons in 2019 before falling from 2020 due to Covid. It decreased to 57 billion in 2021. Now, there has been optimism that has been prevailing since the start of the year that the Omicron strain may prove to be less damaging to the health of people and by ricochet the economy.

This optimism is also backed by data, which indicates that despite Covid infection rates reaching an all-time high, the actual death rate is trending lower. Whatever the reasons for this, be it a higher vaccination rate or a less dangerous variant, more people are willing to take a flight. This is in turn proven by the number of international flight departures rapidly inching back up to 2019 levels according to the Bureau of Transportation statistics.

Thus, glancing back at the above chart, XLE could again climb back to its April 2019 high of $68-69 levels by the second quarter of 2022. Even if this upside is somewhat delayed due to volatility, the SPDR ETF pays substantial dividends.

The dividends

Holdings include oil supermajors Exxon Mobile (XOM) and Chevron Corporation (CVX) with a combined weight of 43.4% of overall assets. These are integrated oil and gas companies operating in every segment of the industry. Activities include extraction/production, midstream, petrochemical manufacturing, refining, and, even downstream activities like marketing and distributing refined petroleum products. People buy these companies primarily for their dividends.

The other holdings which are drilling, refining, or equipment provider plays also pay regular distributions to shareholders. This culminates in XLE paying a 3.62% yield. Here investors will notice that distributions that are paid on a quarterly basis reached the highest point in the fourth quarter of 2019 at $3.58.

Source: Chart prepared using data from Nasdaq.com

This was followed by a period of fluctuating quarterly payments around the $0.5 mark, before eventually rising from the third quarter of 2021. With oil prices remaining sustainably high, energy companies should continue to benefit from higher profitability which in turn enables them to sustain dividend payments and perform share buybacks.

Finally, with demand outstripping supply, the imbalance should persist in 2022. Inflationary pressures may slightly affect demand, but, here, recent fund flows indicate that XLE is inversely correlated to the broader market (SPX). Thus the energy sector ETF seems to be acting like an inflation hedge, a role which is also supported by its ability to pay above-average dividends yields. Consequently, XLE can be trusted for further upside and higher quarterly dividend payments too.

Disclosure: I/We are long XLE. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

 

From howitzers to heli-bombs: Canadian province fights rising avalanche risk

By Nia Williams

CALGARY, Alberta (Reuters) – British Columbia is rolling out the big guns – literally – to control avalanches that are forcing closures on some major roads for the first time in decades as the Western Canadian province grapples with a snowier-than-usual winter.

B.C. was rocked in 2021 by extreme weather events, including a record-breaking heatwave, wildfires and unprecedented rains that washed out highways and cut off Vancouver, its main city and home to Canada’s busiest port, from the rest of the country.

The province, Canada’s third-largest by population, uses bombs thrown from helicopters, remote-triggered explosives, and a howitzer gun manned by Canada’s military to keep roads safe. But frequent closures for avalanche control are disrupting critical routes to Vancouver.

At the start of this month, B.C.’s alpine snowpack was 15% higher than average, according to the Weather Network channel.

Extreme winter weather, including November’s torrential precipitation, a deep freeze in late December and an early January thaw, has created weak layers in the snowpack, making steep mountain slopes more prone to avalanches that can release without warning onto valleys below.

“It’s been such a volatile fall and winter season so far, we have had rare ‘extreme’ avalanche warnings go out for parts of (B.C.’s) south coast in December and the risk is still considerable in the interior,” said Tyler Hamilton, a Weather Network meteorologist.

Avalanche control missions involve closing sections of highways while teams use explosives to pre-emptively trigger smaller slides, preventing the snowpack from becoming too deep and unstable.

This winter a section of Highway 1 through the Fraser Canyon, 150 km (93 miles) northeast of Vancouver, needed avalanche control for the first time in 25 years, B.C.’s Ministry of Transportation and Infrastructure said.

Along Highway 99 north of Vancouver, avalanche control and risk-reduction activities are three times the seasonal average, with some slide paths producing avalanches big enough to hit the highway for the first time in more than a decade.

Avalanche control in Allison Pass further south on Highway 3, another key route connecting Vancouver to the rest of Canada, has also been above average, the ministry said.

‘BALANCING ACT’

All three highways were damaged by the November floods, and a busy avalanche control season is putting further strain on provincial resources. The Coquihalla Highway near Hope only reopened to regular traffic on Wednesday, and provincial authorities said record snow and avalanche risk had delayed repairs to Highway 1 through the Fraser Canyon.

Further east in the province, avalanche teams in Rogers Pass, a rugged 40-km section of Highway 1 running beneath 135 slide paths in Glacier National Park, are dealing with nearly 30% more snowfall than usual and control missions are also above average.

Highway 1 is Canada’s main east-west artery and approximately 3,000 vehicles traverse Rogers Pass every day in winter. A major Canadian Pacific rail line runs parallel to the highway.

Avalanche control missions involve soldiers from the 1st Regiment of the Royal Canadian Horse Artillery, which is stationed in Rogers Pass in winter. They use a howitzer to fire shells packed with 4 kg (8.8 lbs) of explosives in the direction of loaded avalanche paths at 17 different locations along the highway.

“Our goal is to bring down as much snow as we can and bring the hazard down to a point where it’s safe to open the highway,” said Jim Phillips, acting avalanche operations coordinator for Parks Canada, which runs avalanche control in the national parks.

The Rogers Pass program has been running since the highway opened in 1961. Before that, CP trains crossing the Selkirk Mountains in winter ran a higher risk of deadly snow slides, including one that killed 62 railway workers in 1910.

So far this winter the team has fired 333 howitzer rounds, produced 197 controlled avalanches and closed the highway for 43 hours over seven separate days.

Phillips said his team also uses heli-bombing and remote-trigger systems to set off detonations, and spends C$600,000 ($480,346) a year on explosives alone.

“It’s a balancing act. You want to keep traffic moving and minimize closures, but also minimize risk to people using the transportation corridor,” he added.

And winter weather in Canada is far from over.

Avalanche control is typically needed until late April or early May, depending on the snowpack, and the Weather Network forecasts above average winter storm systems returning to B.C. in February and March.

“We’re still in a La Niña situation,” said the Weather Network’s Hamilton, referring to a weather pattern that tends to result in above-average precipitation and cold temperatures in B.C.

($1 = 1.2491 Canadian dollars)

(Reporting by Nia Williams; Editing by Paul Simao)

Exclusive: Chesapeake Energy nears $2.4 billion deal to buy Chief Oil & Gas -sources

By Shariq Khan and David French

(Reuters) – Chesapeake Energy Corp is in advanced talks to acquire privately owned natural gas producer Chief Oil & Gas for around $2.4 billion, including debt, people familiar with the matter said on Wednesday.

A deal for Chief Oil & Gas, founded and controlled by Texan ‘wildcatter’ Trevor Rees-Jones, could be announced as soon as this week, the sources said. In wildcat drilling, exploration wells are dug in areas not known to be natural resource fields.

The acquisition by Chesapeake, a U.S. shale gas and oil producer that only emerged from bankruptcy just last year, underscores the recovery of parts of the energy industry as natural resource prices surge to multi-year highs.

The sources, who spoke on condition of anonymity to discuss private information, cautioned that negotiations could still fall apart at the last moment.

A Chief Oil & Gas spokesperson declined to comment. Chesapeake did not immediately respond to a request for comment.

Reuters reported in October that Chief Oil & Gas was up for sale, amid the surge in energy prices that has boosted corporate valuations in the industry.

If completed, it would be the second acquisition which Chesapeake has made since February 2021, when it emerged from one of the largest oil and gas producer bankruptcies of recent years. In November, Chesapeake completed the purchase of Vine Energy for $615 million.

Since exiting Chapter 11 bankruptcy protection, Chesapeake has focused on natural gas production, a return to its roots as a company founded in 1989 by wildcatters Aubrey McClendon and Tom Ward.

Rees-Jones launched Chief Oil & Gas in 1994. The company operates in the Marcellus shale in northeastern Pennsylvania and has around 600,000 net acres, producing more than 1 billion cubic feet per day (bcf/d) of natural gas.

The sale of Chief Oil & Gas would be the latest combination of U.S. natural gas producers in the last few months.

Privately held Alta Resources was sold in July to EQT Corp for $2.9 billion, and Southwestern Energy Co acquired Indigo Natural Resources for $2.7 billion in September and GEP Haynesville for $1.85 billion in December.

(Reporting by Shariq Khan in Bengaluru and David French in New York; Editing by Kenneth Maxwell)

Kinder Morgan profit tops expectations on higher gasoline, jet fuel volumes

(Reuters) -Kinder Morgan beat Wall Street expectations for fourth-quarter profit on Wednesday, as the U.S. pipeline operator transported higher volumes of gasoline and jet fuel with demand rising as people resumed travel and business activity picked up.

Global jet fuel demand, however, has again come under pressure with some countries reimposing border restrictions and other curbs to keep the Omicron coronavirus variant at bay, prompting travelers to reconsider their plans. (https://reut.rs/3nIz0qm)

“We saw a little bit more downside momentum on jet fuel due to omicron variant, but combined, we didn’t really see a meaningful impact as we exited the year,” senior executive Dax Sanders said in the earnings call.

Kinder Morgan reported a 48% jump in jet fuel volumes and 7% jump in gasoline, following a year of coronavirus-driven decline.

The company, which transports nearly 40% of the natural gas consumed in the United States, said its natural gas transport volumes were down 3% due to declines on Colorado Interstate Gas Pipeline as output from Rockies basins fell and El Paso pipeline outages.

Kinder Morgan said in December it expects part of its El Paso natural gas pipeline to remain out of service for “several months” following a blast in Arizona that killed two people in August.

Excluding items, the company earned 27 cents per share, beating Wall Street estimates of 26 cents per share, according to Refinitiv IBES data.

Adjusted profit rose 0.82% to $609 million in the fourth quarter ended Dec. 31, from $604 million a year earlier.

(Reporting by Rithika Krishna in Bengaluru;Editing by Vinay Dwivedi)

Natural Gas Prices Tumble Ahead of Inventory Report

On Wednesday, natural gas prices tumbled ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 173 Bcf draw in stockpiles, according to survey provider Estimize. According to a recent National Oceanic Atmospheric Administration report, much colder than normal weather is expected to cover most of the Mid-West and North East, and warmer than average weather will cover most of the West Coast for the next 8-14 days. The EIA expects LNG exports will continue to rise in 2022 and 2023.

Technical Analysis

On Wednesday, natural gas prices tumbled 5.7%. Prices sliced through support which is now resistant near the 200-day moving average at 4.07. Support is seen near the December lows at 3.53. Short-term momentum is negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is positive but decelerating as the MACD (moving average convergence divergence) histogram is printing in positive territory with a declining trajectory which points to consolidation.

LNG Exports are Expected to Rise

The Energy Information Administration forecasts that U.S. liquefied natural gas exports averaged 9.8 billion cubic feet per day in 2021, compared with 6.5 Bcf/d in 2020. The EIA expect U.S. LNG export capacity increases will contribute to LNG exports averaging 11.5 Bcf/d in 2022 and 12.1 Bcf/d in 2023.

GM targets hydrogen-powered generators in expansion of fuel cell business

By Tina Bellon

(Reuters) – General Motors on Wednesday said it plans to expand its hydrogen fuel cell business beyond vehicles by supplying hydrogen-powered generators for uses including at construction sites, music festivals, data centers and the military.

The wider application of hydrogen fuel cells will allow GM to leverage and scale existing hydrogen investments and refine the technology, GM executives said.

“Think of places where you don’t have a permanent installation for power generation, but you need clean power sources,” Charlie Freese, executive director of GM’s Hydrotec business, said on a call with journalists.

The company declined to say what revenue it expects from the new business, and said an availability date and price for the generators would be announced at a later time.

The hydrogen fuel-cell systems will be assembled by GM’s joint venture with Honda in Brownstown, Michigan. Utah-based Renewable Innovations will build the generators, with production slated to start next year, GM executives said.

As part of its Hydrotec business, the automaker previously announced hydrogen fuel cell collaborations with truck maker Navistar International Corp, locomotive developer Wabtec Corp and aerospace equipment manufacturer Liebherr Aerospace.

Hydrogen – a fuel obtained by passing electricity through water to split the element from oxygen – has been touted by companies and governments as a way to cut carbon emissions. But most hydrogen is currently produced by electrolyzers powered by natural gas or other fossil fuels, known as “gray hydrogen.” It is four times costlier to produce “green hydrogen,” which is derived from renewable energy sources.

Freese said GM’s goal was to increase the use of green hydrogen and was hopeful that costs would come down. He said the company was also looking to work with infrastructure providers to install more local hydrogen production systems and reduce the need for costly hydrogen transportation.

(Reporting by Tina Bellon; Editing by Leslie Adler))

Natural Gas Markets Pull Back Towards 200 Day EMA

Natural gas markets have pulled back a bit during the course of the trading session on Wednesday to show signs of hesitation, as we are sitting just above the 200 day EMA. The 200 day EMA of course is a longer-term indicator that a lot of people pay attention to, but it is also worth noting that the $4.10 level just below was the top of the overall consolidation area that we had been in. Because of this, the market is likely to see a lot of interest in this area, as previous resistance should be support. Because of this, if we can break down below the $4.10 level on a daily close, I think we will continue to fall apart.

NATGAS Video 20.01.22

Keep in mind that natural gas is highly volatile, and of course very sensitive to short-term weather fluctuations in the northeastern part of the United States. After all, we just had a major storm hit the New York, Boston, and Washington DC area. However, it is starting to go away and therefore people are looking towards the future, recognizing that there will be less demand for natural gas going forward. With this, I think it is probably only a matter of time before we see a continuation of the overall selling.

Keep in mind that we are trading the February contract already, which of course is the last winter months. Once we get into the contract of March, then you start to talk about spring when demand will naturally fall off anyway. Because of this, I remain bearish.

For a look at all of today’s economic events, check out our economic calendar.

Analysis-Governments no match for markets in European energy crunch

By Susanna Twidale

LONDON (Reuters) – European governments have spent tens of billions of euros trying to shield consumers from record high energy prices, and themselves from voters’ wrath, but the measures look set to fall short.

From Athens to Oslo, lawmakers across Europe, some facing elections this year, have scrambled initiatives such as removing VAT on home energy bills or providing targeted help for the most needy households.

The measures, however, pale against a 330% surge in benchmark European gas prices last year which, due to the lag in passing prices on wholesale markets onto consumer utility bills, are only now beginning to bite.

“Measures announced so far in western Europe will only cover about a quarter of the price rises on average,” Harry Wyburd, European utilities analyst at Bank of America Securities, said.

BofA analysts estimate the average western European households spent around 1,200 euros ($1,370) a year on gas and electricity in 2020. Based on current wholesale prices, they estimate this will rise by 54% to 1,850 euros.

Since most energy suppliers buy, or hedge, the power or gas they are going to need to supply customers around 6 to 9 months in advance, high prices, due to lower-than-normal gas supplies from Russia and low storage levels, have yet to fully filter through.

“The price you are paying today to switch your kettle on is based on whatever the gas or electricity price was on average roughly 6-9 months ago. It’s like it’s happening in slow motion,” Wyburd said.

Average annual energy bill increase per household euros per year 2022 v 2020 https://fingfx.thomsonreuters.com/gfx/ce/zgpomazkdpd/Pasted%20image%201642004029958.png

‘EXPLOSIVE’

Violent protests in Kazakhstan over rising costs for car fuel were a reminder for politicians of the response that such spikes can trigger among voters.

In France, where a presidential election is due in April, Economy Minister Bruno Le Maire pointed to the events in Kazakhstan as one of the reasons his government has moved to shield households from higher prices, which include capping an increase on regulated electricity costs at 4%.

French lawmakers are particularly wary of a repeat of 2018’s violent street protests against a fuel tax increase which spiralled into wider protests against authorities.

Polls have consistently shown purchasing power to be the number one issue for voters ahead of the French election. An OpinionWay-Kea poll showed that on Jan. 18, 57% of French voters deemed purchasing power to be an important issue, more than any other and ahead of social protection, security, immigration and unemployment. Two weeks earlier the figure was 51%.

“Electricity prices are an explosive subject and political object that will be used by other parties if they don’t keep this (price cap) promise,” Nicolas Goldberg, Energy specialist at Colombus Consulting, said.

Italy was one of the first European countries to act last year, spending more than 8 billion euros since July to curb retail energy bill hikes. Rome is also likely to raise taxes on energy firms that have benefited from higher prices.

But it is still expected to see household electricity prices rise more than 50% in the first quarter of 2022 with gas rising more than 40%, Italian energy watchdog ARERA said.

Others have already had to extend measures. Spain cut several taxes, originally planning to maintain the lower rates until the end of 2021, but in December decided to hold them at these levels until May 2022.

FUEL POVERTY

In Britain, millions of households are expected to face a surge of around 50% in their electricity and and gas bills when a price cap, introduced in 2019, is lifted in April, a month before local elections in May.

“The government is in the position that the cap has bought it some time to decide what to do, but the figures involved to limit the rise completely would be huge,” Robert Buckley, head of relationship development at Cornwall Insights, said.

A recent poll of voters in the north of England, where Prime Minister Boris Johnson’s Conservative party won seats for the first time at the last election, found that 80% of those who voted for the government cited energy bills as an important issue.

An analysis of the survey by not-for-profit trade body Energy and Utilities Alliance (EUA) found that 17 of the 18 parliamentary seats in that area would switch back to the opposition Labour Party if an election was held now.

Consumer groups and several energy suppliers have called on Britain to do more, such as removing the 5% VAT on energy costs or cutting some green levies.

Higher prices will likely push a further 1.5 million households into fuel poverty, charity National Energy Action said, meaning they are unable to afford to heat their homes to the temperature needed to keep warm and healthy.

This would take the total number of British households in fuel poverty to 6 million, more than a fifth of homes.

A British government spokesperson said the cap is protecting millions from high prices and initiatives targeted to help vulnerable households are in place.

“We’ll continue to listen to consumers and businesses on how to manage the costs of energy,” the spokesperson said.

($1 = 0.8762 euros)

(Reporting by Susanna Twidale, additional reporting by Stephen Jewkes in Milan, Benjamin Mallet and Richard Lough in Paris; Editing by Nina Chestney, Veronica Brown and Alexander Smith)

Factbox-Europe’s efforts to shield households from energy cost spike

By Susanna Twidale

LONDON (Reuters) – European governments, some facing elections this year, have ploughed tens of billions of euros into measures designed to shield households from record high energy prices.

Below are some of the measures announced so far.

BRITAIN

Britain has a price cap on the most widely used household energy contracts but this is expected to rise by some 50% in April.

The government has yet to announce fresh measures to limit the impact of soaring energy costs on homes. Some suppliers have called for it to remove the 5% VAT on energy bills.

BULGARIA

Bulgaria has frozen regulated electricity and heating prices until the end of March to shield households.

CZECH REPUBLIC

The Czech parliament’s lower chamber approved a government bill easing conditions for social benefits connected to housing, which should help those hardest-hit by the energy price surge.

EUROPEAN COMMISION

European Union countries are largely responsible for their national energy policies, and EU rules allow them to take emergency measures to protect consumers from higher costs.

The European Commission in October published a “toolbox” of measures EU members can use without breaching competition rules, including subsidies to help poorer households, funding for renovations that reduce energy use or exempting vulnerable households from higher energy taxes.

FRANCE

France has committed to capping an increase on regulated electricity costs at 4%. To help do this the government has ordered utility EDF, which is 80% state owned, to sell more cheap nuclear power to rivals.

GERMANY

German government departments said they are working on efforts to help consumers affected by wholesale prices.

GREECE

Greece will extend financial relief at a cost of around 400 million euros ($455 million) to help households and businesses into January

ITALY

The Italian government has spent more than 8 billion euros since July to curb hikes in retail energy bills.. Italy said on Tuesday it is also working on more measures to ease bills, such as rejigging some renewable energy subsidies and implementing tax reforms.

NETHERLANDS

The Netherlands has cut energy taxes for its 8 million households.

NORWAY

Norway subsidised household electricity bills in December, paying 55% of the portion of power bills above a certain rate, which it increased to 80% for January-March.

POLAND

Poland has announced tax cuts on energy, petrol and basic food items, as well as cash handouts for households.

SPAIN

Spain cut several taxes to try to reduce consumer bills, originally planning to maintain the lower rates until the end of the year, but it decided in December to keep them lower until May 2022.. It has also put a cap on gas price increases under regulated tariffs but the government eventually rowed back on moves to claw back from energy companies around 2.6 billion euros in profits originally deemed to have been made unfairly during the energy price crisis.

SWEDEN

Sweden will compensate households worst hit by the surge in electricity prices, with the government setting aside 6 billion Swedish crowns ($661 million) for the measures.

($1 = 0.8782 euros)

($1 = 9.0801 Swedish crowns)

(Reporting By Susanna Twidale, Isla Binnie, Stephen Jewkes, Kate Abnett, Vera Eckert, Robert Muller, Benjamin Mallet, Stine Jacobsen, Nora Buli, Angeliki Koutantou, Tsolova Tsvetelia, Anna Koper, Editing by Alexander Smith)

Uniper CEO eyes slice of German gas plant pie

By Christoph Steitz, Tom Käckenhoff and Vera Eckert

FRANKFURT (Reuters) – Utility Uniper could build a handful of the 23 gigawatts’ (GW) worth of new gas-fired power plants that may be needed in Germany by the end of the decade to plug a generation hole due to the country’s coal exit, its chief executive said.

Europe’s largest economy in November unveiled a much more ambitious renewables expansion and a faster exit from coal by 2030, singling out gas as one of the technologies that will be needed to help transition towards a fossil fuel-free energy mix.

Estimates over how many gas-fired power plants, slated to be labelled green as part of EU taxonomy rules, are needed in Germany by the end of the decade range from anywhere between 10 GW and 40 GW.

“We are a big operator of gas-fired power plants and we see opportunities in the government’s announcement,” Uniper Chief Executive Klaus-Dieter Maubach told Reuters.

The Institute of Energy Economics at the University of Cologne reckons that 23 GW of new gas-fired power plants would be needed by 2030, which Maubach said would equal 60 gas-fired power plant blocks assuming an average capacity of 400 megawatts (MW).

“Based on the discussed additional need of 23 GW of gas-fired power plant capacity, we can imagine building a mid-single-digit number of the needed power plants,” Maubach said.

Maubach said that Uniper’s existing gas and former coal power plant sites could serve as locations for new gas capacity under the most recent government plans, details of which are eagerly awaited by the industry.

Turning to renewables, which Uniper wants to expand in cooperation with Finnish parent Fortum, Maubach said that the groups were looking at the option of acquiring project developers to grow.

The firms plan to develop up to 2 GW of onshore and solar capacity by 2025.

(Reporting by Christoph Steitz, Tom Kaeckenhoff and Vera Eckert; Editing by Miranda Murray)

Nat Gas Bulls Waiting for Confirmation of Early Feb Cold

Natural gas futures are inching lower early Wednesday despite reports calling for colder near-term weather patterns, liquefied natural gas (LNG) export strength and expectations for increased storage draws against the potential for warmer weather in February.

Meanwhile, Natural Gas Intelligence (NGI) reported that spot gas prices pulled back sharply in the volatile Northeast amid a spate of moderate weather to start the week.

At 09:52 GMT, March natural gas futures are trading $4.205, down $0.023 or -0.57%.

NatGasWeather’s Short-Term Outlook

According to NatGasWeather, models showed mild conditions would push across the country through Wednesday. However, heating demand “is still on track to spike late this week as an Arctic blast sweeps across the Midwest and East with areas of snow” and subzero temperatures.

This is to be “aided by lows of 20s and 30s into portions of the southern United States. A reinforcing Arctic shot is expected January 24-27 to keep strong national demand going” and when “the pattern remains plenty cold enough to impress.”

Output Remains Below December Levels

NGI wrote that output was estimated at around 94 Bcf on Tuesday, about 2 Bcf/d below December levels, and the coming winter chill in the South could force further production interruptions – after an early January bout of brutal cold forced production curtailments.

Early Peek at Thursday’s EIA Weekly Storage Report

Thursday’s U.S. Energy Information Administration (EIA) weekly storage report is expected to reveal the steepest pull of the winter season to date.

NGI estimated a withdrawal of 195 Bcf for the week ended January 14. That would compare with an actual pull of 179 Bcf a year earlier and a five-year average of 167 Bcf.

Last week, the EIA reported a pull of 179 Bcf natural gas from underground inventories for the week-ended January 7. The draw decreased inventories to 3,016 Bcf, leaving stocks below the year-earlier level of 3,215 Bcf but above the five-year average of 2,944 Bcf.

Daily March Natural Gas

Short-Term Outlook

It “appears that this January will wind up the coldest January since 2014,” Bespoke Weather Services said. “The main question now is whether or not the colder pattern hangs on into February,” the firm added.

The sideways price action on the chart suggests traders still aren’t sure about the 11-15 day forecast. Once they get confirmation either way, March natural gas futures traders will make their next move.

The market is currently trading inside a long-term retracement zone at $4.378 to $3.964.

Look for a downside bias on a sustained move under $3.964. The 50% level at $4.378 is a potential trigger point for an acceleration to the upside.

Holding between $3.964 and $4.378 will indicate investor indecision and impending volatility.

For a look at all of today’s economic events, check out our economic calendar.

Euro zone inflation to burn hotter, but ECB rates to stay on ice: Reuters poll

By Swathi Nair

BENGALURU (Reuters) – Euro zone inflation is set to burn hotter throughout 2022 than expected a month ago, according to economists polled by Reuters, which could pressure the European Central Bank to tighten policy once the Omicron wave of the pandemic passes.

For the near-term, the virus remains a wild card, with a wide range of forecasts on economic growth in the Jan 11-18 poll and the median forecast for the current quarter chopped to 0.5% from 0.7%.

More than two-thirds of economists polled said the Omicron variant will have a milder economic impact than Delta, mainly because there are fewer restrictions in place now.

Forecasts for inflation this year have risen for the seventh consecutive survey — up by 0.6 percentage points each for the first and second quarters to 4.1% and 3.7% respectively, well above the ECB’s 2.0% target.

“In the short term, we see some downside on growth stemming from virus containment measures,” said Bas van Geffen, senior macro strategist at Rabobank, referring to the current quarter.

“In the longer term, we mainly expect slower growth as supply-driven inflation erodes households’ real spending power, which weighs on consumption and euro zone GDP. Omicron or other strains could further aggravate this negative impact of cost-push inflation,” he said.

Like in much of the rest of the world, inflation is soaring in the euro zone but it most likely peaked in the last quarter.

Annual consumer price rises hit a record high of 5% last month. But the ECB has resisted calls for tighter policy, sticking to the view that price pressures will ease this year.

So far, the poll results back that view, with inflation set to dip to 1.9%, just below its target, in the fourth quarter and averaging below 2.0% from then on.

So nearly every economist expected policy interest rates to hold steady well into next year.

“Monetary policy cannot do much about supply-side inflationary shocks like the supply chain shocks, energy shortages, and global food prices: after all, the ECB’s policy cannot create semiconductors, natural gas or food,” said Rabobank’s van Geffen.

Of the 39 economists who had a rate forecast for 2023, those who see a rate hike were evenly split on whether it will happen in the first or second half of the year.

A like-for-like analysis showed slightly more analysts now expect higher rates by the first half of next year compared to the December poll. Only one expects rates to rise this year.

That stands in sharp contrast to the U.S. Federal Reserve. Facing the highest inflation in 40 years, it is set to raise its federal funds rate from near-zero as soon as March.

A few economists say the ECB also should move soon.

“Zero and negative interest rates respectively are pure emergency measures. With inflation above target and inflation risks tilted to the upside as well as a tight labour market and a closed output gap there is no reason to keep rates that low,” said Jörg Angelé, senior economist, Bantleon Bank.

“It would be better for the ECB to start early reversing its ultraloose monetary policy in small steps. If it waits too long, it risks being forced to pull the brakes and end up with a recession.”

Asked when the ECB will end its Asset Purchase Programe, about 85% of respondents, 28 of 33, said by the end of the first half of 2023. The Fed is already hinting it will soon start offloading its holdings of bonds.

The euro zone economy is expected to grow 4.0% this year and 2.4% next, from 4.2% and 2.3% predicted a month ago.

Growth in Germany, the largest economy, was downgraded to 4.0% from 4.4% in the last quarterly poll in October, according to the median forecast. Expected growth in France eased slightly to 3.7% from 3.9%, while Italy’s forecast held steady at 4.2%.

The three biggest economies of the bloc saw a significant upgrade in annual inflation forecasts for this year.

Euro zone jobless rate forecast for this year edged down slightly to 7.2% from 7.3% in the last poll, while prediction for next year remained steady at 7.0%.

(For other stories from the Reuters global economic poll:)

(Reporting by Swathi Nair; Polling by Arsh Mogre and Sujith Pai in Bengaluru; Editing by David Gregorio)

Natural Gas Prices Rally Cold East Coast Weather

On Tuesday, natural gas prices continued to rise. According to a recent National Oceanic Atmospheric Administration report, much colder than normal weather is expected to cover most of the Mid-West and North East, and warmer than average weather will cover most of the West Coast for the next 8-14 days. Production increased in the latest week as a result of imports from Canada.

Technical Analysis

On Tuesday, natural gas prices rallied, 1%. Support is seen near the 50-day moving average at 4.30. Resistance is seen near the January highs at 4.50. The 10-day moving average crossed above the 200-day moving average which means that a short-term uptrend is now in place. Short-term momentum is positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Supplies Rose in the Latest Week

U.S. total natural gas supply increases week over week as a result of higher net imports from Canada. According to data from the EIA, the average total supply of natural gas rose by 0.7%  from a week ago. Dry natural gas production decreased by 0.6% from the previous report week, but average net imports from Canada more than offset this decline by increasing 25.1% from last week.

Italy eyes energy reforms as high prices take toll

By Giuseppe Fonte and Stephen Jewkes

MILAN (Reuters) – Italy is working on a package of structural reforms to curb soaring energy bills as high natural gas prices look set to last longer than expected, Italy’s energy transition minister said on Tuesday.

Addressing lawmakers, Roberto Cingolani unveiled a series of measures being considered by the government to ease energy bills which could be worth almost 10 billion euros ($11.33 billion).

Rome has spent more than 8 billion euros of state money since last July to cushion a surge in quarterly retail energy bills that has left many households and businesses struggling.

In a parliamentary hearing, Cingolani said it was becoming increasingly difficult to believe global gas prices would stabilise any time soon.

“The government can’t keep stumping up cash every quarter… we need structural reforms,” the minister said.

The package includes using up to 1.5 billion euros of proceeds from carbon permit auctions, rejigging some renewable energy subsidies and implementing tax reforms.

Cingolani also said Rome wanted to increase the amount of gas produced domestically and promote the use of long-term power purchase agreements (PPA) for green energy.

A securitisation scheme aimed at reducing the impact of system-cost levies on energy bills “could generate 3 billion in savings,” he said.

Soaring energy prices, triggered by heavy demand for gas as economies look to emerge from the coronavirus pandemic, have prompted governments across Europe to introduce measures to try to shield consumers.

They have also led to calls in some countries for EU-wide solutions, though other governments are wary of long-lasting regulatory reform for what could be short-term price spikes.

“We are looking at a reform of power markets to be implemented at the EU level,” Cingolani said.

The minister said Italy did not have or want nuclear power even though an eye could be kept on new generation nuclear reactors further down the road.

Italy did not run the risk of a blackout from the gas crisis at the moment though some countries in Northern Europe faced bigger problems, he said.

The government is expected to discuss some of the measures at a cabinet meeting as early as this week, sources said.

The Treasury is also studying options for taxing extra profits made by energy companies, sources have said.

($1 = 0.8825 euros)

(Reporting by Giuseppe Fonte and Stephen Jewkes; Editing by Marguerita Choy)

Uniper CEO expects Nord Stream 2 to carry gas in next heating season

FRANKFURT (Reuters) -Uniper, one of the financial backers of Nord Stream 2, expects the pipeline to be available for gas transport from the start of the next winter heating season in October, its CEO said.

The pipeline, which is technically complete, still needs to be certified by the German network agency. Uniper’s chief executive Klaus-Dieter Maubach told the annual Handelsblatt energy summit this was expected by late summer.

“I expect – assuming that the Ukraine-Russia conflict does not escalate – that the pipeline Nord Stream 2 will have successfully gone through the certification process in summer, maybe late summer,” Maubach said.

Chancellor Olaf Scholz on Tuesday signalled that Germany may consider halting the Nord Stream 2 pipeline, which will carry Russian gas to Europe, if Russia attacked Ukraine.

“Of course we at Uniper are worried…about what is happening at the Russian-Ukrainian border and that’s a risk that could have a very short-term impact on gas supplies,” Maubach said.

He said that he expected the pipeline would be available as gas import infrastructure for the German and European market from the next gas year, which starts on Oct. 1, 2022.

“Russia is an important, indispensable partner for us,” Maubach added.

(Reporting by Christoph Steitz and Vera Eckert; Editing by David Goodman and Alexander Smith)

BlackRock’s Fink defends as ‘not woke’ push for values as well as profits

By Akriti Sharma, Ross Kerber and Simon Jessop

BOSTON/LONDON (Reuters) -Larry Fink, chief executive of the world’s biggest asset manager BlackRock Inc, has defended its focus on the interests of society as well as on profits in the face of criticism from many sides.

Asset managers increasingly analyse corporate performance on environmental, social and governance-related issues to bolster returns and to attract cash from investors focused matters such as workforce diversity or how to cut carbon emissions.

In his annual open letter, Fink built on themes he has raised in previous January missives to other CEOs. He called on them to find a purpose and to practice ‘stakeholder capitalism,’ whereby companies seek to serve the interests of all connected to them.

“Stakeholder capitalism is not about politics,” Fink said in the letter issued late on Monday, entitled The Power of Capitalism.

He said it was not ‘woke’ and did not have an ideological agenda, but was capitalist in that it was based on mutually beneficial relationships with employees, customers, suppliers and communities.

Fink, 69, also spoke up for BlackRock’s stance in engaging with companies on the transition to a low-carbon economy rather than divesting from fossil fuel sectors, saying the companies cannot be the “climate police.”

“Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero,” he said.

In an interview with CNBC on Tuesday Fink added that he is frustrated about the process of the energy transition. He said it will require “a combination of government and private sector and that’s just not happening.”

MISSED OPPORTUNITY?

While Fink had used previous letters to announce actions like a tougher threshold for some funds to invest in coal, the dirtiest fossil fuel, climate campaigners called the latest letter a missed opportunity.

“There’s not much to see here other than more hot air from a would-be climate leader,” said Ben Cushing, Fossil-Free Finance Campaign Manager with the Sierra Club.

Jennifer J. Schulp, a director at the libertarian Cato Institute, said Fink’s emphasis on profits showed his focus on the shareholder aspects of stakeholder capitalism, which she called “an ill-defined and vaguely-defined term.”

“I took this as him trying to stake out a middle ground and find a balance,” Schulp said in an interview.

Overseeing $10 trillion as of Dec. 31, BlackRock is one of the most influential voices in U.S. and European boardrooms, making Fink’s annual letter a must-read.

In Monday’s letter, Fink unveiled plans to launch a Center for Stakeholder Capitalism to create a “forum for research, dialogue, and debate.”

Fink also said that BlackRock is working to expand an initiative for investors to use technology to cast proxy votes.

Under pressure from investors BlackRock cast a more critical set of proxy votes in 2021 such as backing calls for emissions reports or the disclosure of workforce diversity data.

At the same time the fund manager has faced challenges from conservative U.S. politicians. On Monday, West Virginia State Treasurer Riley Moore said his agency would no longer use a BlackRock liquidity fund, where it kept $21.8 million as of Jan. 6.

In a news release, Moore cited BlackRock’s dealings in China and noted “that BlackRock has urged companies to embrace ‘net zero’ investment strategies that would harm the coal, oil and natural gas industries.”

A BlackRock spokesman declined comment on the action.

(Reporting by Ross Kerber in Boston, Simon Jessop in London and Akriti Sharma in Bengaluru; editing by Richard Pullin, Gerry Doyle, Barbara Lewis and Marguerita Choy)