World crude oil prices are starting to trend down again after a short upward movement.  US benchmark West Texas Intermediate crude was down to $44 while European benchmark Brent crude was down to $53.  Causes for lower prices included the economic slowdown in China with annual growth rate hovering around 7% along with increased stock piles of crude oil in the US.

With world crude oil prices so low, China is saving an estimated $200 billion a year on its oil import bill.

Last week the International Energy Agency said US crude oil production growth is defying expectations and setting the stage for another round of weaker crude oil prices. The agency said prices have not fallen far enough yet to cut excess supply, and some signs of rising demand are just temporary–bargain buyers using cheap oil to fill up stockpiles. The IEA called the appearance of current price stability a “facade.”

The IEA forecast that US oil production will continue to increase for the next few months despite the drop in active drilling rigs.  This is partly due to backlog of 2000+ wells that have been drilled but have not yet been fracked and could be brought into production relatively quickly.  Horizontal drilling in shale has become more efficient as more multiple wells from the same drilling pad are being drilled and oil companies now are confining themselves to drilling mainly in the most productive “sweet spots” where they will get the highest initial yields.

US shale oil is seen as highly resilient in that production can slow down and speed up rather quickly in response to crude oil price changes as compared with the massive offshore drilling platforms which take years to get into production and are difficult to halt during times of low prices.

There are growing concerns among analysts that the amount of available crude oil storage in the US is dwindling, which potentially could lead to further petroleum price declines if output continues unabated. Large inventories are building up in US storage tanks and behind drilled but idled wells. That overhang can flood the market any time and will act as a cap on any attempt to increase prices.

Balkan nations on the Adriatic Sea announced plans to build a new natural gas pipeline and connect their networks in a move that may help reduce Europe’s dependence on energy imports from Russia. Croatia and Montenegro plan construction of a 700 million-euro ($754 million) natural gas supply route along the coast and link it to the future Trans Adriatic pipeline by 2020.

China now has 24 operational nuclear reactors and has 25 additional reactors, out of a world total of 68, under construction. Following the Japanese Fukushima nuclear disaster in 2011, China slowed approval of new reactor designs following a safety review.  Now the Asian country hopes to have 58 gigawatts of nuclear power online by 2020 as compared with 20 gigawatts today.

Japan is continuing to embrace coal to make up for its lack of nuclear energy, with plans for another coal-fired electric power station released last week bringing the number of new coal-fired plants announced this year to seven. Electric utilities in Japan are eager to take advantage of coal’s relative cheapness to give them a competitive edge at a time when other countries are seeking to reduce their greenhouse-gas emissions by moving away from coal.

US solar firm SolarCity announced a new microgrid product with built in energy storage capability. The system has the ability to manage renewable energy loads by storing power off peak when electricity is cheaper and releasing it during more expensive peak load periods. The microgrids will use new lithium-ion Tesla batteries and can be scalable by installing larger or smaller battery banks. SolarCity expects the product to be useful for municipalities dealing with brownouts and blackouts on their grid systems.

The US state of Oregon has become the first state in that country to begin charging highway taxes by the mile rather than taxing gasoline and diesel purchases at the pump. The “pilot” program begins July 1. Under the program cars and trucks must be fitted with a real-time monitoring device that keeps track of mileage and reports it to the state government who will then either send the owner of the vehicle a bill or perhaps automatically debit the owner’s account.

 

with h/t Tom Whipple

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