EXPERT VIEW: Great Power Politics and the New Global Order

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The first in a new analysis series from Carlos Pascual, senior vice president for Global Energy and International Affairs at S&P Global. Carlos unpacks the changes taking place in great power politics as a result of the Russia-Ukraine war, the strategic positioning of the US and China, and the pressing implications for energy, raw materials, technology and supply chains.

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MPGC 2024: Navigating Uncertainty in the Energy Market Amidst Global Shifts

The annual Middle East Petroleum and Gas Conference convened in Dubai from May 20 to May 22 at a time of heightened concern about the oil markets, the longevity of OPEC+ cuts, the future of hydrocarbons and the switch to non-fossil fuel sources by the middle of the century. The S&P Global Commodity Insights-run event focused on the outlooks for oil and gas on day one with insights from inhouse experts as well as industry leaders and external analysts. The event opened with a keynote address by Emirates National Oil Company group chief executive Saif Humaid Al Falasi, who heads a leading energy company in the UAE. On day one, Carlos Pascual, senior vice president - global energy & international affairs at S&P Global addressed the deepening polarization in the US, the ongoing China-US standoff and potential spill out, and two ongoing wars – Russia-Ukraine and Israel-Hamas – all of them risks to energy market stability. Pascual also talked about energy poverty in the developing world – where many lack access to electricity and have been left behind by the rapid pace of the energy transition. FGE chairman Fereidun Fesharaki tapped his famous crystal ball for analysis on the oil markets. He noted that with a global surplus capacity of 6 million b/d, the world is unlikely to see dramatic swings in oil prices in the event of major political conflict. The focus also turned towards liquefied natural gas, which is widely seen as a transitional fuel. The global LNG market is heating up with European LNG prices rising to a five-month high amid ongoing geopolitical risk factors and tightness in European supply, according to Commodity Insights. There will be “chaos in the markets for the next few years” as the supply of LNG is set to increase by 50% in the next two years, Fesharaki said in his crystal ball analysis. The conference's much-attended events were the ones focused on oil market vagaries with traders concerned about to navigate the sector rife with so much uncertainty. S&P’s Global's vice president and head of crude oil market and energy and mobility research, Jim Burkhard said in his presentation that the surplus in the market will last as long as the US continues pumping more oil, which could extend for a year or two. Members of OPEC+, who are due to meet virtually on June 2 have to make choices about whether to keep the current cuts in place or increase production later this year, he added. Day two of MPGC focused on several downstream tracks with in-house and external experts discussing outlooks for refineries and petrochemicals as well as plans to scale up hydrogen and strategize for a low-carbon future. MPGC attendees also benefited from a day of training courses on May 20. S&P Global experts taught carbon markets fundamentals, oil markets & commercial strategies as well as refining economics and refineries of the future to those in the energy industry.

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Global upstream spending growth expected to slow, but remains well above climate targets: IEA

Global upstream oil and gas investment growth is expected to slow in 2024, driven primarily by Middle Eastern and Asian NOCs, but remains at levels well above that needed for governments to hit key climate targets in full and on time by 2030, the International Energy Agency said June 6. Global upstream spreading is expected to rise by 7% to reach $570 billion this year, following a 9% increase seen in 2023, the IEA said in its World Energy Investment 2024 report. Cost efficiency improvements have helped contain upstream spending which now stands at 30% below the 2015 peak, the IEA said. At the same time, however, global spending on clean energy such as renewable power and energy efficiency is now almost twice the levels of those on fossil fuels, the IEA said. While investment in clean energy is growing fast, the report finds that oil and gas spending this year is broadly aligned with oil demand levels implied in 2030 by today's policy settings under the IEA base-case STEPS scenario, which shows coal, oil and natural gas demand leveling off or declining before 2030. Measured against its central Announced Pledges Scenario, however, the IEA said upstream spending is on pace to be around 35% higher than needed for national climate goals to be achieved by 2030. Global upstream spending is also more and more than double the 2030 levels needed if oil consumption falls in line with Paris Agreement targets to contain global warming, the IEA said. As a result, the IEA reiterated its call that no further developing spending on long-lead-time oil and gas projects is needed to meet global demand in the coming decades. "The trajectory for oil and gas consumption is curbed by rapid growth in renewables, efficiency, and other clean energy sources. There is no need in this scenario for further oil and gas exploration, as already-discovered fields are sufficient to cover projected demand," the IEA said in the report. Total energy investment worldwide is expected to exceed $3 trillion in 2024 for the first time, the IEA estimates, with some $2 trillion set to go toward clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. Peak demand The IEA's latest energy investment report comes amid a growing divergence in long-term demand outlooks by key forecasters due to uncertainty over the ramp-up and affordability of clean energy sources. The IEA predicts that demand for gas, oil and coal will peak by 2030, with road transport no longer a source of oil demand growth by the end of the decade. Under its central APS scenario, the IEA expects global oil demand to average around 97.5 million b/d in 2030. According to S&P Global's reference case scenario, global oil and biofuel demand will peak at around 111 million b/d in 2031 while OPEC expects global oil demand to reach 110.2 million b/d in 2028. The IEA report also comes a day after a similar investment report which concluded that spending on oil and gas projects worldwide must rise by almost a quarter to $738 billion from next year to meet rising hydrocarbons demand and prevent a supply crunch by 2030. According to the "Upstream Oil and Gas Investment Outlook" carried out by the International Energy Forum and S&P Global Commodity Insights, just over $600 billion will be spent on upstream projects to boost or maintain oil and gas output in 2024, the highest figure for a decade. Analysts at S&P Global Commodity Insights estimate that global oil demand -- including biofuels -- will remain at around 31% of the global energy mix through 2030, while renewable energy sources will grow 6%-8% per year to make up 13% of total energy demand at the end of the decade, up from 8% in 2022. Refining sector In the downstream sector, the IEA said it expects spending on oil refineries to decline globally by 5% in 2024, following a similar trend in 2023 where investment was just under $37 billion. Around 800,000 b/d of new refining capacity is set to come online in 2024, the IEA estimates, with future investments likely to continue to be concentrated in China, India, and the Middle East due to competitive operating costs and stronger demand growth. With a rising disconnect between long-term climate change targets and measured global emissions, many refiners are increasingly opting to rationalize capacity or shift to low-carbon feedstock processing. "Uncertainties around future demand growth present significant challenges for new investments in the refining sector," the report notes. Clean energy investments by oil and gas companies themselves reached $30 billion in 2023, accounting for only 4% of the industry's overall capital spending in 2023, according to the report. Meanwhile, coal investment continues to rise, with more than 50 gigawatts of unabated coal-fired power approved in 2023, the highest since 2015. Clean spending by oil and gas companies in 2023 was a 30% increase from 2022 levels but well below the 65% jump seen from 2021 to 2022, reflecting in part the inflationary environment and supply chain issues for some renewable projects, the IEA said.

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Infographic: Atlantic hurricane season could shutter USGC power and gas demand

The 2024 hurricane season could set records for number of named storms, hurricanes and major storms, based on the National Oceanic and Atmospheric Administration’s forecast reflecting a shift from the El Niño to La Niña conditions and extreme heat in Atlantic and Gulf of Mexico waters. Storms making landfall in the US could weaken demand for electricity and natural gas, which in 2021-2023 seasons caused power prices to drop sharply over short periods. See the full-size infographic

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Interactive: The Platts Benchmark Heatmap

The price wall visualizes 258 of the most important price benchmarks assessed by Platts across various commodities from crude through to chemicals, LNG and carbon. The wall shows the price performance of these benchmarks over 2023 based on their indexed value from the first day of trading. Click on the commodity button to isolate different groups of resources to see which performed best in 2023, a year that saw dramatic changes in trade flows and demand because of sanctions and price caps on Russian commodities and a recovering post-COVID global economy. Isolate individual benchmarks by clicking on the tile to reveal a unique QR code to navigate to specific Platts methodology pages and average price data for 2022 and 2023. Click to start exploring