OPEC and the effort to increase the price of oil
Next year, the efforts of the OPEC cartel and its partners to drive up oil prices will most likely continue. Miners from the group have been trying to return to the situation at the beginning of the war in Ukraine, when the commodity climbed to 120 dollars per barrel, practically all this year. Voluntary production cuts have not taken effect so far, so they are planning an even bigger one for the first quarter of 2024, with a total volume of 2.2 million barrels.
However, analysts do not believe that they will bring about a dramatic change. “I don’t think a three-month cut is long enough to make a significant difference in terms of physical deliveries,” he said Reuters oil trader Adi Imsirovic of Surrey Clean Energy. Thus, experts believe that the cartel, led by Saudi Arabia, will probably continue to reduce production in other parts of the year. Especially Riyadh needs to finance their ambitious projects and a balanced budget, the price of oil is at least around 86 dollars per barrel, but they reached this level only in a small part of the ending year.
The development of prices will depend not only on the willingness of the members of the OPEC+ group to comply with the cuts, but also on the demand, which is related to the state of the global economy, and China plays a central role. At the same time, experts generally do not expect major reversals. “Weak global growth in 2024 could prompt further OPEC+ cuts,” she stated agentura Fitch Ratings. It is expectedthat demand for aviation fuel in particular will grow in China, while the increase in demand for gasoline and diesel will be small due to ongoing economic difficulties and the transition to electromobility.
In December, the US Energy Information Administration (EIA) lowered its forecast for the average price of the raw material for next year by ten dollars to 83 per barrel. A role in this is also played by the fact that the US is currently producing at a record pace, according to estimates, this year’s average should be 12.9 million barrels per day. Other analysts believe that prices will probably stay between seventy and eighty dollars.
Gas prices will be affected by the strength of winter
Since the beginning of the war in Ukraine, the question of how severe the winter will be has gained importance in Europe. This is because pumping from gas reservoirs depends on the weather, which, together with unstable supplies of this raw material, strongly affects prices. Next year will therefore be strongly influenced in the gas field by the condition of the reservoirs at the end of the current heating season.
Europe is well on its way, the deposit was made before the coldest months fill practically to the maximum. And according to estimates, they could still be almost half full in the spring. “I expect the European Union to have more than enough gas reserves at the beginning of next summer to recover before next winter,” he told the newspaper The Wall Street Journal Bill Weatherburn of Capital Economics. “However, a lot depends on the weather, and an unusually cold winter could deplete supplies,” he remains cautious in his assessment.
So far, experts see no reason for the continent to repeat the dramatic rise in natural gas prices in the months following Russia’s invasion of Ukraine. During this year, they were mostly around fifty euros per megawatt hour in the Dutch virtual trading hub TTF, and in December they fell to around 35 euros, i.e. the lowest level since the beginning of the war. There are opinions that they could go even lower next year.
Europe has gotten used to the fact that supplies of raw materials from Russia are limited, and this year gas of this origin flowed into it only through Ukraine and the TurkStream pipeline, which is mainly used by the countries of Central and South-Eastern Europe, led by Hungary and Austria. Spain, Belgium and France mainly bought Russian raw material in the form of LNG. The European Commission vainly appeals to the EU countries to end its consumption in liquefied form. Brussels estimated that overall, the EU will consume around 40-45 billion cubic meters of gas from the warring country this year, which is less than a third compared to the pre-war situation.
Norway is now the EU’s largest supplier of gas, this year it should supply it with roughly a third. At the same time, the twenty-seventh country is increasingly relying on LNG, which in 2023 accounted for more than forty percent of gas imports. No significant movement on the supply side is expected for next year, although LNG supplies remain erratic. The governments of countries such as Italy, France, the Netherlands and Germany have recently come under fire for trying to replace Russian gas with Qatari gas. At the same time, Qatar is associated with financing the terrorist organization Hamas.
China slows shift away from coal
In the past year, it was evident how differently different parts of the world approach the issue of burning coal. While the West, led by the United States, is increasingly retreating from this resource, demand for it is growing in Asia. China has accelerated plans to build new coal projects. While the Asian powerhouse has big green ambitions, it remains cautious about moving away from coal. It thus responds to the increasing consumption of electricity, which is caused not only by the economic boom, but also by climate changes. Beijing has so far refused to heed EU calls to halt construction.
In the third quarter of this year according to Greenpeace authorized more new coal-fired power plants than in all of 2021. According to data from the US think tank Global Energy Monitor (GEM) it fell over 95 percent of global coal-fired power plant capacity that began construction this year in China. By the end of the decade, the nation’s coal-fired power plant capacity could increase by more than 200 gigawatts. “Chinese officials consider coal to be the main guarantee of energy security,” he told the newspaper The Guardian Anders Hove of the Oxford Institute for Energy Studies. “For this reason, it is now considered sensitive to criticize the country’s current investment in coal,” he noted.
Another large Asian country, India, is also not idle in this regard. At the end of November, she said that in the next sixteen months will add 17 gigawatts of coal generation capacity, the fastest pace in years. Experts thus expect global coal demand to remain stable next year as Asian additions completely offset reductions in consumption in the United States and Europe.
In Europe, it will probably be most interesting to watch developments in Poland, which is heavily dependent on coal. There is speculation that Donald Tusk’s new government may want to speed up the shift away from this resource, which has also seen declining demand in the country recently.
The EU is finding it difficult to agree on the core
Next year, a number of European countries, including the Czech Republic, will continue their efforts to build new reactors after many years or, in the case of Poland, to build their very first reactors. However, Warsaw is waiting to see how the new government will approach the plan to build up to six new reactors.
He has very ambitious plans at the moment Sweden, which would like to have the equivalent of ten conventional reactors by 2045, but some of them will probably be in the form of small modular ones. Paris wants to start a complete nuclear renaissance, it wants to build reactors in the next decade pace at least one new one per year.
The nuclear club of nine countries achieved several victories this year over states that refused to include nuclear energy among strategic “clean” sources, but disputes can be expected next year as well. The twenty-seventh must solve the issue of nuclear financing at the EU level.
The opposition of Germany and Austria must be reckoned with. “EU funds cannot be used for technologies that are not supported by all member states,” he said, according to the site Euractive representative of the German Ministry of Economy Sven Giegold. For example, there is speculation about the possible role of the European Investment Bank. Brussels would like to resolve the issue before the European Parliament elections.
Germany shut down its last reactors in the spring after a scramble, but that doesn’t mean the country’s nuclear debate has died down. Representatives of the conservative CDU/CSU alliance in agreement with the Free Democrats (FDP) recently surprised suggestions for the country to return to this resource. They would like not only the restart of some shut down units, but also the construction of small modular reactors.
Development of renewable resources at risk
The year 2023 was the year of the development of photovoltaic sources in Europe. Twenty-seven of them this yearinstalled a record 56 gigawatts, last year it was forty. The largest number of them increased in Germany, Spain, Italy, Poland and the Netherlands. The sector association SolarPowerEurope reports that it has also succeeded in starting a new solar era in three countries of Central and Eastern Europe: in the Czech Republic, Bulgaria and Romania, for the first time, they exceeded the limit of annual installation of one gigawatt of these sources. The market for rooftop solar panels in the EU grew by 54 percent year-on-year.
However, it is heard from the market that the continent has still not reached the pace of installation of 70 gigawatts per year, necessary to meet the goal of having 600 gigawatts of these resources available in the EU by 2030. And there are fears that the boom during the energy crisis will be followed by a slowdown. “The last months of 2023 were much calmer than its beginning,” the mentioned association warned.
He estimates, that next year and the following year, the pace of building new photovoltaic power plants could drop by almost a quarter. The EU wind industry, on the other hand, was already facing problems this year and Brussels had to come up with a plan to save it.
At the same time, Europe is not the only continent that strongly bets on renewable resources. It is expected, that for the first time in the United States, solar and water will generate more electricity than coal next year.
China is also investing massively in renewable resources. The country has built as much new solar capacity as the total capacity in the U.S. this year, according to the Center for Energy and Clean Air Research. In 2020, Beijing pledged to have 1,200 gigawatts of renewables by 2030, but is on track fulfill this goal five years earlier.
2023-12-30 13:00:00
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