Weekly News Review - 14th April 2023

OPEC announces surprise cuts in oil production

The Organisation of the Petroleum Exporting Countries (OPEC) have announced additional production cuts of about 1.15m barrels per day in order to support market stability. In a meeting last week it was expected that the panel would stick with the 2m barrels per day cuts agreed last October. However, they announced that additional voluntary reductions would start from May.

The largest contributor to the cuts will be Saudi Arabia who have agreed to lower production by 500,000 bpd. There will also be significant reductions by Iraq (211,000 bpd), UAE (144,000 bpd), and Kuwait (128,000 bpd) with smaller cuts by Kazakhstan (78,000 bpd), Algeria (48,000 bpd) and Oman (40,000 bpd).

OPEC have stated that concerns over summer oil demand were behind the decision. “It should be noted that potential challenges to global economic development include high inflation, monetary tightening, stability of financial markets and high sovereign, corporate and private debt levels,” OPEC said.

However, the International Energy Agency (IEA) have said that the most recent OPEC cuts risk exacerbating an oil supply deficit expected in the second half of the year and could hurt consumers and global economic recovery.

In its monthly oil report, the IEA said: “Oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices.”

Since the announcement on 2 April the price of Brent crude has increased by around 10% from $80/barrel to $88/barrel on Wednesday. Brent prices reached $130/barrel in March and June last year following the Russian invasion of Ukraine. However, prices fell steadily over the winter and reached a low of $71/barrel last month.

World’s deepest offshore wind turbine installed off Scottish coast

Energy company SSE has installed the deepest offshore wind turbine in the world at its £3bn Seagreen offshore windfarm. The 2,000 tonne turbine was installed on Sunday at a depth of 58m at the windfarm located 17 miles off the coast of Angus, Scotland.

There are now only two turbines out of 114 left to install at the first phase of the 454MW windfarm, with further phases expected to increase capacity to over 1GW. The windfarm began generating electricity August last year and will be fully operational by the summer.

However, it is not expected to begin its Contract for Difference (CfD) accreditation until March 2026. This is due to a previous loophole in the CfD framework which will allow joint owners SSE Renewables and TotalEnergies to benefit from the current high wholesale prices. Seagreen Phase 1 was awarded a CfD contract in 2019 with an initial strike price of £41.61/MWh which is less than half the current wholesale electricity price.

Graham Stuart, the minister of state for energy security and net zero, said: “This is another terrific milestone for both Scotland and the UK’s world-leading offshore wind industry. As I saw first-hand last week, Seagreen is making history with the world’s deepest wind turbine foundation which, once operational, will play an invaluable role in powering more of Britain from Britain.”

Chief Executive of SSE, Alistair Phillips-Davies, said: “Thanks to a strong and stable policy framework, the UK has established itself as the world leader on offshore wind and SSE Renewables is building more offshore wind than anyone on the planet. But we want to do more and now is the time to accelerate if we are to achieve the UK’s target of 50GW of offshore wind by 2030.”

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