As for Energyland™, natural gas has reached a record storage level - and unsurprisingly - a new prompt month low for the year, while crude oil has been on a wild ride as the news of the Seaway pipeline reversal (to alleviate the supply glut at Cushing, OK) has rallied WTI prices like a mad thing, before European woes have weighed heavy once more. Anyhoo, that’s enough for now, let’s hit the chow:  

–North Dakota’s oil production approaches that of Opec member Ecuador.

–Why targeting cows rather than coal would more greatly reduce emissions.

–Infographic: Is the American dream still attainable?  All Hail Louisville!!! (h/t B K Swan) 

–What and where are the world’s biggest sources of renewable energy?

–Infographic on fruit drinks – soda’s evil twin.

–US Energy Independance – the big lie.

–13 cool shopping bags.

–Solar power plants to orbit the sun for energy needs.

–Infotastic infographic on Amazon. (h/t Jennifer Simmans)

–Electric cars moving in the wrong direction….although the heavy battery makes it safer to drive.

–Manly ways to prepare a Turkey.

–What the price of euro carbon emissions is saying.

–30 dumb inventions.

The Burrito Deluxe Award of the Week goes to Silvio Berlusconi, for not only resigning as prime minister of Italy, but for releasing an album of love songs to coincide with his departure. You couldn’t make this stuff up.

The Burnt Burrito Award of the Week goes to EU carbon permits. Fears surrounding the fate of Europe are manifested in permit prices as they descend to near three-year lows, while concerns surrounding oversupply add an extra layer of worry.

Have a corking weekend!

First up is Keith Richards, representing EU trading emissions. One look at the chart, and you will see this carbon commodity has shown reckless abandon - like our guitar-wielding wildman of rock - and has fallen out of its own coconut tree:  

EU Carbon Permits, 2011 - 2013 (ascending order)

The reason for this tumble is well represented by Keith Richards here; it was all about excess. The EU is ready to release permits for phase three of the emissions trading scheme, which starts in 2013. However, concerns surrounding oversupply have sent the market plummeting back to levels not seen since early 2009.  

Next up, front man Sir Mick Jagger represents charismatic crude. This stadium rocker of a commodity dominates the limelight in commodityworld™ with its presence on the global stage. And just like Jagger, crude is never far from the headlines. 

Controversy has ramped up recently as the IEA decided to release 60 million barrels of emergency reserves due to apparent concerns of higher oil demand later this year, and covering the supply shortfall left by Libya. 

This decision appears to have undermined Opec, as Saudi Arabia was already increasing production to 10 mb/d to alleviate supply worries. Two weeks on, and crude – the front man of commodityworld™ - is back strutting its stuff above pre-IEA announcement levels. As WTI eyes a break back into triple digits, the decision by the IEA is ever more scrutinized. 

Ronnie Wood, despite having a volatile side, is calm and composed with an axe in his hand (a guitar, that is). US natural gas is also prone to such bouts of volatility. However, despite this choppiness it remains riffing around the 40-week moving average (purple line on chart), while the three previous prompt month expiries (May – Jul) have remarkably all been within a nickel of each other – strange serenity for natty:  

US natural gas prompt month, March 2009 - present

Finally, but actually most importantly, drummer Charlie Watts. Charlie represents coal, because despite appearances, it remains one of the key underlying forces behind everything. Despite all the focus on renewable fuels and reducing emissions, coal consumption in the US will exhibit annual growth of 0.8% from 2009 to 2035, outpacing that of natural gas (0.6%). Keith Richards has gone as far as to say that the Rolling Stones would not be, or could not continue, as the Rolling Stones without Watts. Given the global demand growth shown below in ExxonMobil’s Outlook to 2030, there would appear a similar reliance on coal by commodityworld™:  

Thanks for playing once again; next week we’ll take a look at synthetic fuels through Milli Vanilli. Until then…adios!

Friday, a long weekend ahead, and Q3 kicked off - reasons to be cheerful, 1-2-3. And this week has brought the familiar twists and turns. Well actually, crude had been on the straight and narrow (higher) for most of this week, egged on by the exuberance of the response to the approval of a Greek austerity package, which has essentially ensured the survival of the Eurozone in its current form…for now. As for the good ship nat gas, it has shown moderate progress after bouncing from strong support around $4.20ish, as summer weather supports higher cooling demand, while the first-named storm of this Atlantic hurricane season reminds us we never know what is around the corner – so keep your eyes on the prize (exhibit 1, left). A long weekend awaits, so be sure to load up on sustenance:   

–Tycoon says Bakken field in North Dakota & Montana will yield 24 billion barrels.

–This little pig went to carbon market.

–10 buildings shaped like what they sell.

–France goes contrarian, pledges €1bn to nuclear power.

–A window that makes electricity.

–Beautifully happy and sad…photos re-staged.

–China is heading for a hard landing, Part 1, Part 2 and Part 3. (China is an amazing story, Gary Shilling has an amazing mind).

–Why do airlines always lose money?

–Why rappers shouldn’t be currency traders.

–EPA: cheap natural gas will kill more coal plants than us.

–US can curb emissions even as it promotes oil economy.

–Flow charts at their very best. And 10 of them.

The Burrito Deluxe Award of the week goes to a long weekend for those of us in the US…Happy Independence Day! (down with the redcoats, etc, etc)

The Semi-Burnt Burrito Award of the week goes to global manufacturing data. Although China and the Eurozone saw expansion at their slowest pace since Feb 2009 and Dec 2009, respectively, the US saw expansion quicken for the first month in four.

The Secret Scrutinizer Award of the week goes to Ellen Stamm, for having an eagle eye at editing…muchas gracias!

Have a wonderful weekend.

1) Banana power! Yes, the noble banana is being used to produce ethanol. It is also a nifty acronym in the energy world: B.A.N.A.N.A.

2) Grapes. After the Royal Wedding, William drove Kate around Buckingham Palace in a wine-powered car, borrowed from his dad (it gets 10 miles per 4.5 bottles, by the way).

3) Hybrid. A name given to a vehicle which uses two (or more) power sources, or the marriage of two fruits, such as Tangelos, Orangelos, Plumcots or Apriums.  

4) An old favorite here on the burrito – the lemon-powered alarm clock.

5) Dehydration - the drying of fruit products - is the most common industrial use of geothermal energy. Random but true.

6) This is really, really cool. Scientists in Brazil have developed a way to use the skin from fruit to make strong, lightweight plastic for car parts.

7) Back to wine, or Vin as they call it in France. VIN is an acronym for Vehicle identification number (VIN), which is used to help match vehicles to the EPA certification file for calculating MPGs. Yep, that sentence was acronymtastic.

8) As nutty as it seems, a well-researched source for biodiesel is coconut oil, with colleges such as BYU and the University of Central Florida studying its viability. 

9) To go with the lemon-powered alarm clock….the tomato-powered table lamp!

10) Finally, the fruit that spurred this random turn(over) – the apple. The largest tech company in the world – Apple – says 46% of its carbon footprint comes from the use of its products, while 45% comes from the manufacturing of them. Apple has a carbon footprint of 9 million metric tons of carbon dioxide - similar to that of Honduras.

Thanks for playing – keep it fruity!

The impact from events in MENA (Middle East / North Africa) in the past couple of months has been uncompromisingly bullish for the energy complex, and specifically crude oil. However, with the coming of a second ‘black swan’ event in quick succession to this first outlier through the earthquake in Japan, markets this time have been dealt a very different hand, in that the impact to the energy complex is not quite as clear cut.  

Nikkei Equity Index, Aug 2010 - present

This reaction is also affirmed by trading of the Japanese currency, the Yen. It has reached a post-World War II high versus the US dollar as funds are repatriated to finance a recovery. The Bank of Japan sold 2 trillion Yen in September 2010 to shore it up from strengthening further above 83 Yen. This intervention proved successful, as the FX rate hasn’t strayed too far from this level in the past six months. That is until last week’s earthquake : 

Japanese Yen (vs US Dollar), Aug 2010 - present

But despite price action being overarchingly bearish for equities and bullish for fixed income – both in Japan and globally - things have played out a little differently for our dearly beloved energy commodities. So let’s do a quick review of some of the global commodities to see how they have reacted, and why:   

Crude oil: initially prices have sold off, not only on the immediate drop in oil demand due to a third of Japan’s oil refining capacity being offline, but on the expectation that economic growth will be materially impeded, hence a lower level of oil demand going forward. 

Coal: prices are rallying on the expectation that nuclear facilities will be offline for a sustained period of time, and coal will become a substitute fuel to make up for this shortfall in the power generation sector. 

EU natural gas: prices are rallying on a similar theme as for coal. European natural gas prices are charging higher on the concern that LNG cargoes will be diverted away from Europe to Japan should nuclear facilities remain offline for a sustained period. LNG imports to Japan account for virtually all of their natural gas consumption (which makes up approximately 17% of total energy consumption).

US natural gas: despite a minor initial bullish influence on prices due to the concern that LNG cargoes could be diverted away from the US to Japan, it has become a non-issue due to LNG accounting for less than 2% of total US supply (compared to the UK where it makes up closer to 20%). The US is also not competitive in the spot market, and a portion of current LNG imports are due to long-term contracts already in place.      

European Power: prices are rallying on surging coal and European natural gas prices. They are also being spurred on by the announcement from German Chancellor Angela Merkel that the country’s seven oldest nuclear reactors are being closed for three months to undergo safety checks; this takes just under 10% of German power generation offline – not an insignificant amount.  

European Carbon: emissions prices are following the trend in natural gas and power markets, and rallying also.   

In summary, the ongoing events in Japan appear to be supportive for the majority of global energy prices, barring the bearish impact of a slowing Japanese economy on energy demand. However, the knee-jerk rallies we have seen across the various energy commodities look driven by panic, and somewhat overdone. All this being said, I leave you with an ominous thought: don’t bad things come in threes, even black swans?