Indicators of an Energy Market Recovery

I am sharing the evolution of the IRE index from Red Eléctrica, which shows the trend in #electricity consumption for installations with more than 450 kW of contracted capacity in Spain. The data for the most recent month published (September 2024) shows solid growth of 4.6%, and 5.5% in the #industrial sector after adjusting for labor and temperature effects. Electricity demand growth across all segments in October 2024 has been 1.9%, also adjusted for labor and temperature effects. Electricity demand growth is used as a proxy indicator of #GDP growth in Spain because it reflects overall economic activity. The rationale behind this indicator is that higher electricity demand tends to correlate with increases in industrial production, consumption, and services, all of which are key components of GDP. Some reasons why this indicator is useful include: ✅ Direct relationship with economic activity: Electricity is essential in almost all economic sectors, from industry to services. When the economy grows, productive activity increases, along with the consumption of goods and services, and therefore electricity consumption. ✅ Real-time indicator: Unlike GDP data, which is published quarterly and with some delay, electricity consumption data is often available more frequently (even daily), allowing for a more immediate tracking of economic activity. ✅ Sensitivity to economic changes: Changes in electricity consumption can sensitively reflect variations in specific economic sectors, especially the industrial sector, which consumes a large amount of energy. An increase or decrease in electricity demand can foreshadow the performance of these sectors before it is reflected in GDP, hence the relevance of the IRE indicator. ✅ Energy efficiency and structural changes: Although the relationship between electricity demand and GDP may vary due to improvements in #energyefficiency and shifts toward a more service-based (less energy-intensive) economy, it remains a useful indicator, especially in the short to medium term. In summary, although it is not a perfect substitute for GDP, electricity demand growth in Spain is a useful proxy, especially for closely and quickly tracking economic growth trends in the country. Therefore, it is encouraging to observe a consistent recovery in electricity demand.

"Short-Term Energy Outlook (STEO) December 2024" by the U.S. Energy Information Administration (EIA) provides critical insights into energy trends, including production, prices, consumption, and emissions. This report emphasizes the transition towards renewables, the stabilization of fossil fuel markets, and global energy shifts led by technological and geopolitical factors. 1. Crude Oil and Natural Gas • Brent Crude Price: > 2023: $82/barrel > 2024: $80/barrel > 2025: $74/barrel • U.S. Crude Oil Production: > 2023: 12.9 million barrels/day > 2024: 13.2 million barrels/day > 2025: 13.5 million barrels/day • Natural Gas Prices: > 2023: $2.50/MMBtu > 2024: $2.20/MMBtu > 2025: $3.00/MMBtu • Liquefied Natural Gas (LNG) Exports: Steady at 12 billion cubic feet/day in 2023–2024, increasing to 14 billion cubic feet/day in 2025. 2. Electricity and Renewables • Shares of Electricity Generation: > Natural Gas: 43% (2024), declining to 40% (2025). > Renewables: 22% (2023), rising to 25% (2025). > Coal: 15% (2024–2025). > Nuclear: Stable at 19% (2023–2025). • Renewable Capacity Additions (2025): > Wind: 9 GW. > Solar: 25 GW. 3. Coal Markets • Consumption: > 2024: 407 million short tons > 2025: 409 million short tons (+1%). • Production: > 2024: 508 million short tons > 2025: 472 million short tons (-7%). • Plant Retirements: Coal plant closures expected to increase from 3 GW (2024) to 11 GW (2025). 4. Macroeconomic Indicators • U.S. GDP Growth: > 2024: 2.7% > 2025: 2.1% • Electricity Prices: Residential sector prices stable at 16 cents/kWh through winter 2024–2025. • Heating Degree Days (HDDs): Winter 2024–2025 expected to see 6% more HDDs compared to 2023–2024. 5. Environmental and Emissions • CO2 Emissions: > Stable at 4.8 billion metric tons annually (2023–2025). > Increased emissions from coal and motor gasoline are balanced by biofuel use and renewables growth. • Natural Gas Withdrawals: December 2024: Forecasted at 590 billion cubic feet, 34% above the five-year average. 6. Global Oil Markets Production Growth: Non-OPEC+ countries to drive 1.6 million barrels/day increase (2025), accounting for 90% of growth. Demand: • Global liquid fuel consumption to grow by 0.9 million barrels/day (2024) and 1.3 million barrels/day (2025). • Non-OECD countries, led by India (+0.3 million barrels/day), drive demand growth. 7. Key Risks and Uncertainties • Geopolitical Factors: Ongoing conflicts in the Middle East and OPEC+ production decisions could impact supply and pricing. • Weather Variability: A colder-than-average winter could increase natural gas and electricity demand.

📈 TXOGA Chartbook Update – Week of June 30, 2025 Fresh data. Sharper insights. Here’s what’s moving the energy markets and the broader economy this week: 🔹The U.S. economy showed mixed signals. BEA’s final Q1 2025 GDP estimate was revised down to a 0.5% q/q contraction, and – as discussed in the Chart of the Week – with no detail provided on net trade or inventories—an unusual omission. Prior estimates showed the real trade deficit widening to $1.4 trillion annualized, while the petroleum trade surplus rose to $62.3 billion, up 11% year-over-year (y/y). Consumer spending slowed to 2.7% y/y, consistent with weak sentiment readings. The ADS index, which provides daily GDP growth estimates through June 26, decelerated but remained consistent with modest Q2 growth. Industrial production rose 0.1% m/m in May, with capacity utilization steady at 77.4% and investment growth holding at 6.3% y/y. Credit spreads narrowed as high-yield bond rates fell 30 basis points to 12.7%, while the Fed Funds futures rate remained at 4.3%. 🔹Oil market indicators reflected easing geopolitical tensions and mixed fundamentals. WTI crude prices fell 13.2% w/w to $65.06 per barrel as of June 27, returning to early-June levels. Futures prices re-aligned with their historical mean reversion threshold but remained in backwardation. Price momentum weakened, with technical signals pointing to reduced upward pressure. EIA weekly data show U.S. petroleum demand rose to 20.5 mb/d for the week ended June 20, within the top 25% of the five-year range. Crude oil production remained strong above 13.4 mb/d. Net petroleum exports slipped to 3.7 mb/d, while crude inventories (excluding the SPR) fell by 5.8 million barrels, remaining near the bottom of the five-year range. 🔹 Natural gas prices fell 3.7% w/w to $3.71 per million Btu as of June 27, re-aligning with historical mean reversion levels. The futures curve remains in contango, with price momentum weakening. Storage increased by 3.4% week-over-week (w/w) to 2.9 tcf, within the top 25% of the five-year range. Despite lower U.S. consumption, down 3.7% y/y in May, net exports rose to a record 16.3 bcf/d, up 23.5% y/y. For deeper insights, visit the full TXOGA Chartbook here: 👉 https://lnkd.in/g8tSBmUm #EconomicOutlook #Markets #Business