fuel

Blending sustainable aviation fuels (SAFs) needs to grow massively to meet ambitions for 2030 and beyond. Demand is there, but supply is limiting uptake. Ramping up capacity investments is critical to meet the aspired goals. Airlines (purchase grants) and suppliers (production, delivery) have a joint role here, but more policy support will help

In this article

 

  Ambitions and goal-setting for using sustainable aviation fuel (SAF) by authorities and governments, as well as airlines and corporates, have 

The Swing Overview - Week 22 2022

The Swing Overview - Week 22 2022

Purple Trading Purple Trading 07.06.2022 13:59
The Swing Overview - Week 22 Equity indices continued to rise for a second week despite rising inflation and sanctions against Russia. Economic data indicate optimistic consumer expectations and the easing of the Covid-19 measures in China also brought some relief to the markets. The Bank of Canada raised its policy rate to 1.5%. The Eurozone inflation hit a new record of 8.1%, giving further fuel to the ECB to raise interest rates, which is supporting the euro to strengthen.   Macroeconomic data The US consumer confidence in economic growth for May came in at 106.4. The market was expecting 103.9. This optimism points to an expected increase in consumer spendings, which is a positive development. The optimism was also confirmed by data from the manufacturing sector. The ISM PMI index in manufacturing rose by 56.1 in May, an improvement on the April reading of 55.4. The manufacturing sector is therefore expecting further expansion.   On the other hand, data from the labour market were disappointing. The ADP Non Farm Employment indicator (private sector job growth) was well below expectations as the economy created only 128k new jobs in May (the market was expecting 300k new jobs). The unemployment claims data held at the standard 200k level. However, the crucial indicator from the labour market will be Friday's NFP data.   Quarterly wage growth for 1Q 2022 was 12.6% (previous quarter was 3.9%). This figure is a leading indicator on inflation. Faster inflation growth could lead to a higher-than-expected 0.50% rate hike at the Fed's June meeting.   The US 10-year Treasury yields have rebounded from 2.6% and have started to rise again. They are currently around 2.9%. However, the US Dollar Index has not yet reacted to the rise in yields. The reason is that the euro, which has appreciated significantly in recent days, has the largest weight in the USD index. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has continued to strengthen in recent days. The market seems to be accepting the expected 0.50% rate hike and while economic data points to some slowdown, forward looking consumers‘ and managers’ expectations are optimistic.  Figure 2: The SP 500 on H4 and D1 chart   The US SP 500 index is approaching a significant resistance level, which is in the 4,197-4,204 range. The next one is at 4,293 - 4,306. The nearest support is at 4 075 - 4 086.    German DAX index Figure 3: German DAX index on H4 and daily chart Germany's manufacturing PMI for May came in at 54.8. The previous month it was 54, 6. Thus, managers expect expansion in the manufacturing sector. Surprisingly, German exports rose in April despite the disruption of trade relations with Russia. Exports in Germany grew by 4.4% even though exports to Russia fell by 10%.  The positive data has an impact on the DAX index. However, the bulls in DAX may be discouraged by the expected ECB interest rate hike.   The DAX has reached resistance in the 14,600 - 14,640 area. The nearest significant support is at 14,300 - 14,330, where the horizontal resistance is coincident with the moving average EMA 50 on the H4 chart.   The euro continues to rise Bulls on the euro were supported by inflation data, which reached a record high of 8.1% in the eurozone for the month of May. Inflation increased by 0.8% on a monthly basis compared to April. Information from the manufacturing sector exceeded expectations, with the manufacturing PMI for May coming in at 54.6, indicating optimism in the economy. The ECB will meet on Thursday 9/6/2022 and it might be surprising. While analysts do not expect a rate hike at this meeting, rising inflation may prompt the ECB to act faster.  Figure 4: The EUR/USD on H4 and daily chart The EUR/USD currency pair is reacting to the rate hike expectations by gradual strengthening. A resistance is at 1.0780 The nearest support is now at 1.0629 - 1.0640 and then at 1.0540 - 1.0550.   The Bank of Canada raised the interest rate The GDP in Canada for Q1 2022 grew by 2.89% year-on-year (3.23% in the previous period). On a month-on-month basis, the GDP grew by 0.7% (0.9% in February). This points to slowing economic growth.  Canada's manufacturing PMI for May came in at 56.8 (56.2 in April ), an upbeat development. The Bank of Canada raised its policy rate by 0.50% to 1.5% as expected by analysts. In addition to the rate hike, the Canadian dollar is positively affected by the rise in oil prices as Canada is a major exporter. Figure 5: The USD/CAD on H4 and daily chart The USD/CAD currency pair is currently in a downward movement. The nearest resistance according to the daily chart is 1.2710-1.2730. Support according to the daily chart is in the range of 1.2400-1.2470.  
Stock Market: Uber, Palantir And Moderna In Top 3...

Stock Market: Uber, Palantir And Moderna In Top 3...

Purple Trading Purple Trading 15.07.2022 13:08
TOP 3 most traded CFD stocks of this week Information is one of the most valuable commodities. No one can tell you with absolute certainty where any stock is headed. But sometimes you just need to know where, at what point, and why are investors taking the most positions to try to take advantage of the volume and volatility yourselves. We bring you a summary of this week’s top 3 most traded CFD stocks at Purple Trading. What is behind their popularity and what is the outlook for the future? You can find answers to these questions in today’s article. Uber Shares of the notoricaly loss-making taxi service are under a lot of pressure this year. They have lost more than half their value since January. Uber is now selling more than 50% below the price it was when it entered the stock markets in 2019. Comparing it to its all-time high of $63.18 in early January 2021 is even more dismal. The big drop in Uber stock isn't too surprising in the context of the company's financial results from the first quarter of the year. While Uber's revenue grew 136% year-over-year to $6.9 billion, its net loss came in at $5.9 billion due to failed investments in Grab, Aurora, and DiDi. Chart 1: Uber shares on the MT4 platform on the M15 timeframe along with the 100 and 200 day moving averages Uber has become the focus of investor attention in recent days due to leaked information about lobbying high-profile politicians such as French President Emmanuel Macron. The revelations of the scandal have made Uber shares very volatile, which traders have taken advantage of.   The outlook for the coming months is not very positive for the company - high fuel prices are making Uber's services more expensive and a possible recession could significantly affect the company's revenues. Uber's business can be described as rather cyclical and in times of recession the company could suffer as a result. Nor should we underestimate the impact of the growing coronavirus, which is once again beginning to plague the entire world.   However, Uber’s relatively low valuation (it is now trading near an all-time low) and its positive cash flow outlook for 2022 is what’s playing into Uber’s hands. The company will publish its 2Q earnings in early August, and no matter the outcome, Uber shares are likely to remain popular among traders.   Palantir Uber has become the focus of investor attention in recent days due to leaked information about lobbying high-profile politicians such as French President Emmanuel Macron. The revelations of the scandal have made Uber shares very volatile, which traders have taken advantage of.   The outlook for the coming months is not very positive for the company - high fuel prices are making Uber's services more expensive and a possible recession could significantly affect the company's revenues. Uber's business can be described as rather cyclical and in times of recession the company could suffer as a result. Nor should we underestimate the impact of the growing coronavirus, which is once again beginning to plague the entire world.   However, Uber’s relatively low valuation (it is now trading near an all-time low) and its positive cash flow outlook for 2022 is what’s playing into Uber’s hands. The company will publish its 2Q earnings in early August, and no matter the outcome, Uber shares are likely to remain popular among traders. Chart 2: Palantir shares on the MT4 platform on the M15 timeframe along with the 100 and 200 day moving averages Investors still have no idea where to classify Palantir - is it an army contractor or an IT company? The stock's performance so far this year would point more towards an IT company. Military contractors like Lockheed Martin and Raytheon Technologies have had a great year so far, outperforming the S&P 500 index significantly. Palantir's CEO visited Ukraine in June in an effort to expand the company's operations. This obviously pleased investors, but potential expansion is difficult to quantify.   Moreover, the company's capitalization is still more than 10 times its annual revenue, a giant number compared to its competitors. Competitor Booz Allen Hamilton is currently selling for about 1.5 times annual sales, and the company's stock is near this year’s low. The company has a long track record of growing sales and, unlike Palantir, is profitable. Palantir's 2Q earnings are due in the first half of August. The company is expecting 25% year-on-year revenue growth. However, in the same period a year ago, the company grew revenue by 49%. Thus, any surprise in the earnings could cause high volatility. Palantir is definitely a stock to watch.    Moderna Seeing the famous vaccine producer among this week’s most traded companies in our CFD stock offering is not much of a surprise. Yet, back in mid-June, things were not looking good for Moderna shares - as this company was about 50% below the price we could see at the beginning of the year. However, the last month has been great for Moderna and its shares have soared almost by 50%. The reasons for this steep rise are clear - the coronavirus is once again on the rise globally. Since the beginning of June, the number of daily covid cases have practically doubled globally. The World Health Organisation has warned that the pandemic is far from over. This is just more water on the mill for companies such as Moderna and BioNTech. In addition, Moderna's actions were also helped by the June approval of a vaccine for American children and adolescents aged 6 months to 17 years. Chart 3: Shares of Moderna in the MT4 platform on the M15 timeframe along with the 100 and 200 day moving averages After the outbreak of the coronavirus pandemic, Moderna was the darling of investors for obvious reasons. Shares thus reached an all-time high of almost USD 500. Since last September, however, it has gone south sharply. Looking at the P/E ratio (the ratio of share price to earnings per share), Moderna looks very attractive - the ratio is now around 5, which is a great number for a pharmaceutical company. In addition, Moderna is well funded - the selling of coronavirus vaccines have given it very interesting liquidity.   The biggest concern for investors, however, is the future of the company and its earnings once the coronavirus has passed. Apart from the vaccines mentioned above, at this moment the company does not sell any other products to the public. It has several other products in the testing phase, but their final approval and sales are uncertain. Thus, Moderna's stock may continue to thrive in the coming months thanks to further covid waves. In the long term, however, the company will need more products if it is to prosper.  
American Drivers Fuel Less! Crude Oil: What Do We Learn From OPEC's Forecast?

American Drivers Fuel Less! Crude Oil: What Do We Learn From OPEC's Forecast?

Jing Ren Jing Ren 12.08.2022 10:06
Yesterday, OPEC and the IEA provided their monthly reports on the oil industry. What got quite a bit of headlines was OPEC's forecast that crude demand would decrease during the remainder of the year. With both Brent and WTI below the $100/bbl mark, does this mean triple digit crude prices are a thing of the past? Not necessarily, because the IEA and OPEC are somewhat contradicting themselves in their reports. While OPEC cut its outlook for demand, the IEA raised its outlook. So, who's right? Well, it could have more to do with the initial assessment and converging on a realistic number. And that's rather important, because it appears to coincide with expected supply, even with OPEC raising production. Where this is going The IEA had a more pessimistic outlook for crude demand this year, setting it at 99M bpd, while OPEC had a more optimistic assessment of over 101M bpd. Since then, however, both have been converging on the 100M bpd mark, with the IEA raising demand forecasts and OPEC lowering. But both agree in their forecast that production will be around 100.1M bpd. Why the disagreement on one and agreement on the other? Because tracking production capacity is a lot easier. It's just a matter of counting all the wells and how much they produce. But how much people will decide to spend in a changing environment is a much harder thing to do. Furthermore, as the IEA noted in their report, there can be surprises. For example, Russian production has remained much higher than anticipated despite sanctions. Re-balancing shipments to take into account the sanctions appears to have been easier than anticipated, and happened quicker. Figuring out the price direction This has two implications for prices. One, the expectation for the price to fall once the infrastructure is set up for Russia to export around the sanctions might not pan out. Simply because is already managing to do that. And secondly, as Europe slowly weans itself off Russian supply, the potential for increasing price pressures might not materialize. This is because there appears to be more elasticity in global supply that allows for shifting demand. Speaking of which, high prices are pushing down consumer demand. A study by the AAA in the US, for example, showed that most Americans are cutting back on their driving. So much, in fact, that demand for gasoline has slipped below to the levels it was in 2020 during the pandemic. American drivers are the largest group of crude products consumers in the world. And it's not just fuel prices that are keeping them from driving, a majority said they were shopping less, as well. Suggesting that higher inflation overall, and not just strictly higher fuel prices, is contributing to slowing demand. So recession? With the BOE warning of a recession, and the US having two quarters of negative growth by the White House insisting it isn't a recession, that could be the key to potentially crude continuing its downward trajectory. Daimler Trucks, for example, is already setting up for lowering energy consumption ahead of potential supply shortages in Europe during the winter. Meaning that supply interruptions might not necessarily lead to higher demand, but simply less consumption. While demand might be waning, it still doesn't eliminate the possibility of a surprise on the supply side. Such as a rise in geopolitical tensions, or a natural event. So far, hurricanes in the Gulf of Mexico have been relatively scarce this year, but the season lasts for another four months.
Gasoline Prices Have Decreased Since The First Half Of June, Letting Americans Save Ca. $500m. Will We See Higher Spending?

Gasoline Prices Have Decreased Since The First Half Of June, Letting Americans Save Ca. $500m. Will We See Higher Spending?

ING Economics ING Economics 18.08.2022 16:05
We hoped falling gasoline prices would lift retail spending in July, but this wasn't the case. Nevertheless, the data still points to a healthy start to the quarter. The cash flow boost from lower gasoline prices will provide a major boost to spending in August, with stronger auto sales also set to lift growth. Third-quarter GDP growth of 3% looks possible Gasoline station sales fell only 1.8% in July Mixed news from the retail sector July US retail sales are a little softer at the headline level than the market expected (0% growth versus the +0.1% consensus) while June’s growth was revised down to 0.8% from 1%. That said, gasoline station sales fell only 1.8% despite big falls and anecdotal evidence of less summer driving, while clothing was down 0.6%, auto sales were down 1.6%, and general merchandise dropped 1.7%. However, non-store retail jumped 2.7%, boosted by a successful Amazon Prime day, miscellaneous rose 1.5%, and building materials increased 1.5%. The net result for the “control group”, which strips out the volatile food service, auto, gasoline and building supply components, and historically better tracks broader consumer spending, actually rose a bit more than predicted, up 0.8% versus the 0.6% consensus. Level of US retail sales by component Source: Macrobond, ING Lower gasoline prices and stronger auto production should boost August spending It’s important to remember that this is a dollar value figure so falling gasoline prices are dampening the headline, but on balance we are a little disappointed, having hoped to see a larger fall in gasoline station sales that would have led to stronger spending increases in other components. Gas price changes are like tax changes – lower gasoline prices leaves more money in peoples’ pockets to spend on other goods and services. Gasoline prices have now dropped for 64 consecutive days (from $5.02/gallon on 13 June to $3.94 today) according to Bloomberg data on national averages, which means Americans are spending $400m less per day filling up their vehicles' tanks. Consequently, we should expect to see an even bigger shift in spending away from gasoline stations to other components in the August report. The big increase in July auto production reported yesterday, where there is huge unsatiated demand, also points to a very firm August (excluding gasoline) sales number. Consumer spending is much broader than retail sales Moreover, consumer spending is much broader than retail sales alone. Households are spending more on leisure and hospitality as spending reorientates back towards services and away from goods. This still has a long way to go with retail sales set to underperform broader spending trends over the coming quarters – we look for it to drop back from the current 48% of total consumer spending and move towards pre-pandemic levels of 43% of total spending. Retail sales as a proportion of total consumer spending Source: Macrobond, ING 3% GDP growth looks possible Add in the support from ongoing employment gains and accumulated savings through the pandemic, and we should expect a strong contribution from consumer spending in third-quarter GDP. We also have early evidence suggesting that trade will be additive and inventories less of a drag, while yesterday’s firm manufacturing data adds to the optimism. Taking everything into account, we think 3% annualised growth is definitely on the cards. Read this article on THINK TagsUS Retail sales GDP Consumer spending Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil Is An Indicator Of The Health Of The Global Economy

Crude Oil Has A Selling Weariness? Europe Prefers Oil Over Gas!?

Ole Hansen Ole Hansen 18.08.2022 16:14
Summary:  Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being an increased gas-to-fuel switching supporting the demand outlook for crude oil. Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driving by China’s troubled handling of Covid outbreaks, and its property sector problems as well as rapidly rising interest rates, were the main drivers behind the selling seen across commodities in recent months. Crude oil with its strong underlying fundamentals, with tight supply driven by Russia sanctions and OPEC struggling to lift production, was the last shoe to drop and since the mid-June peak, speculators and macroeconomic focused funds have been net sellers of both WTI and Brent crude oil futures. With most of these market participants using the front of the futures curve, the selling has seen the forward curve flatten, a development that is normally viewed as price negative as it signals reduced tightness in the market. However, for that to ring true we should see inventory levels of crude oil and fuel products rise while refinery margins should ease. None of these developments have occurred and it strengthens our belief that the weakness sign has more to do with position adjustments and short positions being implemented by traders focusing on macro instead of micro.  In the week to August 9, the combined net long in Brent and WTI slumped to 304k lots a level last seen in April 2020, and 209k lots below the mid-June peak.  While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel. The result being surging gas prices as utilities are forced to buy more gas to keep the turbines running. This week the cost of Dutch TTF benchmark gas reached $400 per barrel of crude oil equivalent. Such a wide gap between oil and gas has and will continue to attract increased demand for fuel-based product at the expense of gas and this switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published the incentive to switch has increased even more, adding more upward pressure on refinery margins, so called crack spreads (EU diesel crack shown below as an example) As mentioned, the recent selling pressure together with a deteriorating macro-economic backdrop have been the main drivers behind crude oils near 40-dollar slump since mid-June. The WTI chart below points to support at $85.50, a level almost reached on Tuesday. The price action is currently confined within a declining wedge and a break to the upside could trigger a strong buying response. For that to happen the price first needs to go back above $92 and the 21-day simple moving average, currently at $92.85. Source: Saxo Bank   How to invest in energy and the unfolding energy crisis? By Peter Garnry, Head of Equity StrategySummary:  We are used to not think about the energy sector, but the galloping global energy crisis has illuminated our deficits in primary energy due to years of underinvestment in fossil fuels and renewable energy sources inability to scale fast enough with the green transformation and electrification of our economy. It seems more likely now that the non-renewable and the renewable energy sector will both provide attractive returns as we will need both to overcome our short-term energy crisis and long-term aspirations of a greener energy future.   Source: Refinery margin jump lends fresh support to crude
Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Saxo Strategy Team Saxo Strategy Team 19.08.2022 11:33
Summary:  Equity markets managed a quiet session yesterday, a day when the focus is elsewhere, especially on the surging US dollar as EURUSD is on its way to threatening parity once again, GBPUSD plunged well below 1.2000 and the Chinese renminbi is perched at its weakest levels against the US dollar for the cycle. Also in play are the range highs in longer US treasury yields, with any significant pull to the upside in yields likely to spell the end to the recent extended bout of market complacency.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back a bit yesterday potentially impacted by the July US retail sales showing that the consumer is holding up in nominal terms. The key market to watch for equity investors is the US Treasury market as the US 10-year yield seems to be on a trajectory to hit 3%. In this case we would expect a drop in S&P 500 futures to test the 4,200 level and if we get pushed higher in VIX above the 20 level then US equities could accelerate to the downside. Fed’s Bullard comments that he is leaning towards a 75 basis point rate hike at the September meeting should also negatively equities here relative to the expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index edged up by 0.4% and CSI300 was little changed. As WTI Crude bounced back above $90/brl, energy stocks outperformed, rising 2-4%. Technology names in Hong Kong gained with Hang Seng Tech Index (HSTECH.I) up 0.6%. Investors are expecting Chinese banks to cut loan prime rates on Monday, following the central bank’s rate cut earlier this week. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios and reviewing lending practices at some Chinese banks. The shares of NetEase (09999:xhkg/NTES:xnas) dropped more than 3% despite reporting above-consensus Q2 revenue up 13% y/y, and net profit from continuing operations up 28%.  PC online game revenue was above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version. Mobile game segment performance was in line. USD pairs as the USD rally intensifies The US dollar rally is finding its legs after follow up action yesterday that took EURUSD below the key range low of 1.0100, setting up a run at the psychologically pivotal parity, while GBPUSD slipped well south of the key 1.2000 and USDJPY ripped up through 135.50 resistance. An accelerator of that move may be applied if US long treasury yields pull come further unmoored from the recent range and pull toward 3.00%+. A complete sweep of USD strength would arrive with a significant USDCNH move as discussed below, and the US dollar “wrecking ball” will likely become a key focus and driver of risk sentiment as it is the premiere measure of global liquidity. The next key event risk for the US dollar arrives with next Friday’s Jackson Hole symposium speech from Fed Chair Powell. USDCNH The exchange rate is trading at the highs of the cycle this morning, and all traders should keep an eye out here for whether China allows a significant move in the exchange rate toward 7.00, and particularly whether CNH weakness more than mirrors USD strength (in other words, if CNH is trading lower versus a basket of currencies), which would point to a more determined devaluation move that could spook risk sentiment globally, something we have seen in the past when China shows signs of shifting its exchange rate regime from passive management versus the USD. Crude oil Crude oil (CLU2 & LCOV2) remains on track for a weekly loss with talks of an Iran nuclear deal and global demand concerns being partly offset by signs of robust demand for fuel products. Not least diesel which is seeing increasing demand from energy consumers switching from punitively expensive gas. Earlier in the week Dutch TTF benchmark gas at one point traded above $400 per barrel crude oil equivalent. So far this month the EU diesel crack spread, the margin refineries achieve when turning crude into diesel, has jumped by more than 40% while stateside, the equivalent spread is up around 25%, both pointing to a crude-supportive strength in demand. US natural gas US natural gas (NGU2) ended a touch lower on Thursday after trading within a 7% range. It almost reached a fresh multi-year high at $9.66/MMBtu after spiking on a lower-than-expected stock build before attention turned to production which is currently up 4.8% y/y and cooler temperatures across the country lowering what until recently had driven very strong demand from utilities. LNG shipments out of Freeport, the stricken export plant may suffer further delays, thereby keeping more gas at home. Stockpiles trail the 5-yr avg. by 13%. US Treasuries (TLT, IEF) The focus on US Treasury yields may be set to intensify if the 10-year treasury benchmark yield, trading near 2.90% this morning, comes unmoored from its recent range and trades toward 3.00%, possibly on the Fed’s increase in the pace of its quantitative tightening and/or on US economic data in the coming week(s). Yesterday’s US jobless claims data was better than expected and the August Philadelphia Fed’s business survey was far more positive than expected, suggesting expansion after the volatile Empire Fed survey a few days earlier posted a negative reading.   What is going on?   Global wheat prices continue to tumble ... with a record Russian crop, continued flows of Ukrainian grain and the stronger dollar pushing down prices. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat (ZWZ2) futures contract touch a January on Thursday after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. Existing home sales flags another red for the US housing market while other US economic data continues to be upbeat US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. The Philly Fed survey meanwhile outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). New orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard 2.6% with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kashkari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 26, next Friday.  Japan’s inflation came in as expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside.   What are we watching next?   Strong US dollar to unsettle markets – and Jackson Hole Fed conference next week? The US dollar continues to pull higher here, threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher.  The focus on the strong US dollar will intensify should the USDCNH exchange rate, which has pulled to the highs of the cycle above 6.80, lurch toward 7.00 in coming sessions as it would indicate that China is unwilling to allow its currency to track USD direction. As well, the Fed seems bent on pushing back against market expectations for Fed rate cuts next year and may have to spell this out a bit more forcefully at next week’s Jackson Hole conference starting on Thursday (Fed Chair Powell to speak Friday). Earnings to watch The two earnings releases to watch today are from Xiaomi and Deere. The Chinese consumer is challenged over falling real estate prices and input cost pressures on food and energy, and as a result consumer stocks have been doing bad this year. Xiaomi is one the biggest sellers of smartphones in China and is expected to report a 20% drop in revenue compared to last year. Deere sits in the booming agricultural sector, being one of the biggest manufacturers of farming equipment, and analysts expect a 12% gain in revenue in FY22 Q3 (ending 31 July).   Today: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 19, 2022
Crude Oil Price:  A Crucial Event Takes Place In The Week Ahead

Hello Drivers! Brent Crude Oil Prices Are Expected To Decrease, So Fuel May Be Cheaper!

ING Economics ING Economics 19.08.2022 11:42
Russian crude oil output has held up better than expected which has meant that the oil market is not as tight as originally thought. In addition, weaker demand means the oil balance is looking more comfortable for the remainder of the year. We have revised our forecasts lower The likes of China and India have been able to absorb larger volumes of Russian oil as European demand has fallen Oil price forecast revisions Stubborn Russian oil output and weaker than expected demand growth mean the oil market is likely to remain in surplus for the remainder of this year and into early next year, which should limit the upside in oil prices. Time spreads also point towards a looser market, with the backwardation in the prompt spreads narrowing significantly in recent weeks. As a result, we have revised lower our oil price forecast for the remainder of this year. Although, given that inventories are at historically low levels, we still believe that prices will remain elevated, whilst limited OPEC spare capacity and uncertainty over how Russian flows will evolve once the EU ban comes into full force should also limit downside in the medium term. We have lowered our 3Q22 and 4Q22 Brent forecasts from US$118/bbl and US$125/bbl to US$100/bbl and US$97/bbl respectively. Our full year 2023 Brent forecast has been revised down from US$99/bl to US$97/bbl.   ING oil price forecasts Source: ING Research Stubborn Russian output Since Russia’s invasion of Ukraine, it has become more difficult to get transparency on Russian oil output with the government no longer publishing monthly data. However, the IEA estimates that Russian oil production was around 310Mbbls/d below pre-war levels in July. The decline in output has been much more modest than many in the market were expecting, despite sanctions. IEA numbers suggest that Russian oil exports came in at 7.4MMbbls/d in July, which is only slightly below the 7.5MMbbls/d exported over 2021. The likes of China and India have been able to absorb larger volumes of Russian oil as European demand has fallen. China imported a record 1.99MMbbls/d of Russian crude oil in May, whilst in June Russian oil made up 20% of total Chinese oil imports, making it China’s largest supplier. These stronger Russian flows to China come despite overall weaker domestic oil demand due to Covid-related lockdowns. Whether China has the appetite to increase Russian oil purchases even further will depend on how quickly we see a recovery in domestic demand. However, whilst Russian output has held up well until now, we would expect production to start coming under more meaningful pressure once the EU ban on Russian seaborne crude oil and refined products is fully implemented in February 2023. For now, we are assuming that Russian output declines by a little more than 2MMbbls/d once the ban comes into full force. In addition, if for any reason India and China are unable to sustain the volumes of Russian oil they have imported, there is the risk that Russian oil output will eventually fall more aggressively, which would lead to a tighter market. Similarly, the US has been pushing for a price cap on Russian oil, and if enforced (which will be difficult), there is always the risk that Russia reduces its output in response. Russian oil flows are holding up well for now Source: IEA, NBS, ING Research Weaker demand offers a helping hand The higher price environment that we have seen for much of the year has done its job in terms of ensuring demand destruction to try to balance the oil market. Demand growth forecasts have been downgraded consistently as we have moved through the year. And EIA data provides clear evidence of demand destruction. US implied gasoline demand has underperformed since early June. Generally, we would expect demand to trend higher over the summer driving season, but higher prices have led to US gasoline demand trending quite some distance below the 5-year average (and this average includes 2020 data – a period of weaker demand due to Covid). EIA data shows that from early June through to early August, implied gasoline demand (4-week rolling average) in the US has lagged the 5-year average by almost 450Mbbls/d. In addition, Chinese demand has clearly disappointed this year, which has led to significant revisions in global demand estimates. There had been expectations that demand would come back strong following the easing of lockdown measures in Beijing and Shanghai in the second quarter. However, demand continues to suffer due to further Covid outbreaks and China’s insistence on following its Zero-Covid policy. Cumulative Chinese oil imports are down 4% over the first seven months of the year, whilst apparent domestic demand over the same period is down almost 11% YoY. In 2022, global oil demand is expected to grow by a little over 2MMbbls/d, whilst a similar growth number is expected for 2023. This would mean that in 2023, global oil demand will exceed pre-Covid levels. However, growth next year will depend largely on a recovery in China, and also on how severe any potential recession in the US and Europe is. An upside risk for oil demand comes from the gas market. European natural gas and Asian spot liquefied natural gas (LNG) prices are trading at elevated levels. In fact, the Dutch gas, TTF, is trading at an oil equivalent in excess of US$400/bbl, whilst spot Asian LNG is trading at an equivalent of close to US$330/bbl. Therefore, where there is capacity, we will likely be seeing gas-to-oil switching from the power sector. This will include the Middle East, Asia, and even Europe, where there have been reports of increased oil-fired power generation. Higher oil prices have weighed on demand Note: US implied gasoline demand numbers are 4-week rolling average Source: EIA, IEA, ING Research OPEC has limited room to pump more OPEC+ has been reluctant to deviate away from its planned monthly production increases, although the group finally agreed on larger supply increases for July and August, whilst also allowing for a 100Mbbls/d supply increase over September. And with hindsight, it seems as though OPEC+ made the right decision not to give in to pressure to increase output more aggressively, given the market is expected to be in a more comfortable state for the rest of the year. However, regardless of the state of the market, OPEC members have very limited capacity to increase output significantly more. The group has failed for almost the last 12 months to hit its production target, with a number of producers having faced disruptions or simply not having the capacity to increase output further. Spare capacity within the OPEC-10 (excludes Iran, Libya and Venezuela) stands at around 2.7MMbls/d and is in the hands of a few. Saudi Arabia and the UAE hold more than 80% of this spare capacity. Shrinking spare capacity leaves the market more vulnerable to supply disruptions OPEC struggles to hit output targets Source: OPEC, IEA, ING Research SPR releases coming to an end The SPR releases that we have seen from the US this year have helped the oil market. With 1MMbbls/d of crude being released, it has limited the drawdown in commercial crude oil inventories in the US. Had we not seen these SPR releases, commercial inventories would have been significantly tighter. However, the releases are set to continue only until the end of October. Therefore, there is the potential that from November we start to see some sizeable drawdowns in US commercial inventories. And given that US inventories are more visible to the market, this could provide some support to prices. US draws down strategic petroleum reserves Source: EIA, ING Research Iran a key downside risk to the market Iranian nuclear talks have been on and off for the last 18 months. However, the potential for a deal is looking more promising. The EU has provided its proposal for a nuclear deal with the US and Iran, and up until now there has not been a rejection by either party – although the Iranians have said that the US will need to show some ‘flexibility’. If we were to see a deal and the eventual lifting of sanctions, there is the potential for a significant increase in supply from Iran. Over time Iran would be able to increase production by around 1.3MMbbls/d, which would help ease the tightness that is expected over the second half of 2023. While in the short term, it will be able to boost exports from crude held in storage, and so could put some pressure on prices in the short term. Despite the more positive tone around a deal, we are still assuming in our balance sheet that we do not see an increase in Iranian supply. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Short-term analysis - Euro to US dollar by InstaForex - 31/10/22

Eurozone: Retail Sales Rose Because Of Increased Food And Fuel Consumption

ING Economics ING Economics 05.09.2022 14:30
The small increase in retail sales at the start of the third quarter brings little optimism about the outlook. Increased food and fuel spending masked a decline in sales for all other items. Expect consumption to decline from here on due to the purchasing power squeeze that the eurozone is going through Eurozone retail sales in July Retail sales increased by 0.3% in July, which is small enough for this uptick to be in line with the downward trend seen in recent months. The peak in retail sales was in November and sales in July were about 2.5% below that level. Food and fuel caused the small increase in July as all other items saw a decline of -0.4% in terms of sales volumes. A strong increase in Germany and the Netherlands masked declines in the other large eurozone markets. Don’t expect this to be the start of a sustained upturn in sales. The outlook remains rather bleak for the months ahead as real incomes go through an unprecedented squeeze due to high inflation and lagging wages. We expect consumption to contract for the coming quarters on the back of this. For the European Central Bank though, it is definitely no smoking gun for the start of a contraction. With the September meeting coming up and October of course not long after, the doves are looking for clear evidence that the economy is moving into contraction territory. Today’s data will, in that sense, not be of much help. Still, evidence of a recessionary environment is likely to become more apparent as new data comes in. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Time For Sustainable Aviation Fuels (SAFs)

Time For Sustainable Aviation Fuels (SAFs)

ING Economics ING Economics 29.11.2022 14:22
It’s a pivotal time for sustainable aviation fuels (SAFs). Demand depends heavily on regulation and airline commitments, and blending is just starting off. But on the back of progressive target-setting for 2030, demand is about to accelerate. And this is necessary to curb and reduce net emissions, with airline traffic rebounding post-Covid In this article Drop-in fuels with four main production routes and multiple feed stocks Zero-emission aircraft not yet on the horizon in commercial aviation Multiple reasons why the aviation sector can’t wait for new zero-emission aircraft technology and need SAFs Emissions from long haul flights and short term progression make SAFs crucial for decarbonisation Global and government targets drive the uptake of SAFs ICAO net-zero aspiration promising for pushing decarbonisation and SAF Governments pursue a green recovery with setting blend targets for 2030 National targets of several European countries exceed the EU’s goals US might take-over the lead from Europe in pushing SAFs Sector initiatives set a voluntary standard, but show strategic commitment Corporate clients’ climate commitments increasingly makes sense as the green premium needs to be paid       SAFs may only seem a bridge solution for reducing net carbon emissions in aviation, but aviation is one of the hardest to abate sectors and new technologies won’t be mature anytime soon. SAFs offer the opportunity to reduce net emissions significantly and can ultimately be produced synthetically and almost free of emissions. Public authorities, airlines, and corporate customers increasingly push for SAFs, and they are approved as fuel under the global carbon offset and reduction scheme CORSIA. Global blending is still fractional at less than 0.1%, but acceleration is in progress and ambitions push for upscaling in the coming years, with the first target in Europe for 2025. SAFs are still significantly more expensive. The US now provides incentives to drive production higher as part of the inflation reduction act. Incentives in other regions, as well as commitments to set in stone SAF targets from the global authority, the International Civil Aviation Organization (ICAO), could help support uptake.        Four main production routes of SAFs with net CO2 reductions from 70% to nearly 100% ING Research based on multiple sources Drop-in fuels with four main production routes and multiple feed stocks Sustainable aviation fuel is jet fuel from a qualified renewable source which can be used by blending it into conventional jet fuel. SAFs require certification to be blended. The current maximum certified blend is 50%, but trials have been executed with a 100% usage of SAF, which is expected to be authorised in due course. Of the four main production routes we distinguish, three are bioSAFS and one is synthetic (in this report we exclude direct combustion of liquid hydrogen). The extent to which a SAF reduces emissions depends on the lifecycle emissions profile of feedstock, considering production, transportation, and combustion. CO2 emissions of global aviation have continued to grow over the last decade CO2 emissions of global aviation in MT IEA, ING Research   The aviation sector is responsible for 2% of global greenhouse gas (GHG) emissions, but emissions have grown rapidly, and aviation is one of the hardest to abate sectors because of the required propulsion power and the importance of weight. The real climate impact (based on effective radiative forcing) could be larger due to emissions high in the atmosphere. The pandemic led to a temporary drop in emissions, but global airline demand is expected to recover from the pandemic before 2025 and will continue to grow at an annual pace of around 3-3.5% over the next few decades[1]. Consequently, emissions will barely come down. Despite efforts by the sector, the share of aviation’s CO2 emissions in the International Energy Agency's (IEA’s) net-zero emission scenario is expected to exceed 8% by 2040. This emphasises that change is required, in the short and long run. [1] Based on multiple sources including: IEA, IATA, ICCT Aviation's share of global emissions will rise significantly, even when including SAF blending CO2 emissions of global aviation as % of (expected) global total emissions in the IEA's net-zero emission scenario (including an increasing blend of SAF) IEA, ING Research Zero-emission aircraft not yet on the horizon in commercial aviation Many articles and reports have been published about the future of flying, often suggesting that electric propulsion is already within reach. On the other hand, Airbus has explored direct hydrogen propulsion and announced plans to bring this aircraft concept for commercial purposes to the market in 2035. But technical ability doesn’t automatically mean the concept will be scalable and feasible to replace current commercial aircraft operations in the short run. The energy density of batteries and hydrogen, possible lower expected speed, required spare capacity and not least extremely high specific safety standards pose a real challenge. "Zero-emission" flights powered by batteries or pure hydrogen might eventually be able to execute short-haul (regional) flights over the course of the next decade, but an efficient and commercially-viable zero-carbon alternative for current long-haul flights is not yet on the horizon. This builds the case for using SAFs and there are more reasons.  Multiple reasons why the aviation sector can’t wait for new zero-emission aircraft technology and need SAFs The largest part of total GHG emissions in aviation comes from long-haul flights, with hardly any alternatives. Safety always comes first in aviation. Together with technological complexity, this means future generation "zero-emission" aircraft will require billions in research and development and a long and time-consuming certification process with many years of preparatory testing.   Airbus and Boeing have introduced a range of new-generation aircraft over the last decade and research and development cycles easily exceed a 10-year timeframe. Moreover, manufacturers still have extensive order books, with production backlogs running up to seven to eight years. The aircraft market is an oligopoly with Boeing and Airbus as dominant manufacturers. Challengers may disrupt the market, but given their power it’s likely that the incumbents will retain a dominant influence. An important point in this regard is that the development and ultimately successful introduction of a new commercial aircraft requires massive capital investments.     Fleet replacement is slow and manufacturers currently face production constraints. Most of the current installed fleet will still be in operation in the 2030s. The aviation sector needs a solution that enables the current fleet to operate with lower net emissions and SAFs used as a drop-in fuel. Extra storage facilities at airports may be required, but regular infrastructure and current aircraft can be used, which is a major advantage that avoids massive capital loss. Emissions from long haul flights and short term progression make SAFs crucial for decarbonisation In practice, around 80% of global CO2 emissions emerge from flights travelling more than 1,500km, and in Europe around 50% of CO2 emissions are represented by long-haul flights of more than 4,000km (EASA). In several parts of the world including the US and Australia, these long-haul flights are even more important. For physical, security and economic reasons, a technology switch in commercial aviation is not within reach and this bolsters the case for sustainable aviation fuel. The three main short-term directions to decarbonise aviation are: 1. Fleet renewal/replacement by new generation aircraft. 2. More efficient operations. 3. Blending SAFs. Fleet renewal and efficiency gains can contribute significantly to emission reductions, but SAFs are supposed to make the most difference in the medium term.  Global and government targets drive the uptake of SAFs The production of SAFs is still 1.75-4.5 times as expensive as conventional jet fuel, depending on the type of SAF (REfuel aviation, EC). In most cases, customers are not willing to pay the (full) green premium on a voluntary basis. Research by ACM in The Netherlands showed that just over a third of customers are willing to pay for lower net CO2 emissions and just 10% have done so previously. Early-moving airlines take on responsibility, but a level playing field is required to push up consumption of SAFs and create economies of scale in production to bring down prices. Therefore, regulation is a critical support factor. This can either be done by taxing conventional kerosene (and redistributing the gains for decarbonisation) or subsidising SAFs. Drivers of blending sustainable aviation fuel (SAF) – ambition framework 1ICAO net-zero aspiration promising for pushing decarbonisation and SAF Aviation is a sector with a global level playing field, therefore compelling policies ideally have a global scope. Due to regional differences and varying interests, ICAO struggled for a long time to agree upon climate targets aligning with the Paris agreement. After years of deliberation, in October of this year, ICAO finally succeed in adopting a net-zero emission target by 2050. This was a milestone achievement which shows support for increased production and blending of SAFs. The general ICAO goal is aspirational, and the decarbonisation pathways and solutions are still to be developed, but it’s a signal and call to action. ICAO backs SAF and it seems reasonable to align with the ambitions of the airline association IATA. Implementation of ambitious global targets by ICAO would be most effective to push up SAF consumption.  Governments and sector representatives posed ambitious SAF blend targets for 2030 SAF blend mandates and targets for 2030 in % of total jet fuel consumption Multiple sources, ING Research 2Governments pursue a green recovery with setting blend targets for 2030 Government policies are the most direct regulatory drivers of SAFs. The past two years have been pivotal for increased urgency and ambitions, which led to pledges. Although the aviation sector went through an unprecedented crisis with steeply dropping passenger volumes over the pandemic, it has also been a catalyst for attempts to "build back greener" as the UK government called it. The EU already wants the blend to reach a level of 2% in 2025, which means consumption volumes will have to increase considerably in the years to come. Governments of larger advanced economies set targets to blend 5-15% of SAFs by 2030. National targets of several European countries exceed the EU’s goals The European Commission still takes a relatively conservative approach in setting its SAF targets. Several other European countries have already established goals that are more ambitious than the EU’s 5% mandate for 2030, although European Parliament seeks to raise this target to 8%. Several member states including The Netherlands, Sweden and Finland also adopted a more aggressive approach for this decade by aiming for 14-30%. The UK aims for a 10% blend of SAFs by 2030 and Norway aims for 30%. US might take-over the lead from Europe in pushing SAFs The US has also introduced its SAF strategy as part of its inflation-busting act, with an absolute production target of three billion gallons of SAF in 2030. Based on expected jet fuel consumption, this comes down to some 15% of total usage, and the ultimate goal is to replace the full 100% of future jet fuel consumption with SAFs. The US targets surpass the European ambitions in the medium term, as the EU forecasts a 2% blend in 2025 based on its REfuel Aviation plan, but a less aggressive path afterwards. However, the European ambitions also included a sub-target for synthetic fuels[2]. In addition, the US is offering a tax incentive of $1.25-1.75 per gallon of SAFs to push up production, which is critical for the fuels’ uptake. While Europe is generally leading in climate regulation, and may still choose to impose accompanying support or taxation measures and raise its targets later on, SAF production could grow at a faster pace in the US, at least this decade. [2] As part of the general targets, Europe seeks to stimulate the development of synthetic SAF by setting sub-targets for the blend composition from 2030 (0.7%, increasing to 28% of the total blend – some 45% – by 2050). Decarbonisation ambitions also rely on massive future growth of SAFs SAF blend target development per stakeholder in % of total jet fuel consumption EC, US Gov, IATA, ING Research 3Sector initiatives set a voluntary standard, but show strategic commitment Sustainability targets from airlines are an additional driving force from the private side. Global branch IATA adopted its net-zero 2050 target in 2021 and published its SAF strategy which aims for a 6% blend by 2030 and a 65% blend by 2050. Within the World Economic Forum, a significant number of airlines, airports, producers, original equipment manufacturers (OEMs) and corporate buyers teamed up in the "Clean skies for tomorrow" initiative in 2021, which focuses on accelerating SAF development in order to reach a 10% blend by 2030. In 2020, a group of airlines joined forces in the One World group to develop a SAF supply network. The largest European airline in passenger numbers – Ryanair – didn’t sign up for the collective initiative, but nevertheless aims for a 12.5% SAF blend by 2030. Altogether, the number of airlines to adopt SAF targets has grown from just one (KLM) in early 2020 to more than 30 airlines in 2022, which shows a major acceleration in commitment. 4Corporate clients’ climate commitments increasingly makes sense as the green premium needs to be paid {content} TagsNet zero Fuel Emissions Air travel Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
There Will Probably A Rally Today And For The Remaining Two Weeks Until The End Of The Year

Available Global SAF Capacity Will Increase Fivefold In 2023

ING Economics ING Economics 29.11.2022 14:32
Blending sustainable aviation fuels (SAFs) needs to grow massively to meet ambitions for 2030 and beyond. Demand is there, but supply is limiting uptake. Ramping up capacity investments is critical to meet the aspired goals. Airlines (purchase grants) and suppliers (production, delivery) have a joint role here, but more policy support will help In this article SAF supply is the critical factor to reach the targets Not on track yet – blending goals require much more SAF-production locations The US is taking the lead in developing SAF production capacity SAFs gain from scaling, but will continue to trade at a premium Using SAF will eventually push up airline ticket prices Increased climate awareness leads to scrutiny of SAF feedstocks Synthetic SAF is expected to be the accelerator from 2030 onward       Ambitions and goal-setting for using sustainable aviation fuel (SAF) by authorities and governments, as well as airlines and corporates, have gained traction over the last two years. This created the conditions for the take-off of SAFs from the demand side. But what is the current state of play in supply? What are the critical factors and what is expected in terms of growth?   Global jet fuel demand expected to recover and continue to increase The global consumption of conventional jet fuel by commercial airlines totalled 360 billion litres in 2019, according to the trade association IATA. Consumption dropped following the Covid-19 pandemic, but airline activity is expected to recover and fuel burn is bound to exceed pre-pandemic consumption levels again by 2025. Over the following decades, an average annual global growth of passenger aviation (RPK) of around 3-3.5% is estimated. Operational efficiency measures (such as in taxiing, flight and arrival optimalisation) and aircraft replacements are likely to offset a significant part of the additional fuel consumption, but not all. So annual jet fuel consumption is expected to continue increasing. Given the lack of mature and commercially viable low-carbon technologies, this means aviation will rely heavily on SAFs to pave the way for decarbonisation over the next two decades. SAF production and delivery on the brink of acceleration SAF production capacity per year in billion litres based on publicly-announced intentions BNEF, ING Research   SAF production to reach 1% of jet fuel consumption in 2023 and almost 3% in 2026 The usage of SAFs has been under discussion for quite a while, but on a global scale production hasn’t made a large difference yet. That’s about to change, though. If all publicly-announced initiatives to start and expand production by the summer of 2022 come to fruition, available global SAF capacity will increase fivefold in 2023 and continue to rise in the years after. Production capacity could reach a 1% share of global consumption in 2023, more than 2% in 2025 and nearly 3% by 2026. SAF supply is the critical factor to reach the targets Despite the higher costs of SAF, supply is currently still the most critical factor to secure further uptake. The investment case requires long-term cooperation and commitment between airlines, manufacturers (like Neste, Gevo and World Energy) and distributors (like SKY-NRG – which also develops production partnerships – and World fuel services). Planning and development of production facilities can easily take several years before delivery starts off. This means 2030 targets are already around the corner. Much more production is required to reach ambitious targets for 2030 Development global SAF capacity based on publicly-announced intentions and future blend ambitions Not on track yet – blending goals require much more SAF-production locations Although SAF production is about to accelerate, 2030 targets from IATA (6%) and the corporate initiatives Clean skies for tomorrow and One world group (10%) require more progress, especially when taking into account the expansion risks, such as project delays. The industry targets require strong growth, but they still fall short of what IEA deems necessary for a global net-zero scenario pathway. This implies we’re just at the start of the required surge and we face a long haul to push growth. Market analysts estimate that ultimately 5,000-7,000 SAF facilities may be required to achieve the global SAF blending goals of the aviation industry by 2050 (ATAG/ICF).   Global challenge is also a regional challenge – locations availability at airports is key There’s also a regional puzzle of supply and demand as airlines are dependent on available SAFs at local airports. This means supply networks will need to be unrolled and developed. Currently, SAF supply in the US is concentrated in San Francisco and Los Angeles, and in Europe it is mostly at Amsterdam-Schiphol, London Heathrow, as well as Scandinavian airports, whereas supply at the Asian hubs Singapore and Hong Kong is expected shortly. Local production and diversification are obviously crucial to fueling airline aircraft with more SAF and avoiding long lead times. Europe and US take the lead in SAF production capacity, Asia follows SAF capacity per year in billion litres per region based on publicly-announced intentions BNEF, ING Research The US is taking the lead in developing SAF production capacity European market players seemed to be most ambitious in developing SAFs, but the US now leads the way thanks to efforts made by the Biden administration in the US. America has adopted a different approach to Europe’s demand targeting by subsidising $1.25-1.75 per gallon of bioSAF ($0.33-0.46 per litre) and stimulating supply. Production capacity in the US is expected to surpass Europe’s potential in 2023 or 2024. Examples of recent agreements include Aemetis's delivery to eight members of the One World group at San Francisco Airport. The Asian-Pacific region falls behind despite air travel in Asia expanding at the highest pace over the last decade, and it will continue to do so post-pandemic.    SAFs gain from scaling, but will continue to trade at a premium SAFs production entails significantly higher costs than conventional jet fuel. Based on WEF figures and a fixed production cost of $600 per MT (which is relatively low but still provides a relevant comparison), we have detailed the relative cost ranges for the four distinguished eligible SAF production pathways over time. As a result of economies of scale, production costs are expected to come down significantly in the following decades. But they are unlikely to drop below conventional jet fuel before 2050. This means SAFs will keep trading at a premium, leading to higher fuel costs for flights fueled by SAF blends, as well as higher ticket prices.    HEFA is the cheapest production option, but ultimately synthetic SAF is expected to be most competitive Development of production costs per SAF route (upper and lower boundary) as multiple of jet fuel WEF, ING Research   HEFA is most competitive, but ultimately synthetic SAF is expected to be the most cost-efficient The HEFA production route which has bio-oils and recycled fats as feedstocks (bioSAF) is the most mature and most competitive, with an estimated price range of 1.8-2.7 the cost of conventional jet fuel. The other biogenetic pathways are still significantly more costly at this point. Synthetic SAF currently has the largest cost range, depending on the production costs of hydrogen and the origin of carbon (waste sources, direct carbon capture). With the expected global surge in green energy supply, the costs are expected to drop below the bioSAF in the long run. Most cost efficient HEFA is dominant, but other SAFs are increasingly needed as well to supply sufficient SAF Forecasted SAF capacity per year in billion litres per technology based on publicly-announced intentions BNEF, ING Research   HEFA dominates, while the development of other SAF pathways is also needed to meet future demand HEFA is the cheapest pathway for SAF and is also expected to represent the vast majority of global production this decade. Availability of feedstocks enables HEFA production to expand towards 2030, but expanding bioSAF will increasingly need to be accommodated by alternative feedstocks like cellulosic (paper) and municipal waste (MSW). For the US, feedstock from fats and oils (HEFA) won’t be enough to meet SAF demand. Other production methods are technically feasible but more expensive. Nevertheless, feedstock availability, increasingly stringent requirements, as well as regional differences leave little choice. Development and upscaling of Alcohol to Jet (AtJ), Gassification+FT as well as synthetic SAF are also required to meet future demand. Using SAF will eventually push up airline ticket prices The fuel cost for airlines usually varies between 15-30% of operating costs. Assuming a 25% fuel cost share, an average SAF blend of 10% in 2030 would push total operational costs up by 2.5-5%. For a ticket from London to New York, this initially means an increase of some €15-25. After 2030, the step up in blending rates will push fuel costs up further, despite the expected price decrease. In the low margins airline industry, this will quickly be reflected in higher ticket prices.  Increased climate awareness leads to scrutiny of SAF feedstocks With respect to decarbonisation efforts, corporate sustainability actions are increasingly under scrutiny. The Science Based Target Initiative (SBTI) approach is also increasingly used as a reference. This may not only lead to a shift away from carbon offsets but also encourage the shift to more advanced SAF feedstocks. Sustainability-linked loans with SAF targets have also been introduced. Palm oil blends are already controversial because of deforestation, but the use of (by)products of food crops like corn for SAF (alcohol to jet fuel) will have adverse effects on food or feed supply chains and this might also push up food prices. In the EU, there’s a push for the use of advanced feedstocks and the European Commission also considers a cap on waste oil feedstocks and focuses on more advanced waste and residual sources. But limited availability also leads to tensions. In the US, corn is still seen as an important source for bioSAF going forward.   CO2 reduction potential ranges of the SAF pathways ING Research   Large contribution from synthetic SAF needed to maximise decarbonisation The aviation sector is expected to require hundreds of billions of litres of SAF in 2050. At the same time, demand for biofuels and bio feedstocks from sectors including road transport, shipping and the chemical industry is also increasing. On a global level, an estimated 41-55% of SAF could potentially be provided from biogenic origin. In Europe, bio feedstock supply for SAF is expected to lack ambitions from 2035 onward. This means the remainder should eventually be provided by synthetic fuels. Synthetic SAFs also have the highest potential for decarbonisation when using (almost) 100% green electricity. However, producing synthetic SAFs is energy-intensive and requires more electricity than it contains. It requires large areas of land or sea to produce and intensified competition with other sectors is expected. Consequently, synthetic SAF will depend on the availability of sufficient green energy to convert into the required green hydrogen. Synthetic SAF is expected to be the accelerator from 2030 onward In Europe, several low-volume production facilities for synthetic SAFs (including in the Netherlands and Sweden) are planned to come online between 2025 and 2030. The EU already includes a sub-mandate for synthetic SAFs as part of general targets, which starts at 0.7% of total fuel consumption in 2030, increasing to 28% in 2050. In the US, the introduced production subsidies currently only apply to bioSAFs.   Generally, the rise of synthetic SAF requires a significant reduction in the three cost drivers: green energy, electrolyser technology and direct air capture – and this takes time. Once the global availability of green energy has expanded significantly and the production of synthetic SAF can be scaled, the production costs of synthetic SAF are expected to come down. Eventually (in 2050) synthetic SAF is also expected to be the cheapest option.   Some regions have a competitive edge in producing synthetic SAFs The success of SAFs also has a regional element to it, as previously explained. Countries with an abundance of solar energy and space such as Australia, and Saharan countries, as well as European countries like Spain, could benefit from a competitive advantage as locations for the future production of synthetic SAF as low renewable energy costs are a critical pillar of the business case.   Corporate cooperation required to accelerate SAF supply, more policy support would help SAFs have higher production costs and trade at a premium. Imposing mandatory global blending rates enforced by ICAO would probably be most effective to ramp up supply, although that's not easy to achieve. From a market perspective, subsidies for scaling up production, such as in the US, could improve the business case and push up investments in global supply in the short run. Pricing emissions on a global scale can generally be an efficient measure to structurally improve the market position of SAFs, especially if revenues are (partially) redistributed for decarbonisation. ICAO's CORSIA programme takes a start by increasing obligations for carbon offsets, but only from 2027 and it’s not yet clear how this will eventually play out for the SAF market. In Europe, continental flights are already subject to the European emission trading scheme (ETS), but due to free allowances the impact is currently still limited. Thus, policy changes to support and speed up SAF supply are possible. Demand for SAFs is already there, but supply needs to catch up with the blend ambitions in the coming years. Viable alternative technologies in commercial aviation are still a long way off and SAFs, therefore, have a critical role in emission reductions. Manufacturers, distributors, airlines and corporate users are challenged to team up to develop and secure even more SAF supplies and more policy support can be helpful. TagsSustainability Fuel Air travel Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

currency calculator

Komentarze rynkowe

JingRen
A Breakthrough! Japanese Yen (JPY) Helped By Data, Australian Dollar (AUD) Went Up Post Retail Sales Print
Jing Ren
KamilaSzypuła
ECB Will Continue To Hike Rates To Slow Inflation?
Kamila Szypuła
RebeccaDuthie
Euro To US Dollar Index Falls - Touching Levels Not Seen In 20 Years
Rebecca Duthie
KamilaSzypuła
Interest Rates Hiked. The Most Important Indicators Continue Their Downward Trend
Kamila Szypuła
RebeccaDuthie
Russia Suspends Flow Through The Nord Stream 1 Pipeline, Cotton Futures, Gold Prices Increase For The First Time In 3-weeks
Rebecca Duthie
AlexKuptsikevich
How Have BTC And ETH Performed Recently? Cryptocurrencies: Market Cap Increased Slightly, Telekom And Telefonica "Flirting" With Digital Assets
Alex Kuptsikevich
InstaForexAnalysis
This Week USD May Be Fluctuating! Euro To US Dollar - Technical Analysis And More - 10/10/22
InstaForex Analysis
INGEconomics
US Stocks: S&P 500 And Nasdaq Decreased Slightly Yesterday Losing 0.33% And 0.09% Respectively
ING Economics
AlexKuptsikevich
According to Bloomberg's survey Bitcoin may be trading between $17.6K and $25K
Alex Kuptsikevich
KamilaSzypuła
The Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar
Kamila Szypuła
KamilaSzypuła
BMW Was Fined 30,000 Pounds By CMA, Google Wants To Become More Productive
Kamila Szypuła
AlexKuptsikevich
Until FOMC meeting on December 14th, there could be no other catalyst for markets
Alex Kuptsikevich
AleksStrzesniewski
What’s more worrisome is the fact that we will continue to learn of all of the contagion and aftereffects of the FTX collapse in the coming weeks and months.
Aleks Strzesniewski
JingRen
Euro: 50bp rate hike is on the cards, but ECB decides shortly after Fed...
Jing Ren
AleksandrDavidov
Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%
Aleksandr Davidov
AleksandrDavidov
From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level
Aleksandr Davidov
FranklinTempleton
According to Franklin Templeton global stocks' performance may be better than global bonds
Franklin Templeton
INGEconomics
Did you know that in October average gas price was 4.3 times higher than in 2019?
ING Economics
IpekOzkardeskaya
Fed Chair Powell bears in mind inflation prints, but they seem to be insufficient for FOMC
Ipek Ozkardeskaya
IntertraderMarket News
Tesla (TSLA) sank a further 2.58% after Goldman Sachs lowered its price target on the stock
Intertrader Market News
CraigErlam
European Central Bank is expected to go for a less hawkish hike, but economic projections may be worth even more attention
Craig Erlam
AlexKuptsikevich
Switzerland: National Bank goes for a 50bps rate hike. Swiss inflation slowdown is impressing
Alex Kuptsikevich
INGEconomics
Analysts expect ECB to deliver two 50bps hikes in the first quarter with a chance of one more in Q2
ING Economics
INGEconomics
Sterling to euro exchange rate is expected to hit 0.89 in the first quarter of 2023
ING Economics
Crypto.comAccelerate the...
There is a chance Apple may let users install apps from outside the App Store boosting NFT
Crypto.com Accelerate the...
CraigErlam
Craig Erlam talks euro against US dollar amid central banks decisions
Craig Erlam
IntertraderMarket News
Netflix (NFLX) slumped 8.63%, as a media report said the video streaming firm is refunding advertisers after missing views targets
Intertrader Market News
GecoOne
Geco.one COO says Bitcoin reaching $250K in 2023 is considered as impossible by other analysts as BTC does not exceed $60,000
Geco One
EnriqueDíaz-Álvarez
Bank of England decision wasn't unanimous as one member voted for a 75bp hike with two other opting for inaction
Enrique Díaz-Álvarez
INGEconomics
Indonesia is the world's 6th largest bauxite producer. Country bans commodity export from June 2023
ING Economics
InstaForexAnalysis
Gold supported by, among others, changes on Japanese bond market, may end the year trading at a 4-month high
InstaForex Analysis
DanielKostecki
China reopens, Texas freezes - crude oil has to face contrasting factors
Daniel Kostecki
IntertraderMarket News
European stocks closed mixed. The DAX 40 fell 0.50%, the CAC 40 declined 0.61%, while the FTSE 100 rose 0.32%
Intertrader Market News
IpekOzkardeskaya
China's reopening seems to be a double-edged sword as energy and commodities prices will go up
Ipek Ozkardeskaya
INGEconomics
Auto production and general machinery increased significantly. South Korea Industrial Production as a whole gained 0.4%
ING Economics