OPEC Fails to Boost Oil Supply
Energy Digital reported this last weekend that OPEC was preparing to increase crude oil supply—for which the alliance of oil producing nations accounts for some 40 percent of the international market. However, OPEC ministers this week have been unable to agree upon the terms of boosting supply, and have decided to maintain present output ceilings. The oil conglomerate has stated that they will reconvene over the next three months to readdress a production hike.
The announcement has rocked financial markets that had prepared for a boost in supply, given that just a few days ago OPEC leaders made several comments on the likelihood of a supply increase. Crude oil jumped 1.5 percent to $100.53 a barrel. Energy shares in the Standard & Poor’s 500 Index jumped 0.9 percent. Even Europe was hit hard as the Stoxx Europe 600 Index fell 0.8 percent and German 10-year bond yields fell four basis points to 3.05 percent. The yen gained 1.3 percent versus the Norwegian krone and 1 percent versus the Euro.
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Apparently, the inability of OPEC to reach some kind of decision marks a further division in the oil cartel’s ranks. Analysts covering OPEC note that the indecision marks the possible decline of OPEC as a power player in the realm of international non-governmental organizations. The indecision certainly has failed market speculation expecting a supply hike, and players in world money markets may be less inclined in future scenarios to take OPEC seriously on its claims.
While Saudi Arabia was one of the major proponents in OPEC urging a heightened supply ceiling, opposition, led by Iran, caused the deadlock. Political unrest in Yemen and Libya, which combined account for roughly 4 percent of world production, has led to countries like Saudi Arabia boosting production to fill the market gap. One of the major causes of the deadlock is the fact that other OPEC nations can’t match Saudi Arabia’s ability to increase production.
"Despite all their efforts, the Saudis were not able to convince Iran and other countries to increase production," said Ehsan Ul-Haq, an analyst with KBC Energy Economics. "It means there is a huge disagreement—but it also means that it gives the Saudis free space to do what they like."
OPEC nations are already producing at about 1.3 million barrels per day above their normal quota to meet international demand.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.