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Global investment of $380 billion will flow into solar energy

2023/8/7

At present, the recovery process of the world economy is hindered, the geopolitical situation is evolving rapidly, and the global energy market is undergoing profound adjustments and has withstood unprecedented challenges. In the first half of 2023, with the increase in oil supply and the slowdown in demand from developed economies, the benchmark price of crude oil has fallen back to the level before the Ukraine crisis, and the price of refined petroleum products has also fallen from historical highs. The energy security situation of various countries has eased.

The global energy market has undergone tremendous changes in recent years. The rise of emerging energy sources, the transformation and upgrading of traditional energy sources, and the restructuring of the global energy governance system are profoundly affecting the pattern and trend of the global energy market. Looking forward to the second half of 2023, the impact of the Ukraine crisis will continue, energy commodity prices will continue to fluctuate, and at the same time, the pace of development of renewable energy will further increase. The International Energy Agency (IEA) predicts that renewable energy will cover the expected increase in electricity demand this year and next, and next year renewable energy generation will exceed one-third of the total global electricity supply for the first time.

Reconstruction of Fossil Energy Supply and Demand Pattern

In the first half of this year, in order to maintain the stability of the international oil market, the "OPEC+" formed by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries continued to cut production. At the beginning of October last year, "OPEC+" announced that starting from November 2022, it would reduce monthly production by an average of 2 million barrels per day based on the production in August of the same year. In early April this year, "OPEC+" announced an additional voluntary production cut of 1.66 million barrels per day from May to the end of this year on the basis of the above-mentioned production reduction decision. In early June, "OPEC+" held its 35th ministerial meeting, announcing new production reduction measures to extend oil production cuts until 2024.

On July 3, Saudi Arabia announced that it would extend its voluntary reduction in oil production by 1 million barrels per day until August. Russia also announced that it would cut its daily oil exports to the global market by 500,000 barrels in August in order to ensure market balance. Saudi Energy Minister Abdul Aziz said that Russia and Saudi Arabia will continue to promote strong cooperation and take all necessary measures to support the market. United Arab Emirates Energy Minister Mazrouei also said further production cuts should be enough to help balance the oil market.

While "OPEC+" continues to cut production, the oil supply capacity of oil-producing countries outside "OPEC+" is growing rapidly. The "2023 Oil Market Report" released by the IEA in June shows that oil-producing countries other than "OPEC+" are leading the growth of oil supply capacity. The report shows that from 2022 to 2028, non-OPEC+ oil-producing countries will increase production relatively strongly, leading the medium-term production capacity expansion plan, with an increase in supply of 5.1 million barrels per day, of which the United States and Brazil are the main ones. The Middle East's share of world oil supply continues to rise, rising from 30% in 2023 to 32% in 2028, led by Saudi Arabia and the United Arab Emirates.

In recent years, global oil and gas exploration and development investment growth has been sluggish. Oil and gas companies have always been cautious about expanding upstream investment. However, in the context of the continuous spread of the energy crisis, ensuring sufficient energy supply has become a top priority for all countries, which directly promotes oil and gas upstream exploration and development. Production spending rebounded sharply. According to the "2023 Oil Market Report", global upstream oil and gas investment is expected to increase by 11% in 2023, reaching US$528 billion. If this level of investment is sustained, it will ensure that projected oil and gas demand for the period 2022 to 2028 is met.

From the demand side, the acceleration of global energy transformation will reduce the demand for crude oil, but the demand for crude oil is still resilient in the short term. On July 13, OPEC released a monthly oil market report, predicting that global oil demand will reach an average of 104 million barrels per day in 2024, an increase of 2.25 million barrels per day compared with this year, and an annual growth rate of about 2.2%. The report pointed out that this forecast is based on the strong growth of the global economy next year, especially the continued recovery of the Chinese economy.

The IEA is also optimistic about the demand for crude oil in the coming period. The "2023 Oil Market Report" pointed out that under current market and policy conditions, overall oil consumption is expected to continue to increase from 2022 to 2028 due to the continued growth of the petrochemical industry and air travel. However, as the energy transition continues to advance, the average annual growth rate of global oil demand will slow down in the next few years.

Energy commodity prices continue to fluctuate

The unexpected announcement of production cuts by "OPEC+" in April this year has stimulated a significant rise in international oil prices. However, under the influence of market concerns about the global economic outlook, high inflation, and the tightening of monetary policies by central banks in many major economies, oil prices have since declined. weakening trend. The commodity benchmark S&P Goldman Sachs Commodity Index showed that in the past 12 months ended June 30, the price of energy commodities such as oil and natural gas fell by 23.0%, and crude oil prices have fallen back to the level before the Ukraine crisis.

The price of the energy market is affected by multiple factors. In the short term, supply and demand, geopolitical tensions and seasonal factors can cause price fluctuations. In the long run, the development of new energy technologies, changes in energy policies and environmental factors will determine the trend of energy prices. As the demand for clean energy continues to increase, conventional energy prices may face downward pressure. In addition, technological advances and the internationalization of energy markets may also affect market supply and prices. At present, the inflation rate in Europe and the United States is still high, and the interest rate hike process in the United States and Europe has not yet ended. Global interest rates are still on the rise in the second half of the year, which will drive the global economy to further decline. Under the background of shrinking demand caused by the weakening economy, the price of energy commodities in the second half of the year will still be dominated by a downward trend.

The market has mixed views on the oil price trend in the next few months. Many institutions predict that energy commodity prices will show a downward trend this year. The World Bank released the "Commodity Market Outlook" report at the end of April this year, predicting that energy prices will drop by 26% this year, and the average price of Brent crude oil denominated in US dollars is expected to be US$84 per barrel, down 16% from the average price of the previous year. Morgan Stanley lowered its forecast for Brent crude oil from $77.50/barrel to $75/barrel in the third quarter of this year, and lowered its forecast for the fourth quarter from $75/barrel to $70/barrel. Ed Morse, head of global commodities at Citibank, said that Saudi Arabia failed to persuade all oil-producing countries to take measures to boost oil prices. At the same time, demand in major global consumer markets is weak. It may even fall below $70/barrel.

Many institutions also believe that if the supply in the international crude oil market becomes tighter in the second half of the year, international crude oil prices may further rise. The U.S. Energy Information Administration (EIA) released a short-term energy outlook report in July, showing that the average spot price of Brent crude oil in July is expected to be US$78/barrel, and crude oil prices are expected to rise gradually. In 2023, the price of Brent crude oil will be US$79.34 / barrel, the price of Brent crude oil in 2024 is 83.51 US dollars / barrel. UBS Group reported that good news such as Saudi production cuts will provide support for oil prices in the second half of the year. Oil is still an investment product favored by the market. It is expected that Brent oil prices will be at $95 per barrel by the end of this year. Joseph McMoniger, Secretary-General of the International Energy Forum, said that crude oil demand quickly rebounded to the level before the new crown epidemic, but supply is going through a more difficult period, and supply is difficult to meet demand. International oil prices are expected to rise in the second half of this year.

Acceleration of Energy Structure Transformation

The Ukrainian crisis has had a profound impact on the global energy system, resulting in an impact on global energy supply, followed by energy shortages and rising energy prices, highlighting the importance of an orderly transformation of the energy structure. As a result, governments of various countries have strengthened their strategic layout for energy transition, and the pace of transition to clean energy is accelerating.

The green and low-carbon transformation has continuously injected new momentum into the development of the world economy, and the growth momentum in related fields is obvious. The IEA recently released the "Renewable Energy Market Update" report that due to policy support, rising fossil fuel prices, and active promotion of solar and wind power generation projects, it is expected that the global installed capacity of renewable energy will increase by one-third this year, and the global renewable energy capacity will increase next year. Renewable energy generation will continue to grow and the world is expected to have sufficient solar PV manufacturing capacity by 2030.

The International Energy Agency predicts that this year, global investment of US$380 billion will flow into the solar energy sector, surpassing investment in the oil sector for the first time. The new installed capacity of photovoltaics will account for two-thirds of the new installed capacity of renewable energy this year, and the manufacturing capacity of the photovoltaic industry is expected to more than double to 1,000 GW by 2024. As the wind power projects that were postponed during the epidemic began to advance, the global wind power generation will rebound sharply this year, with a year-on-year increase of about 70%.

However, the energy transition process also faces many challenges. The International Monetary Fund believes that in the process of energy transition, countries need to face four major challenges: energy security, macroeconomic impact, energy transition deployment measures, and key mineral supply chain security. Issues such as the sustainable and inclusive development of clean energy have also attracted people's attention. s concern. At the 8th International Symposium of the Organization of Petroleum Exporting Countries (OPEC) held recently, Haitham Ghais, Secretary-General of OPEC, stated that the sustainability of energy transition lies in balancing the needs of the present and future generations, and properly handling the relationship between development and environmental protection The inclusiveness of energy transition lies in listening to the voices of all parties and recognizing that there are multiple ways to achieve energy transition and address climate change.

As a new engine of the global economy, the new energy market is expected to become an important force to promote sustainable economic development and create a cleaner and greener living environment for mankind. In the context of the restructuring of the global energy governance system, strengthening international energy cooperation, sharing energy resources, promoting energy technology exchanges, optimizing the energy supply structure, and achieving energy complementarity and win-win results are also the proper meaning of promoting global energy development.


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