The World Now Has $13 Trillion of Debt With Below-Zero Yields

https://www.bloomberg.com/news/articles/2019-06-21/the-world-now-has-13-trillion-of-debt-with-below-zero-yields?utm_campaign=socialflow-organic&cmpid%3D=socialflow-twitter-markets&utm_medium=social&utm_content=markets&utm_source=twitter

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The universe of negative-yielding bonds grew about $1.2 trillion this week after dovish messages from central banks in Europe and the U.S., pushing the total past $13 trillion for the first time.

Joining the club of government debt with 10-year yields below zero this week were Austria, Sweden and France. Japanese and German rates plumbed fresh all-time lows amid a global bond rally that even got Wall Street pondering life with Treasuries yields under 1%.

“The message from the markets is that there are problems out there that central banks, not just the Fed, are now responding to,” Ed Hyman, Evercore ISI chairman, told Bloomberg TV.

In Europe, another notable milestone was reached this week. Yields on Danish debt due to mature 20 years from now dropped to a record low, leaving the entire curve within an inch of turning negative. Some 40% of global bonds are now yielding less than 1%, according to data compiled by Bloomberg.

It’s not just sovereign debt. In the investment-grade market, negative-yielding debt now comprises almost a quarter of the total. And as companies take advantage of low interest rates to borrow more, issuance has helped drive junk bonds outstanding to more than $1.23 trillion, more than double the level a decade ago.

Whether the universe of negative-yielding debt continues to expand depends in part on the policy of the European Central Bank under Mario Draghi’s successor and upcoming moves from the Bank of Japan, the two regions making up the overwhelming bulk of sub-zero yields. Countries to watch include Belgium, teetering on the brink with a 10-year rate of 0.08%. And Spain, at about 0.39%.

Bloomberg’s calculations of total global negative-rate bonds date to January
2017; monthly tallies prior to that indicate that the stockpile is now at a record.

— With assistance by Ruth Carson, Phil Kuntz, and Garfield Clinton Reynolds

India, China, US see 70% rise in energy demand: IEA

https://economictimes.indiatimes.com/industry/energy/power/india-china-us-see-70-rise-in-energy-demand-iea/articleshow/68577366.cms?from=mdr

f the rate of the period between 2014 and 2016.

China, the US and India together accounted for nearly 70 per cent of the rise in energy demand, even as such demand worldwide grew by 2.3 per cent last year, at its fastest pace this decade, the International Energy Agency (IEA) said on Tuesday. 

This exceptional rise in energy demand was driven by a  .. 

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Global energy demand rose by 2.3% in 2018, its fastest pace in the last decade

https://www.iea.org/newsroom/news/2019/march/global-energy-demand-rose-by-23-in-2018-its-fastest-pace-in-the-last-decade.html

Energy demand worldwide grew by 2.3% last year, its fastest pace this decade, an exceptional performance driven by a robust global economy and stronger heating and cooling needs in some regions. Natural gas emerged as the fuel of choice, posting the biggest gains and accounting for 45% of the rise in energy consumption. Gas demand growth was especially strong in the United States and China.

Demand for all fuels increased, with fossil fuels meeting nearly 70% of the growth for the second year running. Solar and wind generation grew at double-digit pace, with solar alone increasing by 31%. Still, that was not fast enough to meet higher electricity demand around the world that also drove up coal use.

As a result, global energy-related CO2 emissions rose by 1.7% to 33 Gigatonnes (Gt) in 2018. Coal use in power generation alone surpassed 10 Gt, accounting for a third of total emissions. Most of that came from a young fleet of coal power plants in developing Asia. The majority of coal-fired generation capacity today is found in Asia, with 12-year-old plants on average, decades short of average lifetimes of around 50 years.

These findings are part of the International Energy Agency’s latest assessment of global energy consumption and energy-related CO2 emissions for 2018. The Global Energy & CO2 Status Report provides a high-level and up-to-date view of energy markets, including latest available data for oil, natural gas, coal, wind, solar, nuclear power, electricity, and energy efficiency.

Electricity continues to position itself as the “fuel” of the future, with global electricity demand growing by 4% in 2018 to more than 23 000 TWh. This rapid growth is pushing electricity towards a 20% share in total final consumption of energy. Increasing power generation was responsible for half of the growth in primary energy demand.

Renewables were a major contributor to this power generation expansion, accounting for nearly half of electricity demand growth. China remains the leader in renewables, both for wind and solar, followed by Europe and the United States.

Energy intensity improved by 1.3% last year, just half the rate of the period between 2014-2016. This third consecutive year of slowdown was the result of weaker energy efficiency policy implementation and strong demand growth in more energy intensive economies.

“We have seen an extraordinary increase in global energy demand in 2018, growing at its fastest pace this decade,” said Dr Fatih Birol, the IEA’s Executive Director. “Last year can also be considered another golden year for gas, which accounted for almost half the growth in global energy demand. But despite major growth in renewables, global emissions are still rising, demonstrating once again that more urgent action is needed on all fronts — developing all clean energy solutions, curbing emissions, improving efficiency, and spurring investments and innovation, including in carbon capture, utilization and storage.”

Almost a fifth of the increase in global energy demand came from higher demand for heating and cooling as average winter and summer temperatures in some regions approached or exceeded historical records. Cold snaps drove demand for heating and, more significantly, hotter summer temperatures pushed up demand for cooling.

Together, China, the United States, and India accounted for nearly 70% of the rise in energy demand around the world. The United States saw the largest increase in oil and gas demand worldwide. Its gas consumption jumped 10% from the previous year, the fastest increase since the beginning of IEA records in 1971. The annual increase in US demand last year was equivalent to the United Kingdom's current gas consumption.

Global gas demand expanded at its fastest rate since 2010, with year-on-year growth of 4.6%, the second consecutive year of strong growth, driven by higher demand and substitution from coal. Demand growth was led by the United States. Gas demand in China increased by almost 18%.

Oil demand grew 1.3% worldwide, with the United States again leading the global increase for the first time in 20 years thanks to a strong expansion in petrochemicals, rising industrial production and trucking services. 

Global coal consumption rose 0.7%, with increases seen only in Asia, particularly in China, India and a few countries in South and Southeast Asia.

Nuclear also grew by 3.3% in 2018, with global generation reaching pre-Fukushima levels, mainly as a result of new additions in China and the restart of four reactors in Japan. Worldwide, nuclear plants met 9% of the increase in electricity demand.

Correction: The originally published version of this press release stated that coal accounted for one third of the increase in CO2 emissions last year. This has been corrected to clarify that coal accounted for one third of total CO2 emissions last year.

A Morgan Stanley reading on the economy collapses by the most ever

https://www.cnbc.com/2019/06/13/a-morgan-stanley-reading-on-the-economy-collapses-by-the-most-ever.html

Norway Deals a Blow to an Oil Industry That's Quickly Losing Friends

https://www.bloomberg.com/news/articles/2019-03-08/norway-s-divestment-decision-shows-oil-s-fight-to-keep-investors

The decision of the world’s largest sovereign wealth fund to reduce holdings in oil stocks wasn’t as far-reaching as the industry feared, but dealt a symbolic blow to fossil fuels that will reverberate for energy companies and their investors.

While the divestment by Norway’s $1 trillion fund doesn’t include Big Oil, instead rooting out $7.5 billion of companies that focus purely on exploration and extraction, the impact of the announcement rippled through the sector. Shares of all oil companies initially plunged on the news, suggesting the move sets the industry up for greater disruption.

Selling Out

These are the 10 largest shareholdings affected by Norway's decision

Source: Norges Bank

It’s a bitter taste of the new reality for oil producers, which increasingly have to fight for investor dollars rather than enjoying the perks of being indispensable to the global economy.

“The Norwegian sovereign wealth fund is seen as something of a poster-child amongst sovereign wealth funds,” said Alejandro DeMichelis, director of oil and gas research at Hannam & Partners LLP. “This decision could also trigger other large investors to review their stance toward investing in the oil and gas sector.”

Life is changing for oil companies. Ten years ago, they accounted for about 15 percent of the S&P 500 index. Today, they make up just 5 percent, having been mostly displaced by technology giants such as Facebook Inc. and Apple Inc.

Driving this shift is a smorgasbord of new energy sources that’s bringing unprecedented competition for capital. Consumer choices are set to drift farther from the hydrocarbons of the 20th century, with renewables potentially meeting about a quarter of demand by 2040, according to oil major BP Plc.

It’s no surprise, then, that investors are increasingly questioning the wisdom of betting on oil and gas. A divestment campaign started by activist group 350.org in 2012 has already persuaded funds holding $8 trillion to back away from fossil fuels, according to its website.

Scrutiny could intensify as AGM season approaches. Catherine Howarth, chief executive officer of ShareAction -- a group that has targeted Royal Dutch Shell Plc in the past -- said she expects a “ramp-up” of pressure at annual general meetings that start in the spring.

‘Vulnerable’ Industry

“Institutional investors are withdrawing their capital from oil and gas companies on the grounds that quicker-than-expected growth in clean energy and associated regulation is making oil and gas business models highly vulnerable,” Howarth said in an email.

It’s not only oil companies facing pressure. One of the world’s biggest sellers of coal, Glencore Plc, yielded to investor demands earlier this year by promising to limit production of the fuel and align the business with Paris climate targets. In oil and gas, Shell and BP have made pledges around transparency and climate after facing the wrath of shareholders.

The list of companies to be excluded from the Norwegian fund includes Anadarko Petroleum Corp., Cnooc Ltd. and Tullow Oil Plc. Shale producers like EOG Resources Inc., which extract fuel from the heartland of America’s oil and gas boom, are also included.

Higher Costs

In the longer term, a dearth of capital will push up the cost of borrowing to explore for oil and gas, with those costs likely passed on to consumers, according to Georgi Slavov, head of research at energy broker Marex Spectron. That makes renewables comparatively cheaper, further pushing fossil fuels out of the market.

While Shell, BP and other oil majors were spared in Norway’s decision on Friday, they may yet be earmarked for divestment in the future.

“The country may eventually revisit the issue and target such holdings,” said Rob Barnett, an analyst at Bloomberg Intelligence. In particular, the fund could consider shedding “integrated companies not allocating a portion of their capital spending toward clean energy.”

For those oil companies moving to diversify, there’s light at the end of the tunnel. In its statement, Norway said some of the biggest investments in renewables now come from Big Oil. The fund “should be able to participate in this growth,” the Finance Ministry said.

“While the fund was initially built on revenue from oil and gas, the Ministry of Finance understands that the future belongs to those who transition away from fossil fuels,” said Mark Campanale, founding director of energy researcher Carbon Tracker. “Now is the time for smart investors around the world to follow their lead and make decisions driven by the reality of the energy transition.