Oil jumps to two-year high as OPEC and allies reconfirm gradual production increase

Published

4 years ago

June 1, 2021

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The Headquarters of the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna, Austria on 17 December, 2018.

Beata Zawrzel | NurPhoto | Getty Images

LONDON — A group of some of the world’s most powerful oil producers will likely agree to continue increasing their output at a meeting on Tuesday, analysts say, as oil prices climb amid growing optimism over the fuel demand outlook.

OPEC and its non-OPEC partners, an alliance often referred to as OPEC+, will meet via videoconference to discuss the next phase of production policy.

It comes as the Middle East-dominated group, which is responsible for over one-third of global oil production, seeks to balance an expected upswing in demand with the potential for an increase in Iranian output.

OPEC+ announced massive crude production cuts in 2020 in an effort to support prices when the coronavirus pandemic coincided with a historic demand shock.

In April, the group opted to return 2.1 million barrels per day of supply back to the market over the May to July period, reflecting an optimistic outlook for improved mobility despite ongoing concerns about Covid worldwide.

OPEC+ is expected to reiterate this decision to gradually increase output during this week’s meeting.

“I think the event itself is going to be a non-event. We expect them to basically re-confirm the plan that they laid out on April 1,” Jeffrey Currie, global head of commodities research at Goldman Sachs, told CNBC’s “Street Signs Europe” on Tuesday. “I think the bigger issue underlying this is: How are they going to deal with Iran?”

Iran is currently in discussion with six world powers to revive its 2015 nuclear deal. The restoration of a deal could lead to more oil on the global market in the coming months.

“It’s too early to give specific numbers around Iran … So, I think the best you can hope for in terms of how they are going to deal with Iran is the indication that they are willing to offset any increases in Iran. That could be the positive upside surprise coming out of this meeting,” Currie added.

The flag of Iran is seen in front of the building of the International Atomic Energy Agency (IAEA) Headquarters ahead of a press conference by Rafael Grossi, Director General of the IAEA, about the agency’s monitoring of Iran’s nuclear energy program on May 24, 2021 in Vienna, Austria.

Michael Gruber | Getty Images News | Getty Images

OPEC Secretary-General Mohammad Barkindo on Monday said in a statement that he did not believe higher Iranian supply would be a cause for concern.

“We anticipate that the expected return of Iranian production and exports to the global market will occur in an orderly and transparent fashion,” Barkindo said.

International benchmark Brent crude futures traded at $70.75 a barrel on Tuesday morning in London, up around 2%, while West Texas Intermediate crude futures stood at $68.11, more than 2.7% higher from Friday’s close — with no settlement price on Monday due to a U.S. public holiday.

Oil prices have climbed more than 30% since the start of the year.

Iran likely to act ‘constructively’

“I think everybody is expecting Iran to add a lot of volume. So, beyond the July increase, they aren’t likely to come out with any commitment,” Amrita Sen, chief oil analyst at Energy Aspects, told CNBC’s “Squawk Box Europe” on Tuesday.

“We know that as demand rises, we will need more OPEC barrels, but I think Iran is going to be the big question mark for them,” Sen said.

OPEC+ initially agreed to cut oil production by a record of 9.7 million barrels per day last year as global fuel demand collapsed, before easing cuts to 7.7 million and eventually 7.2 million from January. As of July, the group’s production cuts are on track to stand at 5.8 million.

“The most consequential issue for OPEC+ over the short term relates to the potential rise of Iranian production as a result of the US and Iran returning to JCPOA compliance,” analysts at Eurasia Group said in a research note, referring to the acronym for the nuclear deal: the Joint Comprehensive Plan of Action.

Analysts at the risk consultancy said it believed progress in successive rounds of talks made a return to the deal likely in the third quarter of 2021.

“Over the medium term, OPEC+ will most likely adjust its policy to prevent the addition of Iranian barrels from derailing its market balancing strategy,” they continued. “Saudi Arabia will likely lean on Russia to better understand the scope of Iranian policy to work on adjustment plans. Iran would also probably act constructively as higher oil prices serve its own interests.”

Environment

Jaguar rebrand is a great success, but Elon’s $55 billion payday is a huge fail

Published

5 hours ago

December 4, 2024

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Jaguar rebrand is a great success, but Elon's billion payday is a huge fail

For the second time, a judge strikes down Elon Musk’s $55 billion Tesla CEO pay package as the company struggles to avoid seeing its sales slip year over year for the first time. Plus: an all-new look for Jaguar this Giving Tuesday on Quick Charge!

We’ve also got record EV sales from both Kia and Hyundai, with the latter seeing IONIQ 5 sales double over last year, more Tesla discounts in China AND North America, and more.

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Environment

Tesla loses out to EVgo in Oklahoma’s NEVI EV charger rollout

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5 hours ago

December 4, 2024

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Tesla loses out to EVgo in Oklahoma's NEVI EV charger rollout

“Tesla could not meet program standards” on Oklahoma’s NEVI EV charger installation program, so EVgo took over.

As Electrek originally reported in April, Oklahoma approved more than $8 million in federal funds for Tesla, Love’s Travel Stops, and Francis Energy to build DC fast chargers along its interstates.

The three companies were to provide a combined $7 million in private funding match to build 13 DC fast charging stations. The first round of awards would complete the buildout of I-35, I-40, and I-44 as Alternative Fuel Corridors.

Tesla was supposed to install three Superchargers at the I-44 exit 240 in Catoosa, the I-40 exit 240B in Henryetta, and the I-44 exit 125B in Oklahoma City. In order to qualify for National Electric Vehicle Infrastructure (NEVI) Formula Program funding, they had to be equipped with Magic Docks – that is, CCS compatibility.

However, OK Energy Today reports that Oklahoma Transportation Commissioners unanimously approved replacing Tesla with second-place EVgo yesterday.

Jared Schennesen, multi-modal division manager to the nine commissioners, said:

Tesla could not meet program standards for the gap awarded along I-44 in Oklahoma City.

Due to not meeting the program requirements, ODOT required that the award be revoked from Tesla as direct[ed] by state procurement rules and awarded to second-place finisher EVgo for this gap.

Schennesen didn’t specify exactly how Tesla couldn’t meet the program standards, but the article goes on to note that EVgo reduced its costs considerably compared to what Tesla’s project costs were:

EVgo won the award for a total of $519,740, and Schennesen said it reduced the total project cost by $317,932. The federal share of the project will increase by $201,781 bringing the final total to $801,780.

EVgo has more than 1,000 DC fast charging locations in 40 states and serves over 65 metropolitan areas.

Oklahoma’s NEVI EV charger installation program, EVOK, is responsible for spending $66 million from 2022-27 in NEVI Formula Program funds to create a state EV charging network. The federal NEVI program allocates $5 billion over five years to help US states create a network of EV charging stations. The funding comes from the Bipartisan Infrastructure Law.

The NEVI program requires EV charging stations to be available every 50 miles and within one travel mile of the Alternative Fuel Corridor. EV charging stations must include at least four ports with connectors capable of simultaneously charging four EVs at 150 kilowatts (kW) each, with a total station power capacity of 600 kW or more.

The charging stations must have 24-hour public accessibility and provide amenities like restrooms, food and beverage, and shelter.

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Environment

US to loan $7.54B to Stellantis joint venture for 2 EV battery plants

Published

6 hours ago

December 4, 2024

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US to loan .54B to Stellantis joint venture for 2 EV battery plants

Dodge-Charger-Daytona-EV-Stellantis — 2024 Dodge Charger Daytona EV (Source: Stellantis)

The US Department of Energy (DOE) says it will loan up to $7.54 billion to a Stellantis and Samsung SDI joint venture to help build two EV lithium-ion battery plants in Indiana.

Stellantis + Samsung EV battery plants loan

The joint venture is called StarPlus Energy LLC, and its huge project will create huge job growth: at least 2,800 jobs at the plants, plus hundreds more for parts suppliers at a nearby park.

At full capacity, the plants will produce about 67 GWh of batteries for Stellantis EVs in Kokomo, enough to supply about 670,000 vehicles annually, the DOE’s Loan Programs Office said. Stellantis said yesterday that the first plant will open in early 2025 and the second in 2027.

To secure the loan, StarPlus needs to implement its Community Benefits Plan, which includes working with community and labor leaders to create well-paying jobs. It’s unclear whether the loan will be able to be finalized before Donald Trump takes office on January 20, but according to the Associated Press, the DOE said “it would be irresponsible for ‘any government to turn its back on private sector partners, states, and communities that are benefiting from lower energy costs and new economic opportunities’ from the loans.”

Electrek’s Take

Since Trump is threatening tariffs all over the place to stimulate domestic manufacturing, it would be pretty dumb if he attempted to kill this loan. The DOE anticipates this and makes a point of saying in its announcement that “the project will greatly expand EV battery manufacturing capacity in North America and reduce America’s reliance on adversarial foreign nations like China, as well as other foreign sourcing of EV batteries.”

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