The same force weighing on energy stocks is flashing a green light for growth: Oppenheimer
The next few months could be tough for energy stocks.
With OPEC+ postponing negotiations indefinitely on Monday after failing to strike a deal on oil production, oil prices are already under pressure, falling more than 2% on Tuesday after grazing six-year highs.
Another macroeconomic force could “suggest there’s some vulnerability in terms of the near-term trading,” Ari Wald, Oppenheimer’s head of technical analysis, told CNBC’s “Trading Nation” on Tuesday.
“Specifically, we’re watching the U.S. dollar,” said Wald, whose firm is market-weighted in the energy sector.
The dollar wasn’t nearly as strong when the energy sector peaked in early June, he noted.
“This dollar strength has moderated and put downward pressure on inflation expectations,” Wald said. “This has pressured value-related inflationary trades like energy and in turn given investors the green light to get back into growth stocks.”
“For now, that dollar strength is causing this near-term disruption, but we do side with this idea that more moderate pricing pressure should help elongate the longer-term equity cycle, and with that we do think there’s more of an intermediate-term floor for energy over that period,” he said.
Another trader saw more short-term upside for the energy trade.
Recent buyers and current holders of oil and oil-related investments “want to probably stay in those positions over the short term” with global output staying at its current levels, New Street Advisors Group founder and CEO Delano Saporu said in the same “Trading Nation” interview.
“Short term, you have some room to run here,” he said.
Over the longer term, Saporu said, he expects consumption to wane, particularly in the United States, the world’s largest oil consumer.
“From a long-term portfolio standpoint, you probably want to look at trimming some of your positions over the long term as we move towards different areas and alternative uses,” he said.
Ford Mustang Mach-E to lose EV tax credit
If you are thinking about buying Ford’s electric Mustang Mach-E, you may want to do so before the end of the year. Ford expects the Mach-E will no longer qualify for the federal EV tax credit.
Ford Mach-E will no longer qualify for the EV tax credit
The Inflation Reduction Act (IRA) is due for drastric changes at the end of the year that will affect which EVs will qualify for the tax credit.
Starting on January 1, more restrictions will be put into place. EVs with battery components from a “foreign entity of concern,” including China will lose a portion of the tax credit.
In 2025, the rules will get even tighter. The changes are designed to promote manufacturing in the US while building up a reliable EV supply chain network.
Ford expects to be among several automakers with EVs losing access. Tesla has already said its Model 3 RWD and Long Range will lose $3,750, starting January 1. Meanwhile, it will still qualify for the other $3,750.
In a bulletin sent to dealers (via CarsDirect), Ford said it expects the changes to impact the Mustang Mach-E. Although Ford is “awaiting finalized requirements,” given what we know, “it is unlikely that any Mustang Mach-Es will qualify” beginning the first of the year.
The company didn’t explain why the Mach-E will no longer qualify for the EV tax credit, but it’s likely due to the CATL-supplied LFP batteries.
Qualified customers are still eligible for a $3,750 credit, “making this an excellent motivator to purchase before the end of the year,” Ford added.
Shoppers can still take advantage of the full $7,500 tax credit through leasing. Meanwhile, Ford didn’t indicate the Lightning would be impacted by the changes.
Ford’s electric truck had its best sales month ever in November. All F-150 Lightning trims, except the Platinum version, qualify for up to $7,500 in savings. The Platinum model is excluded as it exceeds the IRA’s $80K cutoff.
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The US’s first utility-scale offshore wind farm delivers its first power
New York’s South Fork Wind has become the first utility-scale offshore wind farm to generate power in the US.
The first operational wind turbine at South Fork Wind sent clean power to Long Island today. The project has completed the installation of two turbines around 35 miles off Montauk, with all 12 SG 11-200 DD Siemens Gamesa turbines expected to be installed by early 2024.
The energy produced is being sold to the Long Island Power Authority under the terms of a 20-year agreement.
Stephanie McClellan, executive director at offshore wind nonprofit Turn Forward, said:
The generation of power from South Fork Wind is an incredible moment in the American clean energy story and for the Long Island communities that will benefit from this project for decades to come.
The 130-megawatt (MW) South Fork Wind will be the US’s first completed utility-scale wind farm in federal waters.
Danish renewables giant Ørsted is jointly developing the offshore wind farm with Boston-based energy provider Eversource. South Fork Wind’s first offshore wind turbine foundation was installed at the end of June, and its first US-built offshore substation was completed at the end of July.
South Fork Wind will produce enough clean energy to power 70,000 homes in New York. It will deliver clean energy directly to the electric grid in East Hampton via a single transmission line installed in March.
It will eliminate up to 6 million tons of carbon emissions, or the equivalent of taking 60,000 cars off the road annually over a 25-year period.
Photo: South Fork Wind
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U.S. crude drops below $70 per barrel, gas prices fall to 11-month low
Gas prices at a Shell gas station in Washington, DC, US, on Tuesday, Nov. 28, 2023.
Al Drago | Bloomberg | Getty Images
U.S. crude declined nearly 4% on Wednesday with retail gasoline prices hitting the lowest point since January ahead of the holiday shopping and travel season.
U.S. crude and the global benchmark have hit their lowest levels since June, despite efforts by OPEC+ to boost prices by promising to slash supply in the first quarter of 2024.
Prices at the pump in the U.S., meanwhile, have followed oil prices lower to hit $3.22 a gallon on average as of Wednesday, the lowest price since Jan. 3, according to AAA.
Oil prices have been on a steep downward trajectory from September highs as nations outside OPEC+, particularly the U.S., pump crude at breakneck clip and worries grow about the Chinese economy.
Moody’s on Tuesday downgraded its outlook for China’s government credit raging to negative from stable.
U.S. crude inventories fell by 4.6 million barrels for the week ending Dec. 1 and gasoline supplied to the market increased by 260,000 barrels per day, according to the Energy Information Agency.
Falling inventories and rising gasoline deliveries implies higher demand, which would typically boost oil prices. Pessimism about the economic outlook in China, however, appeared to be weighing heavier on crude prices.
Oil traders have also been skeptical OPEC+, which includes OPEC members and its allies like Russia, will deliver on supply cuts of 2.2 million bpd in the first quarter next year.
Several OPEC+ members announced the voluntary cuts last week after the group failed to reach a unanimous agreement on production targets.
Saudi Energy Minister Price Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak sough to assure the market this week that they could extend or even deepen the promised cuts.
Tamas Varga, an analyst with PVM Oil Associates, said those reassurances have “fallen to deaf ears.”
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