Oil prices are headed for $100 despite U.S. efforts to release reserves, analyst says

Published

2 years ago

November 27, 2021

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Oil prices could climb higher despite the U.S. and other major consumers releasing millions of barrels of oil from their reserves to try to keep energy prices down, one analyst told CNBC.

“It’s not going to work simply because the strategic petroleum reserve — any country’s strategic petroleum reserve is not there to try to manipulate price,” Stephen Schork, editor of the Schork Report, said Wednesday on CNBC’s “Squawk Box Asia.”

Strategic petroleum reserves exist only to offset short-term, unexpected supply disruptions, he explained.

“There’s a considerable amount of bets out there that we will see $100 a barrel oil,” Schork said, adding it could happen as early as the first quarter of next year, especially if there is a cold winter in the Northern Hemisphere.

Calming oil prices

Oil prices have jumped more than 50% this year, with demand outstripping supply as more countries emerge from national lockdowns and severe restrictions imposed since last year due to the pandemic. Resumption of international travel as more nations re-open borders is also boosting jet fuel demand.

Global benchmark Brent surpassed the psychologically key threshold of $80 per barrel in October and prices have held near that level. As of Wednesday afternoon in Asia, the international contract traded near $82.50.

It is a clear sign of desperation that this is the only tool in the box and it is not going to work.

Stephen Schork

editor of the Schork Report

U.S. President Joe Biden announced Tuesday that the U.S. will release 50 million barrels from its reserves as part of a global effort by energy-consuming countries to calm the rapid rise in fuel prices. Of that total, 32 million barrels will be an exchange over the next few months, and 18 million barrels will be an acceleration of a previously authorized sale.

Other countries that made the joint commitment include China, India, Japan, South Korea and the United Kingdom.

So far, the U.K. has agreed to release about 1.5 million barrels while India committed to 5 million barrels. China, Japan and South Korea have yet to announce specific numbers.

“We are talking 50 million barrels coming out of the United States, potentially another 50 from our partners. That’s 100 million barrels of oil — that is one day’s worth of a global demand for crude oil,” Schork said.

Vivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank of Australia, was more conservative in his estimates. He predicted in a Wednesday note that the number of barrels released by the six oil-consuming countries could amount to “just north of 70 million,” as the release of oil stockpiles from the other countries may be “relatively tame.”

The world consumed 97.53 million barrels of oil per day this year, up from 92.42 million barrels a day in 2020, according to the U.S. Energy Information Administration. In 2022, that figure is set to rise to 100.88 million barrels a day.

“It is a clear sign of desperation that this is the only tool in the box and it is not going to work. I do believe the market will call the U.S.’s bluff on this and we’re likely to see higher prices rather than lower prices one month from now,” Schork said.

Under such conditions, countervailing moves by each side are likely to lead to increased volatility, producing seesawing oil prices and added uncertainty.

Eurasia Group

The U.S. should consider bringing American producers to the table and ask them to ramp up output to offset the supply imbalance, he added.

Commonwealth Bank’s Dhar said a rebound in oil prices on Tuesday indicated that “markets were underwhelmed with the co-ordinated release of strategic oil reserves.”

Showdown with OPEC+

The latest development came after OPEC and its oil-producing allies decided not to pump more oil despite crude prices climbing to multi-year highs and U.S. pressure to help cool the market.

Under its current output plan, the group, known as OPEC+, will gradually increase oil production by 400,000 barrels per day each month. They are due to meet again next month.

Oil well pump jacks operated by Chevron Corp. in San Ardo, California, U.S., on Tuesday, April 27, 2021.

David Paul Morris | Bloomberg | Getty Images

“There have, as of yet, been no signs that OPEC+ is reconsidering its plan,” Eurasia Group analysts said in a note dated Nov. 22, prior to Biden’s announcement overnight. A large-scale stock release by oil consumers before OPEC+ meets may prompt a countermove by the group, resulting in a “disruptive standoff,” they said.

“Under such conditions, countervailing moves by each side are likely to lead to increased volatility, producing seesawing oil prices and added uncertainty,” the Eurasia Group analysts said.

“This would neither alleviate consumer price pressure nor give producers the required stability to ensure steady and reliable supply to a global economy that is still grappling with the worst pandemic in a century,” they added.

Watch the world’s first artificial energy island being built [video]

Published

7 hours ago

April 25, 2024

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Watch the world's first artificial energy island being built [video]

The first of 23 caissons for Princess Elisabeth Island, the world’s first artificial energy island, is nearly complete.

Princess Elisabeth Island will be an electricity grid at sea that will connect offshore wind farms to the Belgian mainland and also serve as a hub for future interconnectors with the UK and Denmark. Belgian electricity transmission system operator Elia is the project’s developer.

The 20,000-ton caissons, which will form the energy island’s outer walls, are being built at Jan De Nul Group and DEME’s construction site in Vlissingen, the Netherlands. It takes around three months to build one caisson. The production process is split into five 20-day stages. The caissons are moved between the different work sites using “runners,” which takes about six hours.

When the caissons are ready, a semi-submersible vessel will transport them further down the harbor, where they’ll be temporarily stored in the water. They’ll then be moved to their final location in the North Sea this summer, weather allowing, said maritime infrastructure company Jan de Nul.

You can watch a time-lapse video of Princess Elisabeth Island’s first caisson being built here:

[embedded content]

Princess Elisabeth Island is part of the larger Princess Elisabeth Zone, a future 3.5 gigawatt (GW) offshore wind farm in the North Sea, around 45 km (28 miles) off the Belgian coast. The world’s first artificial energy island will receive power from the wind turbines via undersea cables, and it will then be converted to high-voltage electricity and distributed to the Belgian mainland and other European countries. The energy island will combine both direct current (HVDC) and alternating current (HVAC).

The energy island will be finished in late 2026 when the electrical equipment will start to be installed. Princess Elisabeth Island is expected to be fully connected to all wind farms and the mainland by 2030.

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Environment

Honda joins EV race with historic $11B investment to build 240K EVs a year

Published

8 hours ago

April 25, 2024

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Honda joins EV race with historic B investment to build 240K EVs a year

Honda is finally joining the EV race after announcing a massive $11 billion (CAD$15 billion) investment to build four new EV plants in Canada. The historic investment will be used to build Canada’s first EV supply chain, enabling 240,000 Honda EVs to be made for the US and Canada annually.

Honda reveals game changing investment to build EVs

Honda announced its largest investment in Canada ever as it prepares for the electric era. The plans for a new Honda EV plant and stand-alone EV battery factory in Alliston, Ontario.

Once fully operational, the EV facility will be able to produce 240,000 EVs a year, while its battery plant will have capacity of 36 GWh per year. Production is expected to begin in 2028.

According to a press release from the prime minister’s office, Honda will build Canada’s first comprehensive EV supply chain. The project will include four new manufacturing plants in Ontario.

In addition to the EV plant and battery factory, Honda will build a cathode active material and precursor plant through a joint venture with POSCO Future M. A second is planned with Asahi Kasei Corp.

Justin Trudeau, prime minister of Canada, said Honda’s investment is a “game changer for manufacturing in Canada.” With a full supply chain, Honda expects to cut costs by over 20%.

Honda aims for EVs and FCEVS to account for 100% of vehicle sales by 2040. Honda also invested $700 million to retool three Ohio plants to serve as its hub for future EV and EV battery production.

Meanwhile, Honda’s first electric SUV, the Honda Prologue, went on sale earlier this year. Starting at $47,400 (excluding destination), the Prologue offers up to 296 miles range.

2024 Honda Prologue trim	Starting Price (w/o $1,395 destination fee)	Starting price after tax credit (w/o $1,395 destination fee)	Starting price after tax credit (with $1,395 destination fee)	EPA Range (miles)
EX (FWD)	$47,400	$39,900	$41,295	296
EX (AWD)	$50,400	$42,900	$44,295	281
Touring (FWD)	$51.700	$44,200	$45,595	296
Touring (AWD)	$54,700	$47,200	$48,595	281
Elite (AWD)	$57,900	$50,400	$51,795	273

2024 Honda Prologue prices and range

With the $7,500 federal tax credit, the Prologue’s starting price can fall to as low as $39,900 (excluding destination).

Lace Woelfer, VP of Honda America National Auto Sales, said the Honda Prologue hits the “sweet spot” as a sporty, stylish electric SUV.

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Environment

In a first, the US will restrict existing coal-fired plants’ emissions

Published

9 hours ago

April 25, 2024

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In a first, the US will restrict existing coal-fired plants' emissions

coal-fired plants emissions — Trucks Haul Coal Navajo Mine by U.S. National Archives is licensed under CC-CC0 1.0

The Environmental Protection Agency (EPA) will require existing coal-fired and new natural gas-fired power plants to control 90% of their carbon emissions or shut down.

It’s the first time the federal government has restricted CO2 emissions from existing coal-fired power plants and one of four measures the EPA announced today to transition the US to a clean energy economy.

The EPA states that “the best system of emission reduction for the longest-running existing coal units and most heavily utilized new gas turbines is based on carbon capture and sequestration/storage (CCS),” which qualifies for Inflation Reduction Act tax incentives.

Coal plants that intend to stay online beyond 2039 will have to cut or capture 90% of their CO2 emissions by 2032. If a coal plant retires by 2039, it has to capture emissions but to a less stringent standard. If a coal plant retires by 2032, it’s exempt from the new final rule. Coal powered around 16% of US electricity in 2023.

The rule is projected to reduce 1.38 billion metric tons of carbon pollution through 2047 – equivalent to preventing the annual emissions of 328 million gasoline cars or nearly an entire year of US electric power sector emissions.

Harold Wimmer, president and CEO of the American Lung Association, said, “Burning fossil fuels in power plants harms people’s lungs, makes kids sick, and accelerates the climate crisis. The stronger clean air and climate protections will save lives.”

The other three final rules for coal-fired plants are:

A tightening of the emissions standard for toxic metals by 67% and finalizing a 70% reduction in the emissions standard for mercury from existing lignite-fired sources
A reduction of pollutants discharged through wastewater from coal-fired power plants by more than 660 million pounds per year
The safe management of coal ash placed in areas that were unregulated at the federal level until now

EPA administrator Michael S. Regan said, “By developing these standards in a clear, transparent, inclusive manner, EPA is cutting pollution while ensuring that power companies can make smart investments and continue to deliver reliable electricity for all Americans.”

The new EPA rules are part of the Biden administration’s pledge to achieve net zero in the electricity sector by 2035.

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