Wall Street predicted a big surge for oil this year. But prices are now lower
Oil prices were rattled by the collapse of several U.S. and European lenders earlier this spring, which discouraged volatility-adverse investors from historically riskier assets, such as commodities.
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A surprise decision by several OPEC+ producers to voluntarily cut output earlier this month had pushed analyst oil price forecasts near $100 per barrel, but stagnating prices now point to a deepening divide between macroeconomic sentiment and supply-demand fundamentals.
Oil prices have once again lulled near the $80 per barrel threshold, nearly revisiting territory walked in early April, before members of the OPEC+ coalition announced a unilateral cut totaling 1.6 million barrels per day until the end of the year.
The production declines prompted some analysts to warn prices could surge to triple digits, with Goldman Sachs adjusting its Brent forecast up by $5 per barrel to $95 per barrel for December 2023.
Analysts now flag that broader financial turmoil has so far obstructed this bullish outlook, as supply-demand factors are outweighed by recessionary concerns.
“Oil markets have completely faded the boost from the surprise OPEC+ cut earlier this month, and we think this primarily reflects deep pessimism about the macro outlook, with little evidence of incremental weakness in demand so far,” Barclays analysts said in a Wednesday note.
“Weaker refining margins and freight demand have been in focus recently, but we believe markets might be reading too much into the implications of these trends for the demand outlook. We also think that markets might be underestimating OPEC+’s resolve to keep the inventory situation in check.”
“People really bet on a China reopening,” Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, told CNBC’s “Squawk Box” on Wednesday.
Beijing, the world’s largest importer of crude oil, reined in its purchases last year amid drastic “zero-Covid” restrictions that depressed transport fuel requirements. China has been progressively lifting its pandemic measures since the end of last year, and local crude oil demand is returning — but at a more “muted” pace, Croft noted.
“And the issue of the Fed is real. I think that is something that a lot of us got wrong in terms of the impact of, you know, the rate hikes, recession concerns,” she added.
“We have these OPEC cuts in place, we do have, you know, again, strong demand in India, China is reopening — this should be set up for a bullish story. People are still optimistic about the back half of the year, but the question is, can you get through the big macro wall of worry?”
Viktor Katona, lead crude analyst at Kpler, told CNBC by e-mail that oil prices have suffered from a “constant barrage of gloomy macroeconomic news that creates a negative sentiment background,” as well as market distrust in the implementation of the OPEC+ production cuts. Market participants often wait for a visible reflection — such as lower export rates — to factor in production cuts, which can create a disconnect when vessel loadings arise from stock inventories.
But Katona projected price-supportive tightness in the physical markets over the summer season:
“We still see July and August as being the tightest months of 2023, with demand surpassing supply by some 2 million b/d (barrels per day), so the overall direction is still the same,” he said, noting that, globally, consumers will be exiting their annual refinery maintenance periods that curb their intake by that time.
“Net length in crude futures contracts has fully recovered from the banking panic seen in March and net length in WTI is the highest since November 2022, so the belief that prices are to increase is definitely widely shared by the market.”
But China’s long-anticipated reopening may prove too little, too late. One trade source — who could only comment on condition of anonymity because of contractual obligations — said the market is waiting for concrete signs of physical inventory draws. Another pointed to generally poor refining margins in Asia and a “poor demand cycle.” Another said that China’s reopening has been fully factored into the current pricing, and Beijing’s needs are simply being met by Russian oil. Moscow has rerouted 20% of the oil it supplied to Europe to other markets such as Asia, Russian Deputy Prime Minister Alexander Novak said Wednesday, in comments reported by Reuters.
Kpler data indicates that China’s imports of Russian crude oil averaged 1.59 million barrels per day in March, up 68% from the same period in 2022. Croft says that Chinese buyers have been “beneficiaries of sanctions policies,” as Moscow’s slashed prices also pushed other sanctioned sellers, such as Venezuela and Iran, to discount their crude.
OPEC+ weight
Oil prices were rattled by the collapse of several U.S. and European lenders earlier this spring, which discouraged volatility-adverse investors from historically riskier assets, such as commodities.
OPEC+ sources told CNBC at the time that these sentiment-driven fears would likely be temporary and pushed aside by supply-demand realities. The group convenes to discuss policy at a ministerial level for one of two annual meetings in June — when Croft flags that Gulf producers will likely set the agenda.
“When you think about Russia, Russia makes involuntary cuts. They basically rebrand the sanctions problem as a production cut. It’s really a question, I think, right now, about Saudi Arabia and the other Gulf producers, what they want to do. Again, Russia’s happy to have anything that raises prices, but they’re not in the driver’s seat.”
The weight of OPEC+ co-chair Russia within the group has been stifled by Western sanctions against its crude oil and oil product imports, in place since December and February, respectively.
As markets settle near $80 per barrel, Croft questioned what recourses still remain in the OPEC+ arsenal. “The question is right now, do they have more bullets to play, as we go into a June meeting?”
The latest cuts already spell a tight supply-demand balance that could hit households, the International Energy Agency warned in its latest monthly Oil Market Report.
“Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices, especially in emerging and developing economies,” it said.
Biden’s bid
Historically a defender of curbing prices at the pump, the U.S. has repeatedly called on OPEC+ producers to lift supplies, waging a war of words with group Chair Saudi Arabia when the coalition instead opted for a 2 million barrels per day cut in October. The U.S.’ own shale production, “traditionally the most price-responsive source of more output, is currently limited by supply chain bottlenecks and higher costs,” the IEA warns.
Throughout Biden’s presidency, U.S. energy policy has been defined by a push toward climate awareness. Shortly after taking office, the head of state suspended new oil and natural gas leases on public lands and waters and kicked off a thorough review of existing permits for fossil fuel development. Biden has openly criticized the oil sector for raking in profit at the expense of consumers, in June last year claiming ExxonMobil “made more money than God.”
But crude oil supply shortages and soaring gasoline prices have pushed Biden — who on Tuesday announced his re-election campaign — to reconsider his tactic, Croft holds.
“You have President Biden coming into office, essentially saying, Keep the oil in the ground. And now when he is faced with higher retail gasoline prices, essentially they say to oil companies, no, put the money in the ground. So we have seen a significant pivot on oil policy from the Biden administration,” she said Wednesday.
“That said, the fully robust defense of the American oil and gas is usually on the Republican end of the House.”
Tesla has confirmed that it is redesigning its door handles with electronic releases after people were left trapped inside its cars.
Earlier this week, we reported that the NHTSA had opened a new investigation into Tesla over children getting stuck inside cars after electronic door releases fail.
Tesla uses frameless doors with electronic door handles. The button to open the doors first causes the window to lower slightly, allowing the door to open. Then, it electronically unlatches, enabling the door to be swung open.
There’s also a manual latch, but it has been known to be somewhat hard to locate for people who didn’t read the owner’s manual, which is most people.
If there’s an electronic failure, especially after a crash, it can result in occupants having issues exiting the vehicle when they are in a state of panic.
Additionally, if a child is in the vehicle after a failure, it can be challenging for them to locate and use the manual release, which is what the NHTSA is now investigating.
Following the publicization of this long-standing issue this week, Tesla announced that it is redesigning its manual release.
Franz von Holzhausen, Tesla’s chief designer, said in an interview with Bloomberg that the automaker is going to combine the electronic and manual releases into one:
“The idea of combining the electronic one and the manual one together into one button, I think, makes a lot of sense. That’s something that we’re working on.”
The designer said that Tesla is already testing this in China.
It’s not a novel design. Toyota already has the same concept in some of its vehicles. The electronic button to release the door can also be pulled to activate the manual release, which works even if the car has no power.
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Environment
Hyundai reveals new EVs, hybrids, a midsize pickup, ultra-luxury vehicles, and much more
Get ready to see a lot more Hyundai vehicles on the road. The South Korean auto giant just revealed its most ambitious growth plan ever, packed with advanced new EVs and hybrids across nearly all segments. Hyundai is also launching its first midsize pickup and an extended-range vehicle (EREV) that promises to deliver over 600 miles (960 km) of range.
Hyundai bets on new EVs, hybrids, EREVs, and trucks
During its first CEO Investor Day held outside of Korea, Hyundai unveiled “its most ambitious growth strategy” in company history.
Hyundai is promising to lead the industry’s shift to electrification with a slate of new vehicles set to launch across nearly every powertrain and segment imaginable.
“In an industry facing unprecedented transformation, Hyundai is uniquely positioned to win,” José Muñoz, President and CEO of Hyundai Motor Company, said during the event held in New York on Thursday. Hyundai isn’t simply adapting, “We’re leading it,” Muñoz told attendees.
Hyundai plans to sell 5.55 million vehicles globally by 2030, including 3.3 million “electrified” vehicles, or about 60% of total sales.
With 18 new hybrids, including the first under its luxury Genesis brand, Hyundai expects “significant growth” in North America, Europe, and Korea.
Hyundai said the new vehicles, including EVs and hybrids, will be custom-tailored for buyers in its biggest markets.
Custom-tailored vehicles for the US, Europe, and China
In North America, Hyundai will launch its first midsize pickup by the end of the decade. Hyundai offers the Santa Cruz, which launched in 2021, but the company promises the new model is aimed at “the heart of the US market.”
Those in Europe will see the IONIQ 3, a smaller and more affordable little sibling to the IONIQ 5. It will feature a next-gen infotainment system, Hyundai said, specifically designed for drivers in Europe.
Hyundai announced plans to introduce its first extended range electric vehicle (EREV). Set to arrive in 2027, Hyundai said the new EREV will deliver an “EV-like driving experience with more than 600 miles (960 km) of range” that will use an added gas-powered engine to extend range.
Unlike traditional EREVs, however, Hyundai will use in-house batteries, which it promises will deliver “full EV power performance with less than half the battery capacity.”
In China, Hyundai will take on BYD and other automakers, leading the shift to EVs, with its new Elexio electric SUV. The Elexio SUV is Hyundai’s first locally produced electric vehicle using tech and software from Chinese leaders.
Wait, there’s even more
We will also see seven new high-performance “N” models added to the lineup by 2030. Hyundai aims to sell 100,000 N-branded vehicles by the end of the decade. The new IONIQ 6 N “will introduce a new paradigm for high-performance EVs,” the company said, with advanced new features and tech.
The luxury Genesis brand is celebrating its 10th anniversary with big growth plans over the next few years, including new EREVs, hybrids, and a flagship SUV.
The flagship Genesis electric SUV is expected to launch as the GV90, which we’ve seen out in public testing with ultra-luxury features, including coach doors.
Hyundai announced plans to ramp up production at its Metaplant America (HMGMA) EV plant in Georgia. With a new $2.7 billion investment, the company is creating 3,000 more jobs in Georgia. By 2028, Hyundai plans to build 500,000 hybrid and EV models at the facility annually.
By 2030, Hyundai expects over 80% of vehicles sold in the US will be made domestically. Its supply chain sourcing in the US will also increase from 60% to 80%.
Globally, Hyundai plans to add 1.2 million units to its production capacity by the end of the decade, including in the US, South Korea, and India.
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Back in August of 2024, I wrote about buying an electric chainsaw for the first time. It was a Father’s Day present for my dad, who has several acres of property to manage and is reaching the point where even his dad strength isn’t enough to hand saw all day. I wasn’t quite sure what to expect from the current state of electric chainsaws, but I was excited to put the new machine to work. Fast forward a full year, and I’ve got an update: we’ve abused the heck out of it – and it’s still going strong!
Over the past 12 months, this Ego Power+ 18-inch 56-volt electric chainsaw has seen more wood than a mom-and-pop lumber mill. I’ve cut through your standard backyard trees, gnarly old branches, telephone poles, construction lumber, and plenty of 2x4s.
We’ve basically started treating it like a general-purpose tool. If anything is fiber-based and currently of a size that is larger than it should be, the standard response is “go grab the chainsaw…”.
And not just on nice sunny days either – this saw’s been dragged through rain, dust, and mud. And more than once it’s been used in situations that absolutely should have killed it: fully underwater.
At my parents’ place, a good-sized tree had fallen into their lake after the last big storm and needed to be cleared out. We had been putting it off due to the size of the thing, but the water level was rising, and soon it was going to be swamped. One of the most recent times I went over to visit my parents, my dad and I decided it was time to finally tackle the job. Unfortunately, by then the water had risen to the point where the tree trunk was already half-submerged, creating a navigational hazard for all the weird little electric boats I’ve dropped in that lake.
We started by trying to just cut the exposed portion, and I figured we’d then put a long line on the UTV and see if we couldn’t just break the rest of it free. But that’s where my dad’s more hours on the saw than mine played a key role: knowing he could keep pushing it. My dad waded in with the chainsaw and absolutely went to town. He had that thing so deep in the water, cutting through the massive trunk that if it had been a gas-powered chainsaw, it would have literally needed a snorkel to keep running.
And yet, it worked. Not just worked – it powered through. We pulled it out, dried it off, and then it was on to the next job.
The battery life has stayed impressive, the power is still solid, and the chain hasn’t even needed a replacement yet (though I should probably give it a sharpening one of these days). I’ve lost count of how many logs this thing has ripped through, and it’s never let me down.
There is one minor downside worth mentioning: the chain tensioner has gotten a bit stiff. It used to adjust nice and easy, but now it takes a little more effort to tighten. It still works, but you’ve got to put a bit of muscle into it. That’s literally the only wear-and-tear issue I’ve noticed after a full year of borderline tool abuse.
I expected an electric chainsaw to be a convenient, eco-friendly option for light-duty work. What I didn’t expect was a rugged, waterproof (apparently), do-it-all beast that could handle nearly anything I threw at it.
So here’s the one-year verdict: I bought an electric chainsaw, I used it for everything I possibly could (and some things I probably shouldn’t have), and it still works like a champ. If you’re wondering whether an electric chainsaw can hold up over time – this one has more than proven itself.
And if I ever buy a second one, I’ll try to keep it out of the pond. No promises, though.
Author’s note: On reading through this again to proofread, it almost sounds like an ad, but I promise it’s not (those have big “Sponsored” labels on them and I generally steer clear of those). This is just a chainsaw I bought for my dad and we’ve been thrilled with it one year later.
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