Oil’s sharp slide has surprised markets. But some traders now see a bottom for prices

Published

2 years ago

May 8, 2023

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Aerial view of oil and gas jack-up rig at the yard for maintenance with many vessels in Singapore. Oil prices saw three consecutive weekly declines last week, marking the longest losing run this year.

Chain45154 | Moment | Getty Images

The recent slide in oil prices is starting to bottom out, according to analysts who predict that a more significant pickup in the coming quarters is in the cards.

Oil prices saw their third consecutive weekly decline last week, marking the longest losing run this year. However, that may soon come to pass, according to some market watchers.

“Now it definitely feels like they’re at the bottom — there are multiple signs of that,” said Citi’s Global Head of Commodities Research Ed Morse.

“Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom.”

He added that markets are currently facing the impact of OPEC+’s recent production cuts, and the world is moving into a higher demand season. Last month, the oil cartel announced it was slashing output by 1.16 million barrels per day. The cuts came into effect in May and will run until the end of 2023. The production declines prompted some analysts to warn prices could surge to triple digits, which failed to materialize.

“We’re looking more positively at the second and third quarter than what’s happened in the first quarter,” Morse said.

Financial services company ANZ also believes that the oil slump could bottom out soon, with global oil demand set to grow by 2 million barrels per day, keeping the market under-supplied throughout 2023.

A tightening oil market in H2 2023 will now rely more heavily on OPEC+, particularly Russia.

Vivek Dhar

Commonwealth Bank of Australia

“OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere … Therefore, we expect prices to bottom out soon,” the bank wrote in a research report dated May 8.

Similarly, Goldman Sachs has maintained its forecasts for a higher crude oil price tag.

“Our forecast remains that Brent rises to $95 per barrel by December and $100 per barrel by April 2024 as we expect large deficits in H2,” the investment bank stated in a report released over the weekend.

Global benchmark Brent traded 1.74% higher at $76.61 a barrel Monday, while the U.S. West Texas Intermediate futures stood 1.92% at $72.71 per barrel.

Oil’s sharp slide

Brent had slipped 8% year-to-date by last Friday. On Wednesday, the benchmark posted a close of $72.33, marking the lowest since December 2021, according to data from Refinitiv. On a similar vein, West Texas Intermediate has seen a 11% year-to-date fall.

The slip in prices is attributed to a confluence of economic concerns.

Last Wednesda y, the U.S. Federal Reserve hiked interest rates by a quarter of a percentage point, raising investors’ concerns that slower economic growth could dent energy demand.

“Pressure from anti-inflationary action undertaken by both the U.S. Fed and the ECB [European Central Bank], have resulted in lackluster demand growth for most of the OECD, with recession risks lying ahead,” Morse wrote in an e-mail.

Last month, OPEC+ announced it was slashing output by 1.16 million barrels per day. The cuts came into effect in May and will run until the end of 2023.

Bloomberg | Getty Images

Additionally, a surprise contraction in China’s April manufacturing activity also threw a shade of doubt over the recovery of the country’s commodity demand.

“The narrative that oil markets will tighten later this year because of rising Chinese demand is being challenged,” Commonwealth Bank of Australia wrote in a daily note dated May 8.

“A tightening oil market in H2 2023 will now rely more heavily on OPEC+, particularly Russia,” CBA’s Vivek Dhar wrote.

And Moscow’s oil production has proved more resilient than expected.

“Russia’s oil production and exports have been resilient despite their announcement production cut of 500,000 barrels per day,” said Kang Wu, S&P’s head of global demand and Asia analytics.

The recent slide is reminiscent of the downside volatility in March and “forces’ an evaluation of whether or not the OPEC will deliver another Saudi-led cut,” Mizuho’s Vishnu Varathan wrote in a note dated May 8.

But S&P’s Wu reckons there is still a “big uncertainty” as to what the cartel’s next move will be.

“Unless they see real demand destruction either due to a weakening economy or surging prices, they probably will hold on a bit longer to decide what to do.”

Environment

Honda deploys Peterbilt 579EV electric semi out of Alabama plant

Published

3 hours ago

November 19, 2024

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Honda deploys Peterbilt 579EV electric semi out of Alabama plant

Honda Alabama plant launches pilot program aimed at electrifying transportation of cars

A new, all electric Peterbilt 579EV is in-service at Honda’s Lincoln, Alabama assembly plant, where it’s busy transporting newly-built Honda cars from the plant to a nearby railhead for shipment to dealers across the country.

Part of a pilot program between Honda, Alabama Power, and Virginia Transportation Corp., the new electric semi truck will help stakeholders gather data about the practicality and performance of the battery-powered Pete and use it to generate case studies for broader electrification initiatives. Other supporters of the pilot project include the Alabama Clean Fuels Coalition and, of course, Peterbilt.

“We remain committed to delivering for our customers and the environment,” offered Leo Doire, owner and CEO of Virginia Transportation Corp. “Our new Peterbilt 579EV model will be tested to determine how well it performs against the high productivity demands of our operations. The partners we have at the table will help us maximize this opportunity and prepare to scale up if we get the results we are hoping for.”

The truck itself has been spec’ed to be perfect for the kind of short haul and drayage applications Honda has in mind. This particular Peterbilt 579EV is fitted with PACCAR’s 400 kWh battery and a 670 hp electric motor good for an impressive 2,050 lb-ft of peak torque at 0 rpm.

The truck offers 150 miles of operating range and can be charged in about 3 hours on a 120 kW charger installed specifically for that purpose. A charger, it should be noted, that was partially paid for by Alabama Power.

“Alabama Power’s ‘Make Ready’ program provides businesses with valuable rebates to help reduce the upfront costs of installing EV infrastructure,” says Alabama Power Electric Transportation Manager Hasin Gandhakwala. “We are committed to partnering with customers who are exploring state and federal grant opportunities. Alabama Power is dedicated to advancing EV technologies to better serve the needs of our customers.”

The electric semi is a continuation of a decarbonization project Honda initiated in 2011, when the company recruited Virginia Transport Corp. to help find ways to reduce emissions at its Alabama facilities. VTC’s efforts have led to changes that displaced more than 475,000 gallons of diesel in 2023 alone.

Electrek’s Take

Peterbilt 579EV at Alabama Honda plant; via Alabama Power.

With the big Pete’s 82,000 lb. GVWR and 150 miles of range between charging sessions, it seems like these guys will be making a lot of back-and-forth runs between the Honda plant and the CSX terminal to me. Here’s hoping they see the benefits of electrifying the rest of their vehicle transport fleets somewhat sooner than later.

SOURCE | IMAGES: Alabama Power.

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Environment

Solar and storage projects make headlines, but will they survive? (Interview)

Published

4 hours ago

November 19, 2024

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Solar and storage projects make headlines, but will they survive? (Interview)

On today’s episode of Quick Charge, we’ve got big solar breaking ground all over, despite the incoming administration’s supposed lack of love for home-grown clean energy. Our guests today walk us through home solar, energy storage, and more.

Today’s episode is sponsored by BLUETTI, a leading provider of portable power stations, solar generators, and energy storage systems. For a limited time, save up to 52% during BLUETTI’s exclusive Black Friday sale, now through November 28, and be sure to use promo code BLUETTI5OFF for 5% off all power stations sitewide. Learn more by clicking here.

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New episodes of Quick Charge are recorded, usually, Monday through Thursday (and sometimes Sunday). We’ll be posting bonus audio content from time to time as well, so be sure to follow and subscribe so you don’t miss a minute of Electrek’s high-voltage daily news!

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Drop us a line at tips@electrek.co. You can also rate us on Apple Podcasts and Spotify, or recommend us in Overcast to help more people discover the show!

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Environment

Tesla turns to its ‘Tesla Electric’ utility service to help sell cars

Published

4 hours ago

November 19, 2024

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Tesla turns to its 'Tesla Electric' utility service to help sell cars

Tesla is now using ‘Tesla Electric’, its electric utility service in Texas, to help sell cars with a new incentive.

After gaining experience through its virtual power plants (VPPs), Tesla took things a step further with the launch of “Tesla Electric” back in 2022.

Instead of reacting to specific “events” and providing services to your local electric utilities, as Tesla Powerwall owners have done in VPPs in California, Australia, and a few other markets, Tesla Electric is actively and automatically buying and selling electricity for Tesla Powerwall owners – providing a buffer against peak prices.

The company is essentially becoming an energy retailer.

Tesla Electric is currently only available to Powerwall owners in Texas and the UK, but the company has plans to expand its products through this new division.

The company has been growing its Tesla Electric userbase in Texas and now it plans to use it to help sell cars.

Tesla has two different plans under the program:

Feature	Tesla Electric Fixed Plan	Tesla Electric Dynamic Plan
Pricing Structure	Competitive fixed rate for electricity, with a discounted rate during low-cost hours.	Competitive variable rate, with higher rates during peak demand periods.
Contract Term	12-month commitment.	Month-to-month flexibility.
Unlimited Vehicle Charging	Available for an additional $15/month per vehicle, allowing unlimited charging.	Available for an additional $25/month per vehicle, allowing unlimited charging.
Powerwall Credits	Earn $400 credit per year per Powerwall by participating in the Tesla Virtual Power Plant, with Tesla managing the Powerwall to share energy with the grid when needed.	Earn $120 credit per year per Powerwall by participating in the Tesla Virtual Power Plant, with the customer managing the Powerwall to optimize earnings.
Energy Sharing with Grid	Sell energy back to the grid at a fixed rate per kWh.	Sell energy back to the grid at 90% of the real-time market price per kWh.

The first one enable you to charge your electric car for just $15 a month.

With this new incentive, Tesla is brining that down to $5 a month for a year for people who take delivery by the end of the year:

Get $5/mo Unlimited Overnight Charging With Tesla

To get unlimited overnight charging for $5 per month per vehicle for a full year, you must complete the following steps by December 31, 2024:

Order and take delivery of a new Tesla vehicle

Sign up for the Tesla Electric Fixed Plan

To be eligible, you need to live in an area of Texas that allows you to choose your electricity provider, be a new Tesla Electric member and take delivery of a new Tesla vehicle. Promotion is subject to change at any time.

This appear to be part of Tesla’s effort to deliver a record number of more than 515,000 vehicles in Q4 in order for its annual deliveries not to be down for the full year.

ver the last few weeks, we have been reporting on a series of sale incentives that Tesla has put in place to make sure it has the demand to achieve this record quarter.

In Europe, it includes a year of free Supercharging and heavy discounts.

In the US, there are also good inventory discounts, 3 months of free Supercharger and FSD, FSD transfer, and more.

And everywhere, Tesla is heavily subsidizing loans with lower interest rates.

But it’s the first time that Tesla is using such a targeted incentive, at the state level, and using its Tesla Electric program.

It’s interesting.

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