Oil prices near $100 per barrel raise questions over demand destruction
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Supply cuts from heavyweight crude producers have helped drive oil prices near $100 per barrel — fueling some to consider the potential for future demand destruction.
Brent crude futures rose 63 cents per barrel from the Thursday settlement to $96.01 per barrel on Friday at 11 a.m. London time and sit well above prices observed in the first half of the year.
The gains could prove short lived, some analysts warn. Sushant Gupta, research director of Asia refining at Wood Mackenzie, on Monday said “there are all signs that we could potentially see $100 per barrel in quarter four,” but warned that global economic fragility and incoming seasonal demand drops in the first quarter would make this unsustainable long term. In a Friday report, ING analysts signaled the oil market is “clearly in overbought territory.”
At the heart of price support are a series of voluntary cuts that fall outside of the official policy of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. First is a 1.66 million-barrel-per-day decline implemented by some OPEC+ members until the end of 2024. Topping this, Saudi Arabia and Russia pledged to respectively remove another 1 million barrel per day of production and 300,000 barrels per day of exports until the end of this year.
This adds to a picture of improving Chinese demand — which analysts say could soon peak — and inventory drops.
Some say buyers can weather the storm of high prices. Seven European refiners and traders, who spoke under anonymity because of contractual obligations, told CNBC that local buyers can withstand oil prices veering into triple digits without lowering their output runs. All of the sources pointed to firm refining margins, meaning the difference between the value of refined products and the price of the crude feedstock to generate them is favorable.
Uncertainty lingers over further China fuel export quotas, while Russia’s indefinite ban of its fuel exports — which Europe cannot purchase because of sanctions that followed Moscow’s full-scale invasion of Ukraine — has tightened availabilities of refined products and could particularly worsen global diesel shortages. Sanctions-disrupted access to Russian crude and OPEC+ cuts have shrunk availabilities of high-density and high-sulfur crude to Western buyers, encumbering their task to produce certain refined products.
Refinery margins so far have nevertheless been attractive enough that some refiners have lightened their seasonal maintenance to take advantage, one refiner said. Refined oil product demand could yet stay strong in the West, as Thanksgiving and winter vacations boost travel in the U.S. and Europe, and the hurricane season looms — which can historically disrupt both local refining and crude production.
“We estimate a high-impact hurricane event this year could result in a temporary loss of monthly offshore crude oil production of about 1.5 million barrels per day (b/d) and a nearly equivalent temporary loss of refining capacity,” the U.S. Energy Information Administration said in July.
“Outages on that scale could increase monthly average U.S. retail gasoline prices by between 25 cents per gallon and 30 cents per gallon.”
‘Self-fulfilling prophecy’
Some European market participants polled by CNBC doubted triple-digit oil prices are sustainable in the long term, with three pointing to possible demand destruction — where customers gradually answer persistently high prices with fewer purchases. A fourth said demand destruction is a potential question, once prices hit $110 per barrel.
“Sometimes high oil prices can become a self-fulfilling prophecy,” Indian Energy Minister Hardeep Singh Puri warned in August. “The self-fulfilling prophecy means that at a particular point of time comes a tipping, and then there’s a fall of demand.”
One of the market sources also noted that steep backwardation — where current prices exceed future ones and a key metric to assess the viability of storage — discourages stocking refined products, leaving the market vulnerable to any disruptions.
“OPEC+ production cuts, including the voluntary extra cut by Saudi Arabia, are bearing fruit, lowering oil inventories and supporting prices,” UBS Strategist Giovanni Staunovo said in a Thursday note, pegging the bank’s oil price estimate at $90-100 per barrel over the coming months.
The oil price hike has benefitted Moscow despite sanctions. Under a program by the G7 largest global economies, non-G7 buyers may only use Western shipping and insurance to import Russian crude purchased at or below $60 per barrel.
But Moscow has been deploying its own dark fleet, and traders say Russia’s flagship Urals crude currently sells at roughly $8-10-per-barrel discounts to benchmark oil prices, implying values $25 per barrel above the G7 price cap. The Russian energy ministry did not respond to a CNBC request for comment.
OPEC+ move
An OPEC+ technical committee meets on Oct. 4 to review market fundamentals and individual production compliance. While incapable of adjusting OPEC+ policy, the Joint Ministerial Monitoring Committee can call an emergency ministerial meeting to do so. Three OPEC+ delegates, speaking anonymously because of the sensitivity of the discussions, told CNBC it is unlikely this upcoming JMMC meeting will result in policy tweaks.
The White House has previously vocally entreated OPEC+ producers to hike output, ease prices at the pump and alleviate inflation — but Washington has been largely silent in response to the production declines. In October last year, the U.S. levied accusations of coercion over other OPEC+ members against de-facto group leader Saudi Arabia, which depends on oil revenues for its economic diversification giga-projects.
The White House faces a difficult balancing act, as it pushes for a normalization of ties between Israel and Saudi Arabia, two top allies in the Middle East. Riyadh has also shown signs of steering closer toward China and Russia after rekindling relations with Iran through Beijing-mediated talks and receiving an invitation to join the emerging economies’ BRICS alliance. A spate of high-profile U.S. official visits to Saudi Arabia over the summer suggests ongoing discussions — though it remains to be seen if oil re-enters the diplomatic agenda.
RBC Head of Global Commodity Strategy Helima Croft, who says “we clearly see momentum” for Brent at $100 per barrel, stressed the absence of many options left in the U.S. toolkit.
“Will there be an energy component of a potential U.S.-Saudi deal? I think the Saudi administration would clearly like more Saudi barrels on the market, because, look, there are not a lot of great options for this administration to get prices down,” she said on Wednesday.
“They’ve already done the big [Strategic Petroleum Reserve] release, the question is are they really going do more … they’ve done deals with Iran, but those barrels are already in the market, so it’s not clear where the administration goes next for additional barrels.”
Volvo Penta will debut its latest modular and scalable battery energy storage system (BESS) platform for the off-grid construction and mining industries at the bauma equipment show – here’s what you can expect.
Best-known for its marine engines and gensets, Volvo Penta is the power production arm of the Volvo Group, specializing in putting energy to work. Operating under the tagline, ‘Made to Move You’, Volvo Penta is headed to bauma 2025 with a plan to keep construction, port shipping, and mining operations moving productively and competitively throughout their transitions to battery and (in theory, at least) hydrogen power.
To that end, the company will show off a job site ready version of the scalable and modular BESS subsystem concept shown last year.
Volvo says its new, modular BESS subsystem will enable other OEMs and third party system integrators to seamlessly deploy electric power to meet the ever-exceeding energy needs in construction and mining.
“Our modular and scalable battery-electric platform is designed to support the electrification ecosystem—combining high-performance drivelines with the crucial energy storage subsystems for efficient charging and operation in construction and mining,” says Hannes Norrgren, President of Volvo Penta Industrial. “We want to meaningfully collaborate with our customers on value-added customization that will enable them to stay productive, efficient, and future-ready.”
The Penta substation at bauma will be built around the company’s “Cube” battery pack, an energy-dense solution with a favorable C-rate designed to make it easy for BESS manufacturers to offer more compact job site solutions capable of charging and discharging energy with high levels of speed and efficiency, enabling both stationary and mobile BESS configurations that can change and grow to meet the evolving needs of a given asset fleet or project.
A Volvo Penta-developed DC/DC unit converts the voltage from the Cube battery packs (600 V) into lower voltage (24 V) for powering auxiliaries and portable offices.
Electrek’s Take
Volvo Penta has always provided power. Historically that’s been from combustion, but the company is looking ahead, developing products that will bring energy to job sites, tractors, and more long after the last ICE engine shuts down.
SOURCE | IMAGES: Volvo Penta.
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Just days after Rivian announced that it would be making its iconic electric delivery vans available to anyone willing to pay for one, the company launched the new Rivian Upfit Program, offering a “one-stop shop” to help fleet managers put its EVs to work.
Launched in partnership with commercial vehicle heavyweights Ranger Design, Sortimo of North America, Bush Specialty Vehicles, Holman, LEGEND, and EV Sportline, the Rivian Upfit Program helps fleet buyers make the switch to electric by simplifying the ordering process and delivering an experience that more closely reflects the experience fleet managers get at dealerships.
Despite partnering with leading brands and launching into a well-establish market, however, the program’s web page seems largely aimed at people outside the space – even kicking off with an explanation of what upfitting is:
Upfitting is the process of customizing a vehicle in order to meet fleet, business, or individual consumer needs to tackle the job at hand. This work is done after the vehicle has been built and released from the factory, and can include everything from shelving modifications, flooring options, to sirens and flashers and much more.
The program was announced on LinkedIn with a number of photos indicating upfit options for Rivian’s R1T and R1S vehicles focused on lifeguard and roadside assistance duty, and Rivian’s van upfit with a HVAC/telecom style toolbox arrangement.
No word on pricing or turnaround time.
Electrek’s Take
The general consensus around the Electrek water cooler is that the direct-to-consumer model offered by Rivian, Tesla, and even CarMax deliver a superior customer experience, I’ve consistently drunk the franchise dealer Kool-Aid, arguing that the industry-leading margins enjoyed by these companies actually indicate they’re giving consumers an objectively worse deal than they’d get in a more competitive dealer landscape.
That same competitiveness has led to talented fleet managers at those franchise dealers putting in the effort to get to know the needs of the businesses and buyers in their regions, to understand what upfit options makes sense for their local markets, and – crucially – what to stock for quick turnaround when their customers need it.
Rivian is hoping its upfit partners will do a lot of that heavy lifting for them, but my two cents is that if building cars is hard, building relationships is harder, and Rivian isn’t going to make a good first impression by talking down to its customers. If you think differently, let me know how I got it wrong in the comments.
SOURCE | IMAGES: Rivian, via LinkedIn.
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For 2025, the Ram ProMaster EV commercial van gets up to 180 miles range from its 110 kWh battery pack, new 12- and 13-foot cargo configurations to meet more fleets’ needs, and a starting price of “just” $56,495. All of which sounds … kind of familiar, right?
When Ram rolled out its ProMaster EV electric cargo van last year, the company promised a huge range of customizable features, 12- and 13- configurations, a “super high roof” variant, and more – even touting a heated windshield. Which is almost exactly what you’ll find hyped up in the latest Stellantis press release for the “All-new 2025 Ram ProMaster EV Cargo Van.”
So, if it’s basically the same van, what’s the story here?
Glad you asked – see, the 2024 announcement for the ProMaster EV made lots of promises, but anecdotal conversations revealed that the vast majority of ProMaster EVs that made it customers last year were the step van version, with its “pocket” side door and roll-up rear door.
That makes sense, considering that’s how Stellantis’ prime customers for the Ram ProMaster EV, Merchants Fleet …
The Ram Truck brand has announced that Merchants Fleet will become a key commercial customer of the all-new Ram ProMaster electric van (EV) that debuts later this year. The agreement calls for the purchase of 12,500 Ram ProMaster EVs.
STELLANTIS; JUN2023.
… and Amazon …
Stellantis, with input from Amazon, designed the vehicle with unique last mile delivery features and Amazon will deploy the vehicles to routes across the United States. Building on the current relationship and as part of the long-term agreement, Stellantis and Amazon will be putting thousands of BEV ProMasters on the road every year.
STELLANTIS; JAN2022.
Spec’ed them out.
Co-developed with Amazon
The story here, then, is that the conventional cargo variants (sliding van door, split-opening rear doors, etc.) are finally available for smaller fleets and van-lifers to order, production capacity apparently having caught up to demand. It’s that van, when ordered in a 12-foot cargo/low roof spec, that pushes that range estimate up to 180 miles. The high-roof version gets a claimed 164 miles of range.
“Our freedom of choice approach with powertrain extends to the Ram Professional lineup with an appropriate solution for last-mile delivery in the Ram ProMaster EV,” says Tim Kuniskis, Ram brand CEO. “With front-wheel drive and a low step-in height, the ProMaster is a solid player and continues to perform well in a wide variety of business sectors, such as the growing home delivery environment, construction services wholesale and IT services among others.”
For 2025, Stellantis has “repositioned” the ProMaster EV step van with a new, lower starting price to match its improved availability. The van can now be had for $69,995 plus $1,995 destination fee. That’s down significantly from the $79,990 starting price for 2024 – proving once again that old adage: good things come to those who wait.
For that money, you get the “All-new” Ram that’s so All-new, in fact, that Stellantis issued almost the exact same press photos they used at the 2024 launch. The order books for the 2025 ProMaster EV officially opened last week.
Electrek’s Take
Commercial vans for regional fleets are a no-brainer. Why? Because fleet managers are focused on the bottom line costs of operating their fleets – and, regardless of their political leanings, EVs cost less to own and operate than comparable ICE models. Until that fact changes, converting whatever assets to they can to electric will remain a priority.
If the “All-new” 2025 model is so similar, the specs so close, the photos so indistinguishable from the 2024 model that it takes your humble author nearly a week to figure if there’s even a story here at all hardly matters for a $10,000 price cut.
SOURCE | IMAGES: Stellantis.
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