Oil strategist says the market could be caught off guard by a crude spike this summer
Investors could be caught off guard by the strength of an oil price rally this summer, according to Morgan Stanley‘s Martijn Rats.
His comments came as oil prices rose on Wednesday amid fears of potential supply disruption after Ukrainian drone attacks on Russian refineries, and hopes that the Federal Reserve may soon start cutting interest rates which traditionally boosts demand.
International benchmark Brent crude futures for May delivery traded at $83.23 a barrel at 12:20 p.m. London time, up $1.3 for the session, while U.S. West Texas Intermediate (WTI) futures for April delivery stood at $78.95, roughly $1.37 higher.
Brent futures have largely been trading in a narrow $75 to $85 interval since the start of the year.
“They are quite benign. We’ve had a nice rally [in] December, January and first half of February but the last couple of weeks we’ve been fairly rangebound,” Rats told CNBC’s “Squawk Box Europe” on Wednesday.
“There is a view in the market that the non-OPEC producers can meet all of the demand growth this year and therefore there isn’t much incremental room for OPEC oil and that means you rely on continued OPEC cuts,” Rats said.
“Now, they are doing that, but people think that that dynamic for now puts a little bit of a cap on the price. We’ve had a good amount of spare capacity. I think the summer could be tighter than people expect but this is the dynamic that currently exists.”
A view of an oil well at Arab Desert in Jebel Dukhan, Bahrain on March 4, 2024.
Nurphoto | Nurphoto | Getty Images
Earlier this month, OPEC+ agreed to extend voluntary output reductions until the end of the second quarter in a bid to shore up the short-term stability of crude markets.
OPEC+ refers to a group of some of the world’s largest oil producers, including heavyweights such as Saudi Arabia and Russia.
‘Really elevated prices’
Asked why fuel supplies could be tighter in the summer, Rats said that the oil research community had been “quite cautious” about the outlook at the start of the year. However, a flurry of stronger-than-expected data had convinced many to upwardly revise oil demand forecasts.
“On the supply side, we’re seeing a slowdown in U.S. shale, we’ve seen a wobbly start in Brazil [and] we’ve seen a wobbly start in Canada. We expected inventories to build but year-to-date they are kind of flat. If in the first quarter, inventories [are] flat then they can draw possibly quite significantly during the summer period.”
Rats said there were plenty of indicators, such as physical differentials and refining margins, among others, that indicate the oil market has already tightened a bit more than the current spot price suggests.
“Now, at the moment we are going through oil refinery maintenance so [this] is always a bit of a soft part of the year but I think as the summer driving season unfolds, inventories draw … look, we’re not calling for the super cycle, but we could have a bit of strength in the summer.”
The summer driving season typically refers to the months between the U.S. Memorial Day and Labor Day holidays when people in the Northern Hemisphere tend to hit the roads.
Speaking to CNBC’s Dan Murphy in late January, Amrita Sen of Energy Aspects said geopolitical factors such as the Israel-Hamas war and tensions in the Red Sea could also push oil prices higher this summer.
Reflecting on attacks in the Red Sea, Sen said that naphtha (a hydrocarbon mixture) and jet fuel markets had been significantly impacted.
“This is the weak period for jet demand,” Sen said.
“Summer jet is ahead of us, and we think these attacks are going to go on for months so we could see some really elevated prices into the summer.”
The German city of Karlsruhe is setting an example for sustainability in waste management by deploying a fleet of 18 Mercedes-Benz eEconic electric garbage trucks that are helping make the streets cleaner, quieter, and a lot less stinky.
Since the end of September, the city of Karlsruhe has been relying on Mercedes’ fully electric waste collection vehicles throughout, with none of the area-specific restrictions or limited rollout strategies for one or two trucks at a time that typically accompany stories like these. Instead, the city is using the Mercedes eEconics for the same stuff they’d use the diesel versions for: residual waste disposal, paper collection, and bulky waste collection.
Normal garbage duty, in other words. And, in such daily use, they do a great job. The trucks cover an average route distance of around 80 km (about 50 miles) on 112 kWh battery packs (usable capacity is ~97 kWh) which can be reliably completed in single-shift operation without intermediate charging — thanks, in part, to Mercedes’ efficient electric motors and regenerative braking that shines in the trucks’ typical stop-and-go duty cycles.
More than a single shift, in fact. The fleet managers report that after “a good 80 kilometers with around 60 stops on its daily route,” energy consumption was only around 35% of the battery capacity, meaning the charge level dropped from 100% to 65% and 64% respectively.
At the same time, CO₂ emissions are significantly reduced: depending on the area of application, each eEconic can save between 150 and 170 tons of CO₂ per year. This results in a total potential annual saving of around 1,200 tons of CO₂ emissions.
The purchase of the electric vehicles was funded by the Federal Ministry of Transport (BMV) as part of the guideline on the promotion of light and heavy commercial vehicles with alternative, climate-friendly drives and the associated refueling and charging infrastructure (KsNI). The funding guideline was coordinated by NOW GmbH, and applications were approved by the Federal Office for Logistics and Mobility.
Electrek’s Take
Look, you know me. There is absolutely ZERO chance that I’ll be able to remain objective about anything that’s putting down more than four thousand lb-ft of torque. Make that thing quieter, cleaner, and generally better for me and my community, and there’s even less of a chance of me saying anything critical about it.
Here’s hoping more cities go electric rather sooner than later.
SOURCE | IMAGES: Daimler Truck.
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Electreon just took a big step toward expanding wireless EV charging. The Israel-based company signed a memorandum of understanding (MoU) to acquire the assets of InductEV, a Pennsylvania-based firm known for its ultra-fast, high-power static wireless charging systems used by heavy-duty electric transit and freight fleets.
If the deal closes after due diligence and regulatory approvals, the combined company would bring together Electreon’s dynamic wireless charging tech – the kind that can charge vehicles while they drive – with InductEV’s high-power stationary systems. That would create one of the most complete wireless charging portfolios on the market, covering everything from passenger EVs to vans, buses, heavy-duty trucks, and even autonomous vehicles.
Electreon and InductEV together hold around 400 granted and pending patents, and have a lot of field experience across their respective projects. Electreon says that pairing its manufacturing capabilities and global footprint with InductEV’s ultra-fast tech will help streamline and speed up fleet electrification.
Both companies already work with major vehicle OEMs, which Electreon asserts will make integrating wireless charging into future vehicle platforms easier.
Electreon CEO Oren Ezer said the deal would combine the two companies into “a truly global powerhouse for wireless EV charging.” He added that “the decision by InductEV’s shareholders to invest in Electreon is a tremendous vote of confidence in our shared vision.”
InductEV CEO John F. Rizzo said, “Together, we’re combining world-class innovation with real-world experience to deliver even greater value to our North American and European customers and accelerate the shift to wireless power for sustainable commercial transportation.”
Read more: Michigan installs the US’s first wireless EV charging public roadway
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The Dolphin Surf is already one of Europe’s cheapest EVs, yet BYD may have an even more affordable electric car up its sleeve.
Is BYD launching the Racco mini EV in Europe?
BYD revealed the Racco at last month’s Japan Auto Show, its first EV designed exclusively for overseas markets.
The mini EV, or “kei car,” is launching in Japan, where over 1.55 million of them were sold last year, accounting for about a third of new vehicles sold.
Although Japan has been a brutal market for foreign brands to crack, BYD believes it may have an edge. The Racco measures 3,395 mm in length, 1,475 mm in width, and 1,800 mm in height, or about 600 mm longer than the Dolphin Surf.
That’s about the size of the Nissan Sakura EV, Japan’s best-selling electric car. Like the Sakura and most kei cars, the Racco has a boxy, upright stance. It has four doors, with the back two sliding open.
Powered by a 20 kWh battery pack, the mini EV is expected to have a driving range of around 180 km (112 miles).
BYD is using its Blade lithium iron phosphate (LFP) battery packs to keep costs down. Although prices have yet to be revealed, the Racco is expected to start at around 2.5 million yen ($18,000) in Japan, putting it on par with the Nissan Sakura.
If it launched in Europe, the Racco could go on sale for under £15,000 ($20,000), putting it on par with the Dacia Spring (£14,995) and Leapmotor T03 (£15,995). The BYD Dolphin Surf currently starts at £18,650 ($24,300).
Although it will arrive in Japan first, BYD may launch its smallest, cheapest EV in Europe after all. BYD’s vice president Stella Li suggested to Autocar that the Racco could play a key role globally as an affordable, entry-level EV.
“In Japan, we are already launching a kei car; we will be very interested to follow the EU regulation,” Li said, adding, “If there’s some space, we can bring that car here.”
The regulation Li is referring to is the new “E-car” segment that the European Commission president, Ursula Von der Leyen, called for in September.
Von der Leyen said that Europe “should have its own E-car,” where “E” stands for efficient, economical, and European, and added “we cannot let China and others conquer this market.”
The Racco could sit underneath the Dolphin Surf in BYD’s growing European lineup. However, the company is focusing on expanding hybrid options. Li said launching Racco was “not a topic” the company is immediately focused on.
The Seal U, Europe’s best-selling plug-in hybrid through September, will be the first vehicle built at BYD’s new factory in Turkey, as it seeks to gain an edge through local production.
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