Oil alliance OPEC+ could extend production cuts this weekend as focus shifts away from Middle East tensions, sources say
The OPEC logo on the building of the Organization of the Petroleum Exporting Countries.
Thomas Coex | Afp | Getty Images
The oil-producing Organization of the Petroleum Exporting Countries and its allies could extend existing output cuts this week, delegates and analysts told CNBC, even as focus shifts from Middle East tensions to summer demand.
The group, collectively known as OPEC+, was set to convene in person in Vienna on June 1, but last week moved the encounter virtually to June 2.
OPEC+ producers are currently implementing a combined 5.86 million barrels per day of supply cuts. Just 2 million barrels per day of these cuts represent unanimous commitments under OPEC group policy, and expire at the end of this year.
The remainder are reduced voluntarily by a subset of the alliance. A cut of 1.66 million per barrel is in place until the end of 2024, and 2.2 million barrels per day of supplies have been trimmed until the end of the second quarter. Market participants are watching whether this latter cut will be extended for another quarter, amid projected demand hikes.
“Come June, China would be largely out of refinery maintenance, U.S. consumption is improving as summer moves closer, so June should already see negative crude balances. And then August is the peak month for tightness,” Viktor Katona, lead crude analyst at Kpler, told CNBC.
The OPEC+ coalition is also eyeing individual members’ quota compliance, asking overproducers to implement additional cuts. Iraq and Kazakhstan have detailed compensation plans.
Extension
Three OPEC+ delegates, who spoke anonymously because of the sensitivity of talks, told CNBC the 2.2 million-barrels-per-day supply reductions will likely be prolonged, with a fourth saying this is the scenario anticipated by the market. One delegate acknowledged the probable market tightness in the second half of the year, but noted that demand concerns persisted until only recently.
OPEC’s latest Monthly Oil Market Report of May projects a 2.25 million barrel-per-day increase in demand this year, while Paris-based International Energy Agency’s Oil Market Report of the same month points to just a 1.06 million-barrel-per-day demand hike.
“I think that the clever thing for OPEC+ would be to gradually unwind the voluntary cuts to limit the upside price pressure, to prevent refilling inflation,” Jorge Leon, senior vice president of Rystad Energy’s Oil Market Research, told CNBC. “However, I think that the market right now has priced in a full extension of the voluntary cuts. So I think that is what, probably, they will do.”
He added, “If they decide to fully extend the voluntary cuts, and there is perfect compliance, and they do the full compensation, and then, if, I think prices could reach closer to $100 per barrel this summer.”
Energy security concerns fueled global inflation in the wake of Russia’s invasion of Ukraine and were further stoked after the conflict in Gaza threatened a broader spillover in the oil-rich Middle East, while frequent maritime attacks by Yemen’s Houthi militants disrupted trade transit in the Red Sea.
A high-inflation environment and tight monetary policy in turn reined in oil demand, but central banks have signaled readiness to lower interest rates in the second half of the year.
Tamas Varga, analyst at PVM Oil Associates, told CNBC that the OPEC+ supply restrictions will likely remain in place for the third quarter, adding, “I also believe that the producer group will emphasize that anyone who did not comply with the quota will have to make amends. And I believe that OPEC+ will only ease the supply constraints when they see obvious signs of global oil inventories depleting.”
Kpler’s Katona aligned with the views, but noted that heavyweights Saudi Arabia, Russia and the United Arab Emirates, who participate in the voluntary reductions, could seek to scrap the latter curbs toward the end of the year.
“Further down the line into 2025, unwinding cuts might be challenging for prices as incremental production from Guyana, Brazil, Canada will saturate the markets,” he said, flagging new Floating Production Storage and Offloading facilities due to come online. “This year there’s no new FPSO in Guyana, whilst next year it starts up a new one in [third-quarter] 2025. Brazil, likewise, has one FPSO starting up this year whilst next year it will be a bonanza of new capacity.”
Rising competing supplies have reduced the market prominence of OPEC+, one OPEC+ delegate acknowledged, while analysts signaled that the group’s ongoing output cuts allows unfettered producers to capture their market share.
Priced in
Oil prices have largely languished range-bound in the first half of the year, under ongoing threat of spikes from developments in the Middle East. Regional escalations could top prices with a risk premium of up to $10 per barrel, Rystad’s Jorge Leon noted – while OPEC+ delegates told CNBC that the situation in the Gaza Strip is still adding a little pressure, but that the market has already absorbed the majority of its effect.
Katona likewise noted that the Gaza crisis “will seemingly persist for longer than everyone expected but it doesn’t really have an imprint on OPEC+ coherence and policy.”
One OPEC+ delegate meanwhile said that the unexpected death of Iranian President Ebrahim Raisi represented a tragic accident that could not be interpreted as a risk to the market, especially given that his successor will likely pursue similar politics.
“I think the geopolitical risk premium has subsided and I think that the tension between Israel and Hamas will only support prices if it will have an obvious impact on oil production or oil flows, which might come in the form of the closure of the Strait of Hormuz, or attacks on oil infrastructure in the region, something which does not look plausible at the moment,” Varga said.
OPEC+ must also balance its relationship with the U.S., which has previously blasted the coalition’s supply cuts amid concerns over gasoline prices. The Biden administration last week said it will release 1 million barrels of gasoline from reserves in a bid to curb prices at the pump. The U.S. undertook similar crude releases from its Strategic Petroleum Reserve Stocks during the Covid-19 pandemic, but one OPEC+ delegate noted such measures are unlikely to have an impact beyond price relief during the summer. The U.S. typically seeks to replenish the emergency stockpile of its state reserves.
In a bold bid to combat the crippling air pollution crisis in its capital, Delhi, Indian lawmakers have begun high-level discussions about a plan to phase out gas and diesel combustion vehicles by 2035 – a move that could cause a seismic shift in the global EV space and provide a cleaner, greener future for India’s capital.
Long considered one of the world’s most polluted capital cities, Indian capital Delhi is taking drastic steps to cut back pollution with a gas and diesel engine ban coming soon – but they want results faster than that. As such, Delhi is starting with a city-wide ban on refueling vehicles more than 15 years old, and it went into effect earlier this week. (!)
“We are installing gadgets at petrol pumps which will identify vehicles older than 15 years, and no fuel will be provided to them,” said Delhi Environment Minister Manjinder Singh Sirsa … but they’re not stopping there. “Additionally, we will intensify scrutiny of heavy vehicles entering Delhi to ensure they meet prescribed environmental standards before being allowed entry.”
Making it prohibitively difficult for Dehli’s residents to own and operate older, presumably more polluting vehicles is one way to reduce harmful emissions and air pollution, but Sirsa’s team isn’t just targeting newer vehicles. They’re also planning to deploy more than 900 electric transit buses, part of a larger plan to replace 5,000 of the city’s 7,500 total bus with lower- or zero-emission options this year alone.
The Economic Times is reporting that discussions are underway to pass laws requiring that all future bus purchases will be required to be electric or “clean fuel” (read: CNG or hydrogen) by the end of this year, with a gas/diesel ban on “three-wheelers and light goods vehicles,” (commercial tuk-tuks and delivery mopeds) potentially coming 2026 to 2027 and a similar ban privately owned and operated cars and bikes coming “between 2030 and 2035.”
Electrek’s Take
After a Chinese government study linked air pollution caused by automotive exhausts and coal-fired power plants to more than 1.1 million deaths per year in 2013, the nation’s government took serious action, shuttering older coal plants and imposing strict emissions standards. The country also incentivized EV adoption through license-plate lotteries favoring electric cars and a nationwide EV mandate set to kick in by 2030.
The results were astounding, and the technological innovations that have come from an entire nation of talented engineers all “pulling in the same direction” have put the West to shame, with Western auto executives repeatedly sounding the alarm and lobbying for tariffs and other protectionist policies on both sides of the Atlantic.
To see India make move towards a gas and diesel ban like this, and on such an aggressive timeline, can only mean that they’ve been paying attention … and America is about to fall even further behind.
SOURCE: India Times; featured image by Sumita Roy Dutta.
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Last week, Parker Hannifin launched what they’re calling the industry’s first certified Mobile Electrification Technology Center to train mobile equipment technicians make the transition from conventional diesel engines to modern electric motors.
The electrification of mobile equipment is opening new doors for construction and engineering companies working in indoor, environmentally sensitive, or noise-regulated urban environments – but it also poses a new set of challenges that, while they mirror some of the challenges internal combustion faced a century ago, aren’t yet fully solved. These go beyond just getting energy to the equipment assets’ batteries, and include the integration of hydraulic implements, electronic controls, and the myriad of upfit accessories that have been developed over the last five decades to operate on 12V power.
At the same time, manufacturers and dealers have to ensure the safety of their technicians, which includes providing comprehensive training on the intricacies of high-voltage electric vehicle repair and maintenance – and that’s where Parker’s new mobile equipment training program comes in, helping to accelerate the shift to EVs.
“We are excited to partner with these outstanding distributors at a higher level. Their commitment to designing innovative mobile electrification systems aligns perfectly with our vision to empower machine manufacturers in reducing their environmental footprint while enhancing operational efficiency,” explains Mark Schoessler, VP of sales for Parker’s Motion Systems Group. “Their expertise in designing mobile electrification systems and their capability to deliver integrated solutions will help to maximize the impact of Parker’s expanding METC network.”
The manufacturing equipment experts at Nott Company were among the first to go through the Parker Hannifin training program, certifying their technicians on Parker’s electric motors, drives, coolers, controllers and control systems.
“We are proud to be recognized for our unwavering dedication to advancing mobile electrification technologies and delivering cutting-edge solutions,” says Nott CEO, Markus Rauchhaus. “This milestone would not have been possible without our incredible partners, customers and the team at Nott Company.”
In addition to Nott, two other North American distributors (Depatie Fluid Power in Portage, Michigan, and Hydradyne in Fort Worth, Texas) have completed the Parker certification.
Electrek’s Take
With the rise of electric equipment assets like Bobcat’s T7X compact track loader and E10e electric excavator that eliminate traditional hydraulics and rely on high-voltage battery systems, specialized electrical systems training is becoming increasingly important. Seasoned, steady hands with decades of diesel and hydraulic systems experience are obsolete, and they’ll need to learn new skills to stay relevant.
Certification programs like Parker’s are working to bridge that skills gap, equipping technicians with the skills to maximize performance while mitigating risks associated with high-voltage systems. Here’s hoping more of these start popping up sooner than later.
SOURCE | IMAGES: Parker Hannifin.
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Based on a Peterbilt 579 commercial semi truck, the ReVolt EREV hybrid electric semi truck promises 40% better fuel economy and more than twice the torque of a conventional, diesel-powered semi. The concept has promise – and now, it has customers.
Austin, Texas-based ReVolt Motors scored its first win with specialist carrier Page Trucking, who’s rolling the dice on five of the Peterbilt 579-based hybrid big rigs — with another order for 15 more of the modified Petes waiting in the wings if the initial five work out.
The deal will see ReVolt’s “dual-power system” put to the test in real-world conditions, pairing its e-axles’ battery-electric torque with up to 1,200 miles of diesel-extended range.
ReVolt Motors team
The ReVolt team starts off with a Peterbilt, then removes the transmission and drive axle, replacing them with a large genhead and batteries. As the big Pete’s diesel engine runs (that’s right, kids – the engine stays in place), it creates electrical energy that’s stored in the trucks’ batteries. Those electrons then flow to the truck’s 670 hp e-axles, putting down a massive, 3500 lb-ft of Earth-moving torque to the ground at 0 rpm.
The result is an electrically-driven semi truck that works like a big BMW i3 or other EREV, and packs enough battery capacity to operate as a ZEV (sorry, ZET) in ports and urban clean zones. And, more importantly, allows over-the-road drivers to hotel for up to 34 hours without idling the engine or requiring a grid connection.
That ability to “hotel” in the cab is incredibly important, especially as the national shortage of semi truck parking continues to worsen and the number of goods shipped across America’s roads continues to increase.
And, because the ReVolt trucks can hotel without the noise and emissions of diesel or the loss of range of pure electric, they can immediately “plug in” to existing long-haul routes without the need to wait for a commercial truck charging infrastructure to materialize.
“Drivers should not have to choose between losing their longtime routes because of changing regulatory environments or losing the truck in which they have already made significant investments,” explains Gus Gardner, ReVolt founder and CEO. “American truckers want their trucks to reflect their identity, and our retrofit technology allows them to continue driving the trucks they love while still making a living.”
If all of that sounds familiar, it’s probably because you’ve heard of Hyliion.
Hyliion electric semi truck
Before it changed its focus to develop Carnot-cycle generators and gensets, Austin-based Hyliion built a number of EREV Peterbilts using the then-new 15L Cummins diesel as a generator and employing the same sort of battery and e-axle-arrangement as ReVolt.
In addition to being located in the same town and employing the same idea in the same Peterbilt 579 tractor, ReVolt even employs some of the same key players as Hyliion: both the company’s CTO, Chandra Patil, and its Director of Engineering, Blake Witchie, previously worked at Hyliion’s truck works.
Still, Hyliion made their choice when they shut down their truck business. ReVolt seems to have picked up the ball – and their first customer is eager to run with it.
“Our industry is undergoing a major transition, and fleet owners need practical solutions that make financial sense while reducing our environmental impact,” said Dan Titus, CEO of Page Trucking. “ReVolt’s hybrid drivetrain lowers our fuel costs, providing our drivers with a powerful and efficient truck, all without the need for expensive charging infrastructure or worrying about state compliance mandates. The reduced emissions also enable our customers to reduce their Scope 2 emissions.”
Page Trucking has a fleet of approximately 500 trucks in service, serving the agriculture, hazardous materials, and bulk commodities industries throughout Texas. And, if ReVolt’s EREV semis live up to their promise, expect them to operate a lot more than 20 of ’em.
SOURCES | IMAGES: ReVolt; via Power Progress, TTNews.
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