A general view of Isfahan Refinery, one of the largest refineries in Iran and is considered as the first refinery in the country in terms of diversity of petroleum products in Isfahan, Iran on November 08, 2023.
Fatemeh Bahrami | Anadolu | Getty Images
Oil prices have jumped more than $5 a barrel since the start of the week amid intensifying fears that Israel could launch an attack on Iran’s energy infrastructure.
The rally, which puts crude futures on track for gains of around 8% week-to-date, has surprised many market observers in that it appears to be somewhat subdued given what’s at stake.
Energy analysts have questioned whether oil markets are being too complacent about the risk of a widening conflict in the Middle East, particularly given that the fallout could disrupt oil flows from the key exporting region. Iran, which is a member of OPEC, is a major player in the global oil market. It’s estimated that as much as 4% of global supply could be at risk if Israel targets Iran’s oil facilities.
For some analysts, the reason crude prices have yet to move even higher is because the oil market is short. This refers to a trading strategy in which an investor hopes to profit if the market value of an asset declines.
“There is a very large short position, not only in oil, you [also] see it in equities. In general, the investors don’t like this space. Why? They are concerned about a big oil supply glut next year,” Jeff Currie, chief strategy officer of energy pathways at Carlyle, told CNBC’s “Squawk Box Europe” on Wednesday.
“When we look at the situation today, it is starkly different. Inventories are low, curve is backwardated, demand is middling, it’s not great but now you have [China’s] stimulus package on top of that, and you still have the OPEC production cuts,” Currie said.
“On top of that, we’ve thrown in potential conflict in the Middle East that could take out some energy facilities, so the near-term outlook is positive, which is why the front of the curve is strong, but it is being weighed down on the back end over the fears of this big oil supply glut,” he added.
The market is backwardated, or in backwardation, when the futures price of oil is below the spot price. The opposite structure is known as contango.
‘The market is so short’
Amrita Sen, founder and director of research at Energy Aspects, echoed Currie’s view.
“The market is so short. We’ve never seen these levels of record shorts before,” Sen told CNBC’s “Squawk Box Europe” on Thursday.
Many oil traders appear to have taken a bearish position on the belief that China’s stimulus rally will fail to restore confidence in the world’s second-largest economy, Sen said, adding that market participants also tend to expect OPEC and non-OPEC allies to boost oil production later in the year.
“The market has just gotten itself into this fit of around bearishness but that’s why if it goes, we could be above $80 very quickly,” Sen said.
International benchmark Brent crude futures with December expiry traded 0.8% higher at $78.26 a barrel on Friday, while U.S. West Texas Intermediate futures stood at $74.34, up 0.8% for the session.
Fundamentals ‘anything but encouraging’
Oil’s biggest move this week came on Thursday, when prices popped more than 5% following comments from U.S. President Joe Biden over a possible retaliatory move from Israel following Iran’s ballistic missile attack earlier in the week.
Asked by reporters whether the U.S. would support an Israeli strike on Iranian oil facilities, Biden said: “We’re discussing that. I think that would be a little – anyway.” The president added that “there’s nothing going to happen today.”
CNBC has reached out to the White House for further comment.
Tamas Varga, an analyst at oil broker PVM, told CNBC via email on Thursday that the oil market was pricing in some risk premium given the geopolitical concerns.
“This is why oil is stable-to-higher, equities are weakening, and the dollar is strong. These fears, however, will be greatly alleviated in [the] coming days unless oil supply from the region or traffic through the Strait of Hormuz are materially impacted,” he added.
Situated between Iran and Oman, the Strait of Hormuz is a narrow but strategically important waterway that links crude producers in the Middle East with key markets across the world.
“Under this scenario underlying fundamentals will become the driving force again and these fundamentals are anything but encouraging,” Varga said.
Israeli Prime Minister Benjamin Netanyahu on Tuesday pledged to respond with force to Iran’s ballistic missile attack, insisting Tehran would “pay” for what he described as a “big mistake.” His comments came shortly after Iran fired more than 180 ballistic missiles at Israel.
Speaking during a visit to Qatar on Thursday, Iranian President Masoud Pezeshkian said his country was “not in pursuit of war with Israel.” He warned, however, of a forceful response from Tehran to any further Israeli actions.
An Islamic Revolutionary Guard Corps (IRGC) speed boat is sailing along the Persian Gulf during the IRGC marine parade to commemorate Persian Gulf National Day, near the Bushehr nuclear power plant in the seaport city of Bushehr, Bushehr province, in the south of Iran, on April 29, 2024.
Nurphoto | Nurphoto | Getty Images
Bjarne Schieldrop, chief commodities analyst at SEB, said that oil prices were surprisingly steady given the high stakes.
“I think it is definitely a little bit about short covering, but [the price rally] is surprisingly weak … given the scenarios that might play out in the Middle East,” he told CNBC’s “Street Signs Europe” on Thursday.
Schieldrop said Brent crude prices had largely traded between $80 to $85 for around 18 months or so, before dipping below $70 in September. He described the oil contract’s recent move higher as “very meager,” especially given the “potentially devastating scenarios in the Middle East.”
— CNBC’s Spencer Kimball contributed to this report.
A Tesla Model S has caught fire while charging at a Supercharger station in France. Tesla is investigating the issue, and the station is temporarily closed.
Sunday night, a fire was reported at the Tesla Supercharger station in Pontarlier, a small community in France near the border with Switzerland.
The firefighters were called, and they were able to extinguish the fire, which appeared to have originated from a Model S that was plugged into the Supercharger.
The car was supervised until this morning to ensure it didn’t reignite.
The local newspaper L’Est Republicain shared a picture of the aftermath, which shows the Tesla Model S is a total loss:
According to the local paper, Tesla sent a technician from Lyon to investigate the issue (translated from French):
A Tesla technician came from Lyon during the night to investigate the causes of the fire. The investigation is still ongoing.
Electric vehicle batteries can sometimes catch on fire, but statistically, they don’t catch on fire at a higher rate than fossil fuel-powered vehicles.
Like with fossil fuel-powered vehicle fires, most EV fires occur after a significant crash. However, it can happen that a vehicle catches on fire by itself. In those cases, it’s important to investigate and make sure to track down the cause of the fire in order to make EVs safer.
For example, this is what happened with the Chevy Bolt EV battery recall.
The first all-electric Ferrari is expected to make its first official appearance later this year. Ahead of its debut, Ferrari’s first EV was spotted testing with an updated design. Take a look at it below.
Ferrari’s first EV caught testing ahead of its official debut
Despite an expected debut later this year, Ferrari has been, for the most part, tight-lipped about its first electric car.
CEO Benedetto Vigna promises it will be “a lot of fun” to drive, as expected from a Ferrari.” Vigna explained, “People buy a Ferrari because when they buy a Ferrari, they have a lot of fun.” The first fully electric model will be no different.
Although it has taken longer than many wanted, Ferrari’s CEO promises its first EV will be built “the right way.” It will still include all the Ferrari-like sound and signature design elements but in an all-electric form.
We caught a glimpse of the upcoming EV a few times already last year as it hit the road for testing. However, the most recent sighting, courtesy of Varryx, gives us an even closer look. The new video reveals an updated prototype and new design features you can expect to see.
Despite still being covered in camouflage, you can see the prototype is wearing new headlights and body panels. It also has several wires and brackets exposed up front.
Like previous sightings, Ferrari’s first EV prototype still has fake tailpipes. As the car passes, you can hear an exhaust-like sound, hinting that a fake one like Dodge’s electric charger could be in the works.
Last summer, Ferrari opened its new e-building, where the first electric car will be built. The facility will also build e-motors, batteries, and inverters. As you can see, the first electric Ferrari will be a crossover SUV similar to the Purosangue.
The electric crossover SUV is expected to make its first official appearance later this year as a 2026 model. By 2026, Ferrari aims for EVs and plug-in hybrids (PHEVs) to account for 60% of sales.
What do you think of Ferrari’s electric crossover? Let us know in the comments. Check back soon for more leading up to its debut later this year.
Source: Varryx
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The White House announced today that President Joe Biden is banning new offshore oil and gas drilling along 625 million acres of US coastline, taking the total area of ocean he’s protected to 670 million acres.
Biden, who wraps up his term in just two weeks, has used his authority under Section 12(a) of the Outer Continental Shelf Lands Act, which allows him to withdraw any unleased areas of the Outer Continental Shelf from future offshore drilling. Biden is protecting stretches of the East and West coasts, the eastern Gulf of Mexico, and parts of Alaska’s Northern Bering Sea.
“In balancing the many uses and benefits of America’s ocean, it is clear to me that the relatively minimal fossil fuel potential in the areas I am withdrawing do not justify the environmental, public health, and economic risks that would come from new leasing and drilling,” Biden said in a statement on Monday.
Biden continued, “The Deepwater Horizon oil spill [pictured above], a man-made catastrophe that took the lives of 11 people and spilled millions of barrels of oil into the waters of the Gulf of Mexico, is a solemn reminder of the costs and risks of offshore drilling to the health and resilience of our coasts and fisheries and underscores the importance of the legal protections I am putting in place today.”
Previous presidents from both parties have used this authority to withdraw large areas from oil and gas leasing. In 2020, the Trump administration protected North Carolina through Florida for 10 years in response to wide opposition to drilling from Republicans and voters, but the protections were set to expire in 2032. Biden’s announcement now permanently protects these areas. Trump, however, says he wants to overturn Biden’s oil drilling ban “on day one.”
Joseph Gordon, campaign director for the ocean conservation group Oceana, said in a statement, “President Biden’s new protections add to this bipartisan history, including President Trump’s previous withdrawals in the southeastern United States in 2020. Our treasured coastal communities are now safeguarded for future generations.”
The oil industry currently holds more than 2,000 leases, according to a 2023 Oceana report, with 75% of that ocean acreage currently unused.
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