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.”
A major new EV battery factory is being built in Sunderland, bringing 1,000 new jobs with it. AESC, Nissan’s battery partner, is behind the £1 billion ($1.33 billion) plant, which will boost the UK’s EV battery production by six times, enough to power 100,000 electric cars annually.
The 12 GWh capacity plant, AESC’s second battery plant in Sunderland, will be powered by 100% net-zero carbon energy. That big jump in capacity helps position Britain as a global player in EV manufacturing while pushing forward the country’s net-zero goals.
The investment is getting a serious financial lift from the British government. Through a combination of support from the National Wealth Fund and UK Export Finance, the project is unlocking £680 million in financing from major banks, including HSBC, Standard Chartered, SMBC Group, Societe Generale, and BBVA, that covers the construction and operation of the battery factory. Another £320 million is coming from private investment and fresh equity from AESC. On top of all that, the government’s Automotive Transformation Fund is pitching in with £150 million in grant funding.
This deal follows closely on the heels of the new UK-US trade agreement announced a day earlier, which cuts car export tariffs from 27.5% down to 10% for up to 100,000 UK-made vehicles – nearly the total number exported last year. That move could save car companies hundreds of millions of pounds and help protect good-paying jobs in manufacturing hubs like Sunderland.
Chancellor of the Exchequer Rachel Reeves visited AESC in Sunderland, where she met with staff and local leaders to discuss what this means for the Northeast and the British car industry.
“This investment follows hot on the heels of yesterday’s landmark economic deal with the US, which will save thousands of jobs in the industry,” Reeves said.
Read more: UK unveils largest curbside EV charger installation of 6,000 ports
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It’s about the future of their jobs. Ford workers at two plants in western Germany are set to go on strike on Wednesday, their works council chief said on Monday.
Ford is facing a worker strike in Germany
In November, Ford announced it would cut around 4,000 jobs in Europe by 2027 as part of a restructuring, primarily in Germany and the UK. That’s still about 14% of its European workforce.
The American automaker said the move comes after it has incurred “significant losses” in recent years and a “highly disruptive market” with new EVs quickly gaining market share.
Ford blamed slower-than-expected demand for electric vehicles and a weak economic situation. It also plans to slow production at its Cologne EV plant, where the electric Explorer and Capri are built.
Last week, IG Metall members voted in favor of “industrial action” with 93.5% of votes in favor of a strike. “Ford must act now—otherwise, we will go through with it,” said Kerstin D. Klein, Chief Representative of IG Metall Cologne-Leverkusen.
Ford is facing an influx of new competition, including Chinese EV makers like BYD. BYD’s overseas sales are surging with a fifth straight month of growth in April.
BYD even outsold Tesla in Germany last month, with 1,566 vehicles registered. In comparison, Tesla had just 855, and Ford saw 9,534 registrations.
On top of this, Ford, like most of the industry, is preparing for more disruption with Trump’s auto tariffs. After releasing Q1 earnings last week, Ford warned that the tariffs could cost up to $2.5 billion this year.
During Ford’s earnings call, CFO Sherry House said that recent EV launches in Europe, including the Explorer, Capri, and Puma Gen-E, helped more than double Model e’s wholesale volume in Q1.
After early success in the US, Ford also launched its “Power Promise” promotion in Europe, offering EV buyers a free home charger and several other perks.
Source: Reuters
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Environment
Slate’s $20k electric pickup that can be converted into an SUV has secured 100k reservations
Young EV startup Slate Auto is gaining significant interest from the US consumer market, just weeks after it emerged out of stealth with a bare-bones all-electric pickup. The company just announced its “Blank Slate” EV has already garnered 100,000 reservations.
It’s been just over two weeks since we reported on Slate’s official debut. Before that, much of our information was compiled from various sites on the internet and riddled with speculation. We knew the company was based in Michigan and was working on at least one BEV model, but not much else was confirmed until April 24, when Slate stepped out from behind the curtain and entered the electric pickup market.
It was then that we learned about the startup’s “Blank Slate” design, which involves a simplified all-electric pickup with over 100 accessories, plus a five-seat SUV configuration kit (seen above). We also learned that this new model is expected to start below $20,000 after US tax incentives.
Following the public launch of Slate and its flagship model, the company opened reservations with a $50 deposit. Today, a representative for Slate told Electrek that it has already hit the 100,000 reservation tally.
Slate’s booming reservations show appetite for affordable EVs
We don’t have much else to report now, other than that Slate has secured 100,000 reservations in the 18 days since it unveiled its electric pickup. It’s an impressive milestone showing that US consumers don’t necessarily need all the bells and whistles most of the electric SUVs and pickups on the current market offer.
Instead, people want BEVs that they can afford, with the option to upgrade and customize à la carte to their liking—a strategy Slate has adopted that could help the American startup do well out of the gate. While the 100k tally is impressive, those reservations do not accurately indicate how the “Blank Slate” pickup will sell, especially since the deposit to get on the wait list is only $50.
Before the polarizing Cybertruck hit US roads, Tesla reported it had received over one million reservations, possibly quite a bit more. However, the public’s response to the production version was as cold as the steel from which it was assembled. The Cybertruck overpromised and underdelivered, arriving at MSRPs significantly higher than initially promised.
As a result, a massive majority of those reservation holders walked, and Tesla has only sold less than 50,000 to date and is sitting on a ton of inventory. This should serve as a lesson to Slate, but its counter approach to the $100k+ Cybertruck should bode well, especially if it can deliver at or near the $20k price point as advertised.
As reported last month, its “Blank Slate” EV will be sold directly to consumers and is available for reservations here. The trucks will be built in the US, with initial customer deliveries expected to begin in Q4 2026.
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