Ahmed Zaki Yamani, former Saudi oil minister, dies at 90

Stocks next week: $ 3 gasoline could be around the corner – unless OPEC and Russia start pumping more oil

The price of US crude rose again above $ 60 a barrel. This is a far cry from the depths it reached last April Subzero oil crash (Minus $ 40.32 a barrel, to be exact) for the first time in history. Prices are starting to rise, too. The national average was $ 2.70 a gallon on Friday. According to the AAA. This is well above the April low of $ 1.76 a gallon.

Investors are betting that the pandemic will soon be brought under control – which, in turn, will unleash pent-up demand for road trips, cruises, flights and other oil-consuming activities.

Against this background, OPEC and its allies, known as OPEC +, are the It is scheduled to meet Thursday To deliberate on adding more barrels to the hungry market. They definitely have the firepower and price incentive to do so.
last year, OPEC + cut production by a record percentage 9.7 million barrels per day. The emergency steps, along with production cuts by the US and other producers, led to a strong price recovery. This recovery has accelerated in recent months as millions of people around the world have been vaccinated against COVID.

OPEC + may soon announce that the market is now healthy enough to ramp up production this spring.

“Given the attractiveness of the higher prices, there should be more supply in the market,” said Ryan Fitzmores, energy analyst at Rabobank.

Indeed, sources within OPEC + said Reuters In the past week, it was possible to increase production by half a million barrels per day starting in April without increasing stocks, although no final decision has been made.

“Given where the prices are, how would anyone tell Russia that they need to curtail production?” Jim Mitchell, chief US oil analyst at Refinitiv said.

There are several good reasons for OPEC + to release more barrels.

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First, higher prices mean that countries like Saudi Arabia that depend on oil to balance their budgets can generate much-needed revenue.

Second, if OPEC + does not start producing more, other countries will. It includes Crackers in Texas who have been marginalized Because of the oil breakdown.

Strategists at Bank of America told clients in a recent note that OPEC + will “maintain market share” by pumping more soon. In the second quarter alone, Bank of America expects OPEC + to add more than 1.3 million barrels per day of supply.

There is another reason OPEC + wants to act before it is too late: self-preservation.

If gasoline prices continue to rise and reach $ 3 a gallon – and more – that will only accelerate clean energy investments and convince more drivers to abandon gas-intensive SUVs for electric cars.

“If oil rises to extreme levels, it only helps the renewables story and cuts off the demand for oil,” said Fitzmores of Rabobank.

Switching to electricity means more expensive recalls

Hyundai Recall 82 thousand electric cars Globally, to replace their batteries after 15 reports of fires involving vehicles. Despite the relatively small number of cars involved, the recall is one of the most expensive in history.

The numbers: The withdrawal of Hyundai will cost a trillion Korean won, or $ 900 million. On a per vehicle basis, the average cost is $ 11,000 – a great astronomical number to remember.

The episode hints at how the disadvantages of electric cars could lead to prohibitive costs for carmakers – at least in the near future, according to a report by my colleagues Chris Isidore and Peter Valdes-Dabina.

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Recall is another indication of how expensive EV batteries are relative to the cost of the entire vehicle. Until the cost of batteries goes down, through increased worldwide production and economies of scale, the cost of manufacturing electric cars will remain higher than that of petrol cars.

Once the batteries become less expensive, as expected in the coming years, electric cars could become much cheaper to build because they have fewer moving parts and require 30% less labor hours to assemble compared to conventional vehicles.

Reducing electric vehicle parts may also mean that auto recalls will become less common in the future. But at present, there could be significant costs if battery fire issues require battery replacement.

next one

Monday: US ISM Manufacturing Index

Tuesday: Target, Kohl’s, AutoZone, AMC Entertainment, and HP Enterprise earnings

Wednesday: US ISM Non-Manufacturing Index; Crude oil stocks in the EIA; Dollar Tree earnings, Stilantis and American Eagle

Thursday: OPEC + US jobless claims meeting; Kruger, Gap and Costco earnings

Friday: February US jobs report; Great profits

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