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



US crude oil has run back over $ 60 per barrel. Barrel. That is far from the depth it reached in April last year, when oil crashed below zero (negative $ 40.32 per barrel, to be exact) for the first time in history. The prices of the pump are also starting to creep higher. The national average hit $ 2.70 per share. Gallon Friday, according to AAA. That is well above the April low of $ 1.76 per share. Gallon.

Investors are betting that the pandemic will soon be under control – and this in turn will release the suspended demand for car rides, cruises, flights and other oil-consuming activities.

Against this background, OPEC and its allies, known as OPEC +, are scheduled to meet on Thursday to consider adding more barrels to the hungry market. They have determined the firepower and the price incentive to do just that.
Last year, OPEC + cut 9.7 million barrels per year. Day. The emergency steps together with production cuts from US and other manufacturers led to a strong rebound in prices. This recovery has accelerated in recent months as millions of people around the world have been vaccinated against Covid.

OPEC + could soon announce that the market is now healthy enough to increase production in the spring.

“Given the lure of higher prices, there should be more supply in the market,” said Ryan Fitzmaurice, energy strategist at Rabobank.

In fact, sources within OPEC + told Reuters last week that a production increase of half a million barrels per day. Day beginning in April is possible without building inventories even if a final decision had not been made.

“Given where prices are, how will anyone tell Russia they need to limit production?” said Jim Mitchell, chief of U.S. oil analysts at Refinitiv.

Shell says its oil production has peaked and will decline every year

There are several good reasons why OPEC + is releasing more barrels.

First, higher prices mean that countries like Saudi Arabia, which depend on oil to balance their budgets, can bring in revenues that are much needed.

Second, if OPEC + does not start producing more, other countries will. This includes frackers in Texas who were put on the sidelines of the oil accident.

Bank of America strategists 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 year. Delivery day.

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

If gasoline prices continue to rise and hit $ 3 per barrel, Gallon – and beyond – it will only accelerate investment in clean energy and persuade more drivers to dump their gas-guzzling SUVs into electric vehicles.

“If oil shoots up to extreme levels,” said Rabobank’s Fitzmaurice, “it will only help the history of renewable energy and eat away at oil demand.”

The switch to electric means more expensive recalls

Hyundai remembers 82,000 electric cars globally to replace their batteries after 15 reports of fires involving the vehicles. Despite the relatively small number of cars involved, the recall is one of the most expensive in history.

The numbers: The recall costs $ 1 trillion won by Hyundai or $ 900 million. On a vehicle basis, the average cost is $ 11,000 – an astronomically high recall figure.

The episode signals how electrical car failures could create huge costs for car manufacturers – at least in the near future, my colleagues Chris Isidore and Peter Valdes-Dapena report.

The recall is another indication of how expensive EV batteries are in relation to the price of the whole car. Until the price of batteries falls through greater worldwide production and economies of scale, the cost of manufacturing electric vehicles will remain higher than comparable gasoline cars.

When batteries become cheaper, as expected in the coming years, electric cars can become much cheaper to build because they have fewer moving parts and require as much as 30% fewer hours of working time to assemble compared to traditional vehicles.

Fewer parts on electric vehicles may also mean that auto-calls will become less common in the future. But so far, there can be significant costs if battery fire issues require battery replacement.

Next

Monday: US ISM Manufacturing Index

Tuesday: Target, Kohls, AutoZone, AMC Entertainment and HP Enterprise earnings

Wednesday: US ISM Non-Manufacturing Index; EIA crude oil stocks; Dollar Tree, Stellantis and American Eagle earnings

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

Friday: Report on US jobs for February; Large lots of earnings


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