Oil Prices Set For A Second Consecutive Weekly Loss As War Premium Fades
Crude oil prices looked set for a second weekly decline as the war premium stemming from the conflict in the Middle East continued to lose its hold over traders. In addition to the lower war premium due to continued containment of the Israel-Hamas war, prices were affected by the latest economic data from China, which showed an unexpected contraction in manufacturing activity in October, sparking once again questions about oil demand. “Oil prices have managed to ride on the improved risk environment higher, as markets continue to bask in the hopes that the Fed is likely done with its rate hiking process,” Reuters quoted IG market strategist Yeap Jun Rong as saying. “The fact that Israel’s ground invasion of Gaza has commenced without expanding the Israel?Hamas war has given hope that disruptions to oil supply and trade can be avoided,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note, quoted by Bloomberg. Dhar added, however, that “any direct involvement of Iran in the Israel?Hamas war will initially take Brent oil futures to $100 a barrel.” Earlier this week, ING analysts estimated that should the U.S. tighten sanctions on Iran, global markets could lose between half a million and a million barrels in daily supply. They went on to add, however, that the risk of supply disruptions remained limited for the time being. In this context, the upside potential for prices remains limited. Analysts expect Saudi Arabia to extend its voluntary production cuts into December, as previously suggested by the Saudis, so the supply curb has already been factored in. With the war premium down, so is the chance of prices spiking, bar any equally sudden escalation between Israel and Hamas. A potentially bigger worry for oil prices is diesel fuel supply, which has been tight for a year now. The only reason the market has not swung into a shortage yet is weak economic growth in key markets such as Europe and the U.S.
Natural Gas Flows From Israel To Egypt Resume
Natural gas deliveries from Israel to Egypt have restarted, after several days of no imports at all due to war-related disruptions. Bloomberg cited unnamed sources in the know as saying the gas is coming from the Leviathan offshore field, following the end of a production outage at another field, Karish, supply from which is currently being used to ensure domestic demand in Israel. Egypt used to import some 800 million cubic feet of natural gas from Israel before the war began. Following the Hamas attacks in southern Israel and the Israeli response, however, imports dried up. The Israeli authorities ordered Chevron to shut down production at the Tamar field because of its proximity to fighting and told the supermajor to reroute production from the Leviathan field to Jordan. Chevron became operator of the Tamar and Leviathan gas fields when it acquired their original operator, Noble Energy. Tamar has reserves estimated at around 11 trillion cubic feet of gas and Leviathan has twice that, according to estimates cited by Energy Intelligence. Israeli exports from these fields to Egypt secured the country’s growing energy demand and left some for exports to Europe, from Egypt’s LNG plant. With the shutdown and the rerouting, however, Egypt was plunged in a crunch, with daily blackouts at a time of higher demand. Now that Israeli gas is flowing to Egypt once again, the blackouts may end but exports to Europe may not resume immediately. Egypt’s first order of business would be to secure domestic supply first. That should not be an immediate problem for Europe, however. Reuters recently reported that close to 30 LNG tankers are en route to the continent and the UK, due to arrive before the end of this month. Egypt, on the other hand, will resume exports of LNG when domestic demand subsides, according to Eni, which has extensive operations in the North African country.
Natural Gas Flows From Israel To Egypt Resume
Natural gas deliveries from Israel to Egypt have restarted, after several days of no imports at all due to war-related disruptions. Bloomberg cited unnamed sources in the know as saying the gas is coming from the Leviathan offshore field, following the end of a production outage at another field, Karish, supply from which is currently being used to ensure domestic demand in Israel. Egypt used to import some 800 million cubic feet of natural gas from Israel before the war began. Following the Hamas attacks in southern Israel and the Israeli response, however, imports dried up. The Israeli authorities ordered Chevron to shut down production at the Tamar field because of its proximity to fighting and told the supermajor to reroute production from the Leviathan field to Jordan. Chevron became operator of the Tamar and Leviathan gas fields when it acquired their original operator, Noble Energy. Tamar has reserves estimated at around 11 trillion cubic feet of gas and Leviathan has twice that, according to estimates cited by Energy Intelligence. Israeli exports from these fields to Egypt secured the country’s growing energy demand and left some for exports to Europe, from Egypt’s LNG plant. With the shutdown and the rerouting, however, Egypt was plunged in a crunch, with daily blackouts at a time of higher demand. Now that Israeli gas is flowing to Egypt once again, the blackouts may end but exports to Europe may not resume immediately. Egypt’s first order of business would be to secure domestic supply first. That should not be an immediate problem for Europe, however. Reuters recently reported that close to 30 LNG tankers are en route to the continent and the UK, due to arrive before the end of this month. Egypt, on the other hand, will resume exports of LNG when domestic demand subsides, according to Eni, which has extensive operations in the North African country.
Is This The Moment Of Truth For The EV Industry?
A casual glance at key trends in electric vehicle markets suggests that the much-hyped EV revolution is very much alive and well. In the U.S., EV sales are on track to surpass 1 million units by year-end, good for an impressive 50% year-over-year increase. This in turn translates to, for the second year in a row, EVs making up nearly 10% of all new cars sold in the country. China remains firmly in the driver’s seat with a third of all new vehicles sold this year being electric while global sales have grown 33%. But looking below the hood reveals a much murkier reality, and suggests that the halcyon era of rapid EV adoption could be drawing to a close. Experts are saying that the people who have so far held off buying an electric vehicle are likely price-sensitive shoppers, leery of making major adjustments to accommodate an entirely new technology including charging anxieties and home equipment installations. “EV adoption is looking to move into its next phase — requiring much more mass-market interest — and this larger cohort has to be sold on EVs since they aren’t as enthusiastic and willing as early adopters,” Jessica Caldwell, director of insights at Edmund, has said. Signs are legion that point to an increasingly beleaguered industry and suggest that electric vehicles could increasingly become a hard sell. Shares of iconic EV manufacturer Tesla Inc. (NASDAQ: TSLA) have been selling off after the company under-delivered in its latest quarterly report. Tesla reported Q3 Non-GAAP EPS of $0.66, missing the Wall Street consensus by $0.07 while revenue of $23.35B (+8.9% Y/Y) missed by $790M. The Austin-based company produced 430,488 vehicles and delivered 435,059 vehicles during the quarter, blaming the sequential decline in volumes on downtimes for factory upgrades. More alarmingly, Tesla’s margins have been shrinking at a very worrying clip: Operating margin clocked in at 7.6% of sales, a full 200 basis points lower from the previous quarter and incomparable to 17.2% a year ago. Total GAAP gross margin was 17.9% compared to 25.1% a year ago and 18.2% in the prior quarter. Tesla has cut prices on multiple occasions over the past year, leading to contracting margins. Falling ASPs are usually the result of increasing competition and waning pricing power. Tesla CFO Zachary Kirkhorn had earlier stated that FY23 automotive gross margin should remain above 20% with average selling prices in the high $40K range, something that is clearly not happening. Cost remains a major sticking point for buyers of electric vehicles: In August 2023, the average transaction price for a new car (of any powertrain) was $48,451, compared to $53,376 for EVs (for new cars). Luckily, the price of EVs has been declining in-line with falling battery prices. Further, this trend is likely to hold in the coming years as lithium prices continue falling from their recent all-time highs. Tesla can take small comfort in the fact that it’s in good company. General Motors (NYSE:GM) has pushed back production launches of several electric trucks and SUVs, including the Chevy Silverado, GMC Sierra Denali EV and Equinox EVs. Ford MotorCompany (NYSE:F) has put on hold the construction of a new $12 billion EV factory citing slower customer demand. Honda Motor Co. (NYSE:HMC) and GM have canceled their plan to jointly develop a slate of affordable EVs, saying the economics do not work. Volkswagen AG (OTCPK:VWAGY) has announced that it will stop making the ID.3 and Cupra’s Born, citing subsidies and competition from China. Hybrids Remain Popular Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age of pure EVs, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs. In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefit. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.
Bharat Petroleum begins registration process in Cooch Behar for piped natural gas supply
The registration process for a connection to piped natural gas supply was introduced in Cooch Behar on Wednesday. Authorities of Bharat Petroleum Corporation Limited (BPCL) reached the residence of Rabindranath Ghosh, the chairman of Cooch Behar municipality, and got him to register his name for the facility, which, the authorities said, would be provided by March next year. The BPCL is carrying out an awareness campaign across the heritage town on the new facility. “It is a major development and residents of Cooch Behar town will benefit from it. There are indications that cost will be less if natural gas is supplied through pipelines instead of LPG cylinders…. We want the residents here to avail the benefit…,” said Ghosh. BPCL officials said that from this week, they would initiate the process of laying pipelines across the town. “In Cooch Behar, we will provide around 25,000 connections. So far, we have received 7,000 applications and by March next year, we would be in a position to supply gas to 1,000 households,” said B.C. Sikdar, the territory manager (I) of BPCL in Bengal.
BPCL and GAIL sign long-term gas supply deal
Indian oil and gas companies Bharat Petroleum Corporation Limited (BPCL) and Gas Authority of India Limited (GAIL) have signed a long-term gas supply agreement. Under the agreement, which is valued at Rs630bn ($7.56bn), BPCL will supply propane to GAIL’s petrochemical facility in Usar. BPCL will deliver 600ktpa of propane, a feedstock for petrochemicals, from its liquified petroleum gas import facility at Uran. As part of its efforts to meet the rising demand of the petrochemical Industry , BPCL is expanding its Uran liquefied natural gas facility to handle three million tons per annum (mtpa) of propane and butane imports from the current capacity of 1mtpa. With operations scheduled to begin in 2025, GAIL’s propane dehydrogenation (PDH)-polypropylene project in Usar is India’s first propane PDH facility. The PDH facility will have a nameplate capacity of 500ktpa, with propylene production integrated into a polypropylene plant of similar capacity.