Stellantis – the merged automaker between Fiat Chrysler and French automaker PSA Groupe – plans to invest at least $35.5 billion (30 billion euros) in electric vehicles and supporting technologies through 2025.

The world’s fourth-largest automaker announced the plans Thursday during an electrification strategy event. Stellantis joins automakers such as Volkswagen, General Motors and Ford Motor in announcing investments of tens of billions of dollars in EVs.

The company said it expects to have 55 electrified vehicles in the U.S. and Europe by 2025. That includes 40 all-electric models and 15 plug-in hybrid electric vehicles. It’s a different strategy from other automakers such as GM that have announced plans to eventually only offer offer all-electric vehicles.

Most notably, for the U.S., Stellantis said it would offer an electric Dodge muscle car by 2024 and Jeep would offer an all-electric SUV in every vehicle segment by 2025. The company also plans to launch a Ram full-size electric pickup by 2024, which would put it at least two years behind American rivals Ford and GM.

The event did little for the company’s stock. Stellantis shares on the New York Stock Exchange closed Thursday at $18.99 a share, down by 3.2%…read more.

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 30 energy, energy service and pipeline & infrastructure companies with regular updates. We hold quarterly subscriber webinars and provide Action BUY and SELL Alerts for paid subscribers. Learn more. 

EIA Weekly Data: The EIA data on Thursday July 8th (delayed one day due to the July 4th holiday) was mostly supportive of crude oil prices as energy product demand continued to grow. The headline Commercial Crude Inventories data showed a normal summer seasonal rise in demand that caused a decline of 6.9Mb on the week (forecast was for a draw of 4.1Mb) to 445.5Mb. Refinery Utilization fell 0.7% to 92.2% last week (last year was 77.5% and in 2019 was 94.7%). Gasoline Inventories fell by 6.1Mb as demand rose by 870Kb/d, or by 6.1Mb on the week. Distillate Fuel inventories rose by 1.6Mb.

US Crude Production was the bearish part of the report as the US industry added 200Kb/d last week to 11.3Mb/d of production, and up 1.6Mb/d from the pandemic low. Over the coming months we see US crude production continuing to lift and getting close to the 12.0Mb/d level. The increase in drilling activity and higher energy company cash flows are causing a growth in reinvestment to stabilize production volumes which were declining for many producers. We expect to see the vast majority of energy companies to indicate a go forward strategy of increased activity with production growth in 2H/21 and much more growth in 2022 than in their prior forecasts.

Total Product Demand rose by 645Kb/d to 21.5Mb/d. Demand now exceeds that of early July 2019 when consumption was 20.8Mb/d. Gasoline Demand rose by a staggering 870Kb/d to 10.0Mb/d (9.49Mb/d consumed in early July 2019). Jet Fuel Consumption fell a modest 64Kb/d to 1.37Mb/d (and was much below the pre-pandemic level of 1.86Mb/d in early July 2019). Cushing Inventories fell last week by 700Kb to 39.6Mb compared to 47.8Mb last year.

Baker Hughes Rig Data: The data for the week ending July 2nd showed the US rig count with a rise of five rigs to 475 rigs. Of the 475 US rigs active, 376 were drilling for oil and 99 were focused on natural gas activity. This overall rig count is up 81% from 263 rigs working a year ago. The US oil rig count is up 103% from 185 rigs last year. The natural gas rig count is up only 30% from last year’s 76 rigs.

Canada had a 10 rig increase (up by nine rigs in the prior week) to 136 rigs. Canadian activity is now up 7.6x from the low of 18 rigs last year. Of the Canadian increase there were five more oil rigs working last week for a total of 87 oil rigs working, up from just six last year. There are 47 rigs working on gas projects now, up from only 12 last year.

The increase in rig activity in both the US and Canada should continue to translate into rising production.

Conclusion:

The OPEC meeting last week to decide the August production quota ended with no deal. There were three key issues that were not solved.

1. The Saudis wanted to see an increase of 400Kb/d in each of the remaining five months of the year which would add 2.0Mb/d into the year end. The UAE and Russia wanted to see the increase to be 500Kb/d per month or 2.5Mb/d before year end. Russia is currently producing 100Kb/d over its official quota and wants to raise production materially in the coming months. Russia and the UAE are pressuring OPEC to open the spigots to fill current demand and lower the price so that demand is not destroyed once the summer seasonal demand growth subsides.
2. The Saudis wanted to extend the deal to the end of 2022 from the current agreement to end in April 2022. The UAE and the Russia oppose this.
3. The UAE wanted a higher quota level as they have been investing in new productive capacity and felt they were being penalized by those not reinvesting in their energy industry. The UAE produced 2.64Mb/d in June versus 3.1Mb/d in Q4/19 and its capacity of 3.8Mb/d. They are spending US$25B per year so that they can raise their productive capacity to 5.0Mb/d before the end of the decade.

There is now a debate over whether this lack of attaining a deal means that supplies will be tight in 2H/21 or that the taps will be opened as the producers increase production to gain market share and higher revenues as many of the members are cash strapped. Pressure by the US, China and India as the largest consuming nations is expected to force the members to an accommodation later this month that would see meaningful increases in production in 2H/21 so that prices don’t escalate further and impact the nascent worldwide economic recovery.

Bearish pressure on crude prices:

1. The new Covid variant ‘Delta” is spreading around the world and more countries are facing lockdowns as this new variant takes hold and becomes the dominant version. New lockdowns or restrictions have been imposed in the UK, Australia (nearly half of the country led by Sydney), Israel and Portugal. This Delta version has been found in over 100 countries including the US and Canada. Over 4.0M people have died from the pandemic of which the US has exceeded 606K deaths. The biggest single case load increases this week are occurring in Afghanistan, Bangladesh, Brazil, Mongolia, Indonesia, South Africa, Tunisia and Zimbabwe. Today, Japan announced a Covid state of emergency through August 22nd and will not allow any fans to attend the upcoming Olympics. The more of a resurgence, the more problematic the economic recovery worldwide.
2. Iran is in the final stage of talks to return to the 2015 UN nuclear deal and an accord is likely to be completed this month. Significant progress has been made and 1,040 sanctions on issues such as insurance, oil and shipping have been agreed to. China and India are expected to be the biggest buyers of this new crude supply. The US has signalled that things are progressing as they lifted sanctions on more than a dozen Iranian officials and energy firms. Iran is cash strapped and needs a deal if they are going to afford imports and keep their economy provided with the necessities.
3. Rising crude and product prices may again dampen worldwide demand. Overall the US is seeing an average cost over US$3/gal with some places seeing price spikes to US$5/gal. Other gasoline stations have no supply availability and have closed.

Bullish pressure on crude prices:

1. Rising vaccination levels of the adult population in the US to herd immunity level of 70% during July, is expected to provide a return to normal summer holidaying and energy consumption, as well as in Canada and the EU. Worldwide demand should rise by 1.5-2.0Mb/d during the summer travel months. The data this week from the US supports this view.
2. Weather impacts (hurricane season) have started in the Gulf of Mexico which may necessitate shutting in some of the offshore production.
3. High temperatures, crippling droughts and heatwaves across the US and Canada are cranking up demand for air conditioning and natural gas is a beneficiary of this increase in electricity demand. NYMEX natural gas prices have lifted to US$3.70/mcf. AECO prices are at C$3.64/mcf.

CONCLUSION: We remain skeptical of the optimism about the projected 4-5Mb/d full recovery in energy demand to 100Mb/d before year-end. The tug of war between the normal summer holiday travel demand pick-up and the 3-4Mb/d increase in crude oil supplies this year remains the key determinant of future energy consumption and crude oil prices. We see demand picking up by around 2Mb/d before year-end which is less than the amount of production that will be brought on by OPEC (ex-Iran) alone. Between some OPEC cheating, US production growth  and Iran adding 1Mb/d+ beginning in August (if a deal is concluded), the additional product will be in excess of current demand and will build inventories. This would endanger the OPEC bullish scenario for crude prices.

WTI crude oil prices rose recently to US$76.98/b (the highest since October 2018 – today US$72.16/b). Crude has fallen nearly US$5/b over the past few days as the concern about a market share war by OPEC members increases supplies faster than demand growth. All eyes will be on the UAE to see what crude price discounts they offer and what volumes they want to sell to customers.

A decline below US$67/b for WTI should start the corrective phase we have been forecasting. The current enthusiasm by speculative forces including hedge fund futures traders, appears to be like that seen in late 2018. That’s when crude oil prices rose to US$76.90/b in September and three months later, had declined to US$42.36/b, and down by 45%. The price of crude now is above the pre-pandemic price of early 2020, yet demand is 4-5Mb/d less and OPEC is ramping up production while still having nearly 9Mb/d of spare capacity.

Energy Stock Market: The S&P/TSX Energy Index trades currently at 136 (down from 143 last week). A close below 132 should initiate the next sharp decline. An initial downside target after such a breach is down to the 111 area. The current stock market weakness is likely an additional catalyst for the energy sector to lose its current momentum and back off meaningfully.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all  archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY or SELL signal occurs, as well as our Quality Scoring System review of the 30 companies that we cover. We go over the markets in much more detail and highlight individual companies’ financial results in our reports. Our next four SER reports will focus on the results of Q2/21 for the 30 companies on our Coverage List.

Our July Interim Report comes out later today, Thursday July 8th, and includes our normal Stock Market and Energy Market Updates. If you want to access this report and our forthcoming quarterly reviews then become a subscriber and go to https://bit.ly/34iKcRt to subscribe.

With the rush of newly minted investors into the EV space, news about electric vehicle technology now rivals that of climate change. Most of the news is good and the latest in batteries is no exception: researchers have managed to make a lithium metal battery last for 600 cycles.

Here’s some clarification upfront: lithium-ion batteries are made up of a lithium-containing cathode and an anode, usually made from graphite. They also feature an electrolyte solution through which lithium ions shuffle back and forth as the battery charges and discharges.

Lithium metal batteries, on the other hand, have an anode that is made from lithium rather than graphite. Lithium is much lighter than graphite and reduces the total weight of the battery. This lighter weight also helps the battery store a lot more energy.

What’s more, lithium metal batteries are a newer technology, which means there’s more space for innovation, while lithium-ion technology is “rapidly approaching their theoretical limit on energy density,” as one scientist from the SLAC National Accelerator Laboratory put it last year.

Unfortunately, as is the case with any technology, not all the news is good. The replacement of graphite with lithium in the anode makes the usual electrolytes used in lithium-ion batteries unusable so new electrolytes need to be developed. This has proved challenging, so for all its advantages, lithium-ion technology has yet to get out of the lab and before it does that, it needs to prove it can make batteries with lithium anodes last at least as long as the lithium-ion ones.

The problem with lithium metal batteries is their short life, so this is what scientists have been focusing on lately. Last year, a SLAC National Accelerator Laboratory team reported it had succeeded in making a lithium metal battery last for 420 cycles of charging and discharging. That’s up from an average of 30 cycles for previous lithium metal batteries, so it’s quite an advancement. To compare, the average lithium-ion battery for EVs lasts for a few thousand cycles.

Now, another team of scientists, from the U.S. Department of Energy’s Pacific Northwest National Laboratory, has announced a battery that can last for up to 600 cycles, and even once this number was reached, it still retained close to 80 percent of its capacity…read more.

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 30 energy, energy service and pipeline & infrastructure companies with regular updates. We hold quarterly subscriber webinars and provide Action BUY and SELL Alerts for paid subscribers. Learn more. 

EIA Weekly Data: The EIA data on Wednesday June 30th was supportive of crude oil prices. The headline Commercial Crude Inventories data was bullish for crude as it fell 6.7Mb on the week (forecast was for a draw of 4.7Mb) to 452.3Mb. The reason for the miss was that Net Imports fell by 602Kb/d or by 4.2Mb on the week. Refinery Utilization rose 0.7% to 92.9% last week (last year was 75.5% and in 2019 was 94.2%). With the increase in refinery activity Gasoline Inventories rose by 1.5Mb.

US Crude Production was steady at 11.1Mb/d last week. Over the coming months we see US crude production lifting to 11.5-12.0Mb/d as the increase in drilling activity and higher energy company cash flows are reinvested to stabilize production volumes which are still declining for many producers. Many companies are now talking about lifting their production guidance for the second half of this year.

Total Product Demand rose by 152Kb/d to 20.9Mb/d. Demand now exceeds that of late June 2019 when consumption was 20.76Mb/d. Gasoline Demand dropped by 267Kb/d to 9.17Mb/d (9.49Mb/d consumed in late June 2019). Jet Fuel Consumption also fell with a decline of 149Kb/d to 1.43Mb/d (1.86Mb/d in late June 2019). Cushing Inventories fell last week by 1.4Mb to 40.3Mb compared to 45.6Mb last year.

Baker Hughes Rig Data: The data for the week ending June 25th showed the US rig count flat at 470 rigs (up nine rigs in the prior week). Of the 470 US rigs active, 372 were drilling for oil and 98 were focused on natural gas activity. This overall rig count is up 77% from 265 rigs working a year ago.

Canada had a nine rig increase (up by 24 rigs in the prior week) to 126 rigs. Canadian activity is now up 9.7x from the low of 13 rigs last year. Of the Canadian increase there were eight more oil rigs working last week, for a total of 82 oil rigs working, up from just four last year. There are 44 rigs working on gas projects now, up from only nine last year.

The increase in rig activity in both the US and Canada should continue to translate into rising production. Energy service stocks have recovered significantly from this activity recovery.

Conclusion:

In July, OPEC plans to lift production by 840Kb/d. OPEC’s meeting tomorrow will determine the increase planned for August. An agreement for an increase of 500Kb/d is expected but Russia is pushing for an increase of up to 1.0Mb/d. The final number to be decided will depend upon the timeline for a nuclear deal with Iran, with sanctions ending against their energy industry, and when they can bring back shut in production. It is now expected that a deal will be completed in July and Iran could increase production sometime in August. Iran has over 200Mb in storage waiting to be sold. Of this 80Mb is in floating storage offshore their probable customers. They want to quickly lift production to 4.0Mb/d from the 2.46Mb/d they produced in May 2021.

Bearish pressure on crude prices:

1. The new Covid variant ‘Delta” is spreading around the world and is replacing the prior B.1.1.7 variant. Now more than 50% of new cases are of this variant. It is also hitting more young people under 12 years of age. New lockdowns or restrictions have been imposed in the UK, Australia (nearly half of the country), Israel and Portugal. Spain  and Portugal have imposed travel restrictions on unvaccinated Britons on Monday which will hurt their recovering tourist industry.
2. This Delta version has been found in over 60 countries including the US (49 of the 50 States) and Canada. Over 3.93M people have died from the pandemic of which the US has exceeded 604K deaths. The biggest single case load increases are occurring in Bangladesh, Brazil, Colombia, Oman and Zambia.
3. Iran is in the final stage of talks to return to the 2015 UN nuclear deal and an accord is likely to be completed in July (the seventh and likely final round). Significant progress has been made and 1,040 sanctions on issues such as insurance, oil and shipping have been agreed to. China and India are expected to be the biggest buyers of this new crude supply. The US has signalled that things are progressing as they lifted sanctions on more than a dozen Iranian officials and energy firms.
4. Rising crude and product prices may dampen worldwide demand. Overall the US is seeing an average of over US$3/gal with some places seeing price spikes to US$5/gal. Other gasoline stations have no supply availability and have closed.

Bullish pressure on crude prices:

1. Rising vaccination levels of the adult population in the US to herd immunity level of 70% during July, is expected to provide a return to normal summer holidaying and energy consumption, as well as in Canada and the EU. Demand should rise by 1.5-2.0Mb/d during the summer travel months.
2. Weather impacts (hurricane season) have started in the Gulf of Mexico which may necessitate shutting in some of the offshore production.
3. High temperatures, crippling droughts and heatwaves across the US and Canada are cranking up demand for air conditioning and natural gas is a beneficiary of this increase in electricity demand. NYMEX natural gas prices have lifted to US$3.62/mcf. AECO prices are a marvelous C$4.10/mcf.
4. There has been a lift in crude prices in the last few weeks as some commentators have said that the Iran deal may come much later than the August forecast as talks drag on.

CONCLUSION: We remain skeptical of the optimism about the projected 4-5Mb/d full recovery in energy demand to 100Mb/d before year-end. The tug of war between the normal summer holiday travel demand pick-up and the 3-4Mb/d increase in crude oil supplies this year remains the key determinant of future energy consumption and crude oil prices. We see demand picking up by around 2Mb/d before year-end which is less than the amount of production that will be brought on by OPEC (ex-Iran) alone. Between some OPEC cheating and Iran adding 1Mb/d+ beginning in August (if a deal is concluded), the additional product will be in excess of current demand and will build inventories. This would endanger the OPEC bullish scenario for crude prices.

WTI crude oil prices rose recently to US$74.45/b (highest since October 2018 – today US$73.22/b) and are now quite overbought. A decline below US$67/b should start the corrective phase we have been forecasting. The current enthusiasm by hedge fund futures traders and now MEME speculators for the sector, appears to be like that seen in late 2018. That’s when crude oil prices rose to US$76.90/b in September and three months later, had declined to US$42.36/b, down by 45%. The price of crude now is above the pre-pandemic price of early 2020, yet demand is 4-5Mb/d less and OPEC is ramping up production while still having over 8Mb/d of spare capacity. The current price level for crude does not make sense! It should be trading in the US$50/b area.

Energy Stock Market: The S&P/TSX Energy Index trades currently at 139 (down from 143 last week). A close below 132 should initiate the next sharp decline. An initial downside target after such a breach is down to the 100 area. General stock market weakness would be the catalyst for the energy sector to lose its current momentum and back off meaningfully.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all  archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY or SELL signal occurs, as well as our Quality Scoring System review of the 30 companies that we cover. We go over the markets in much more detail and highlight individual companies’ financial results in our reports. Our next three SER reports will focus on the results of Q2/21 for the 30 companies on our Coverage List.

Our July Interim Report comes out on Thursday July 8th and includes our normal Stock Market and Energy Market Updates. If you want to access this report and our forthcoming quarterly reviews then become a subscriber and go to https://bit.ly/34iKcRt to subscribe.