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Texas freeze helps rival oil exporters like Saudi Arabia ‘tremendously,’ may influence OPEC decisions

Pump jacks operate in the Permian Basin in Midland, Texas, U.S, on Saturday, Feb. 13, 2021.

Matthew Busch | Bloomberg | Getty Images

The shock winter storm in Texas that left millions without power and took dozens of lives also froze a major local commodity: the Lone Star State’s oil production, slashing some 4 million barrels per day from U.S. output. 

The consequence will be a boost in revenue and potentially increased exports among rival oil-producing nations, commodities experts say. 

Analysts estimate the total volume of oil lost to Texas’ production freeze at anywhere between 18 million and 40 million barrels and roughly one-fifth of U.S. refining capacity was shut in. And while temperatures are moving upward again and production is expected to mostly recover by the end of this week, the impact of the deficit on oil markets is already visible in the recent jump in crude prices.  

International benchmark Brent crude is up more than $6 per barrel since the storm began hitting Texan production facilities in mid-February. U.S. benchmark West Texas Intermediate has risen about $3 per barrel.  

The development, while adding yet another blow to Texas on top of the devastating damage and human suffering wreaked by the once-in-a-decade storm, translates on the global market into a likely boon for other oil producers, like those in the Middle East.  

“The Texas storm helps Saudi and its partners tremendously because it accelerates the path to inventory normalization,” Peter Sutherland, president of Houston-based energy investment firm Henrietta Resources.  

“Concurrent drawdowns of both crude and refined products are a big tailwind heading into spring,” he told CNBC. “It’s not just positive sentiment; the roughly 40 million barrels lost due to the storm help tighten the market.”

OPEC expected to increase production

The inventory drawdown continues a trend that’s seeing oil prices steadily rise from their historic pandemic-induced lows nearly a year ago. Brent crude is up 30% year to date, with Goldman Sachs predicting it could hit $75 by the end of this year, a level not seen since fall of 2018.  

This could influence decision making among OPEC members in their upcoming meeting on March 4. While the organization had prioritized production cuts during much of the pandemic to keep a floor under oil prices, the more promising outlook for demand — and gradually normalizing global supply — provides incentive for these producers to speed up the rate at which they’ll increase their production.   

“I would certainly expect Saudi Arabia to boost production given the current prices that the market has seen,” said Yousef Alshammari, CEO at oil markets consultancy firm CMarkets.

“Supply disruption in Texas may lead to OPEC+ and Saudi Arabia to raise production by a certain extent and much of that production rise will go to exports at higher prices.” OPEC+ is the loose alliance of 13 OPEC states and 10 non-OPEC oil-producing countries.  

Saudi Arabia’s voluntary production cuts of 1 million barrels per day ends in March, and is already expected to start gradually bringing back supply in April. But that also means the kingdom can’t take advantage of higher crude prices by ramping up exports until that production cut period ends. 

Still, “every oil producer, including Saudi Arabia, enjoys the benefit of” the price increase, said Tamas Varga, senior analyst at PVM Oil Associates. “U.S. crude oil exports will fall in coming weeks and this provides support for international grades — again supportive for oil producers.”

‘Very small on a global basis’

Some analysts don’t see the Texas output loss as consequential, even in the medium term. 

The impact of a 4 million barrel daily loss “is very small on a global basis as the world produces over 80 million barrels per day of oil,” Rene Santos, manager for North America supply at S&P Global Platts Analytics, told CNBC.

“Freeze-offs happen in the U.S. every year but of the magnitude that we experienced in the past few days does not happen very often,” he said. “In addition, freeze-offs are short-lived.”

PVM’s Varga agrees. “The situation will likely normalize soon and in the medium-term the impact of the Texas freeze will be negligible, I think,” he said.

But the longer-term market dynamic is still in OPEC members’ favor — not because of Texas’ storm, but thanks to last year’s devastating oil production shut-ins across the U.S. when crude prices crashed. The high cost of U.S. shale production meant most producers couldn’t survive the impact of the lockdowns. U.S. rig count is still 50% below 2019 levels, despite climbing prices. 

“U.S. oil production is not expected to rebound to 2019 levels which will leave OPEC+ with much more influence on the markets in 2021,” Alshammari said. 

Over the long term, the impact from a weather shock like this month’s “really depends on how Texas will deal with such crises in the future,” he added. “I expect them to be more resilient to such adverse weather conditions on the upstream supply side, yet I certainly expect Saudi Arabia to have a bigger market share in the long run due to the lost market share from shale production.”

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Former Tesla exec signs new recycling deal as battery costs soar 

Walk with JB Straubel through the Redwood Materials recycling plant in Carson City, Nevada, and one thing stands out: Pallets stacked on top of pallets filled with old batteries, defective battery cells and scrap material from the nearby Panasonic plant.

“The sheer magnitude of the waste and scrap problem and the magnitude of batteries that need to get recycled is, I think, shocking to most people,” said Straubel, founder and CEO of Redwood Materials. Straubel spent more than a decade at Tesla, before resigning as chief technical officer in 2019 so he could focus on growing his recycling company.

Redwood Materials has reached an agreement to recycle scrap and defective battery cells for Envision AESC, which manufactures batteries for the Nissan Leaf in Smyrna, Tennessee. It is the latest move for the company Straubel started in 2017 to supply battery makers and auto companies with raw materials in short supply as EV production surges around the world. 

“We bring the materials back to a very clean and sort of fundamental state so there is no loss in effectiveness,” said Straubel. “It’s actually indistinguishable whether there is cobalt coming via an old battery or from a mine.” 

Cobalt, lithium, nickel, and other minerals and metals used in EV batteries have become very hot commodities, so hot, prices have rocketed to 52-week highs. Fueling the rise in prices is an announced surge in lithium-ion battery production as automakers from Tesla to General Motors and Ford dramatically increase EV plans over the next decade.   

“To make the batteries the world needs in 10 years, the industry will need 1.5 million tons of lithium, 1.5 million tons of graphite, 1 million tons of battery-grade nickel and 500,000 tons of battery-grade manganese. The world produces less than a third of each of those materials today. New battery materials sources are highly valued and desperately needed,” said Sam Jaffe, managing director at Cairn ERA, an energy consulting firm.  

To drive home his point, Jaffe points out U.S. lithium-ion battery demand topped 43 megawatt hours last year and will climb to 482 megawatt hours by 2030.

The growth is fantastic news for Panasonic, which manufactures battery cells at the Gigafactory it operates with Tesla in Sparks, Nevada. Thanks to its latest expansion, the Gigafactory will produce just under 2 billion battery cells this year.

Allan Swan, who oversees Panasonic’s part of the factory, says even more production is needed. “Here in the United States, we certainly need four, five, six of these factories to support the automotive industry,” he said.  

Celina Mikolajczak, vice president of engineering and battery technology at Panasonic Energy North America, believes the booming EV plans means the industry has to look at recycling batteries as a new source for key minerals.

“There’s a lot of energy spent extracting these minerals and it makes absolutely no sense to landfill them,” she said. “We would be really foolish if we didn’t take advantage of the capacity of older cells, to create the next generation.”

Straubel and his team at Redwood like to say the largest lithium mine is in the junk drawers of America. It is a reminder Redwood is positioning itself to recycle a wide range of lithium-ion batteries, not just those that go into electric vehicles. Still, given Straubel’s long tenure at Tesla and his vast knowledge of the EV market, he is closely watching the rapidly expanding EV market.

As Straubel ripped open the packaging holding an old laptop battery that had been shipped to Redwood Materials, he sized up the pallet of old batteries stacked as high as his waist.  He estimates there may be a billion batteries in old laptops, cellphones and long-forgotten cordless tools sitting around U.S. homes.

“I’m a little surprised that some of the big OEMs (automakers) have taken perhaps a little longer to get fully pivoted and oriented in this direction,” said Straubel. “I’m also a little surprised at how many other successful and growing start-ups there are.”

Many of those start-ups have become publicly traded companies through SPAC mergers. Straubel thinks some of the start-ups are intriguing, but a few may have weak or questionable business plans. Which ones? Straubel won’t say, but he does have these words of caution for investors.

“Think calmly about the real business plan and the long-term potential,” he said. 

— CNBC’s Meghan Reeder contributed to this article.

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Former Tesla exec inks new recycling deal as battery costs soar 

Walk with JB Straubel through the Redwood Materials recycling plant in Carson City, Nevada, and one thing stands out: Pallets stacked on top of pallets filled with old batteries, defective battery cells and scrap material from the nearby Panasonic plant.

“The sheer magnitude of the waste and scrap problem and the magnitude of batteries that need to get recycled is, I think, shocking to most people,” said Straubel, founder and CEO of Redwood Materials. Straubel spent more than a decade at Tesla, before resigning as chief technical officer in 2019 so he could focus on growing his recycling company.

Redwood Materials has reached an agreement to recycle scrap and defective battery cells for Envision AESC, which manufactures batteries for the Nissan Leaf in Smyrna, Tennessee. It is the latest move for the company Straubel started in 2017 to supply battery makers and auto companies with raw materials in short supply as EV production surges around the world. 

“We bring the materials back to a very clean and sort of fundamental state so there is no loss in effectiveness,” said Straubel. “It’s actually indistinguishable whether there is cobalt coming via an old battery or from a mine.” 

Cobalt, lithium, nickel, and other minerals and metals used in EV batteries have become very hot commodities, so hot, prices have rocketed to 52-week highs. Fueling the rise in prices is an announced surge in lithium-ion battery production as automakers from Tesla to General Motors and Ford dramatically increase EV plans over the next decade.   

“To make the batteries the world needs in 10 years, the industry will need 1.5 million tons of lithium, 1.5 million tons of graphite, 1 million tons of battery-grade nickel and 500,000 tons of battery-grade manganese. The world produces less than a third of each of those materials today. New battery materials sources are highly valued and desperately needed,” said Sam Jaffe, managing director at Cairn ERA, an energy consulting firm.  

To drive home his point, Jaffe points out U.S. lithium-ion battery demand topped 43 megawatt hours last year and will climb to 482 megawatt hours by 2030.

The growth is fantastic news for Panasonic, which manufactures battery cells at the Gigafactory it operates with Tesla in Sparks, Nevada. Thanks to its latest expansion, the Gigafactory will produce just under 2 billion battery cells this year.

Allan Swan, who oversees Panasonic’s part of the factory, says even more production is needed. “Here in the United States, we certainly need four, five, six of these factories to support the automotive industry,” he said.  

Celina Mikolajczak, vice president of engineering and battery technology at Panasonic Energy North America, believes the booming EV plans means the industry has to look at recycling batteries as a new source for key minerals.

“There’s a lot of energy spent extracting these minerals and it makes absolutely no sense to landfill them,” she said. “We would be really foolish if we didn’t take advantage of the capacity of older cells, to create the next generation.”

Straubel and his team at Redwood like to say the largest lithium mine is in the junk drawers of America. It is a reminder Redwood is positioning itself to recycle a wide range of lithium-ion batteries, not just those that go into electric vehicles. Still, given Straubel’s long tenure at Tesla and his vast knowledge of the EV market, he is closely watching the rapidly expanding EV market.

As Straubel ripped open the packaging holding an old laptop battery that had been shipped to Redwood Materials, he sized up the pallet of old batteries stacked as high as his waist.  He estimates there may be a billion batteries in old laptops, cellphones and long-forgotten cordless tools sitting around U.S. homes.

“I’m a little surprised that some of the big OEMs (automakers) have taken perhaps a little longer to get fully pivoted and oriented in this direction,” said Straubel. “I’m also a little surprised at how many other successful and growing start-ups there are.”

Many of those start-ups have become publicly traded companies through SPAC mergers. Straubel thinks some of the start-ups are intriguing, but a few may have weak or questionable business plans. Which ones? Straubel won’t say, but he does have these words of caution for investors.

“Think calmly about the real business plan and the long-term potential,” he said. 

— CNBC’s Meghan Reeder contributed to this article.

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Energy

It’s time to add exposure to energy after sector’s ‘surprising’ reversal: Trader

The energy sector has gone from worst to first.

After trailing the S&P 500’s other major stock groups in 2020, energy has emerged as a leader this year, far outperforming its counterparts with a 25% gain. It’s also the top performer this month, up nearly 21%.

The sharp reversal has “caught a lot of people by surprise,” Craig Johnson, senior technical research analyst at Piper Sandler, told CNBC’s “Trading Nation” on Friday.

Now, they’re trying to figure out whether the run is for real, he said.

“If we come back and we look at a chart of, say, the XLE, it’s at a very interesting inflection point,” he said, referring to the Energy Select Sector SPDR Fund, which tracks the group.

“You’ve made a very nice double-bottom low and it looks like … we’re getting very close to reversing,” Johnson said. “I think from here, people have to add energy exposure — begrudgingly.”

Though the group remains a small part of most benchmarks, “you’ve got to buy the energy sector and at least start adding to positions,” he said.

Johnson highlighted the stocks of Exxon Mobil and Pioneer Natural Resources, saying in an email to CNBC that if Exxon closes above $54 a share, it “should open the door to a new leg higher.” Exxon rose by more than 3% in early Monday trading to $54.16.

Investors should also watch shares of Marathon Petroleum, BK Asset Management’s Boris Schlossberg said in the same “Trading Nation” interview.

“It’s the largest refiner in the U.S. It’s just sold off its retail operations to 7-Eleven,” said Schlossberg, managing director of FX strategy at his firm. “It’s going to use that money to pay down debt and maybe buy back shares. It’s got a 4.25% yield.”

“If you want to get super fancy, you can sell the March $51 puts and get the stock 7.5% lower from the price here with a higher yield,” he said. “I think it’s going to benefit from the long-term move in oil. So, to me, that’s going to be one of the better plays as we go forward.”

Marathon Petroleum’s stock popped 4% in early Monday trading to around $55.24 a share.

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State of Texas should pay for enormous energy bills after power outages, Houston mayor says

Workers repair a power line in Austin, Texas, U.S., on Wednesday, Feb. 18, 2021.

Thomas Ryan Allison | Bloomberg | Getty Images

Houston Mayor Sylvester Turner on Sunday called on the state of Texas to pay for the enormous electric bills that scores of Texans reported after severe winter weather knocked out power and rose energy prices.

Frigid conditions last week caused major grid failures and skyrocketing demand that left millions of people without heat and electricity. Now, as power resumes for most of Texas, some households face utility bills as high as $10,000.

“For people getting these exorbitant electricity bills and having to pay to repair their homes, they should not have to bear the responsibility,” Turner said during an interview on CBS’ “Face the Nation.” “Those exorbitant costs should be borne by the state of Texas and not the individual customers who did not cause this catastrophe this week.”

The high utility bills in Texas are due to the state’s unregulated power grid that’s nearly cut off from the rest of the country. In the market-driven system, customers pick their own power suppliers. In many cases, when demand increases, prices also rise.

The Electric Reliability Council of Texas (ERCOT), which manages power for roughly 90% of the state, was unprepared for the cold conditions and the surge in demand for power as people tried to heat their homes.

“All of what happened this past week was foreseeable and preventable. Our system in Texas is designed for summer heat and not necessarily a winter event,” Turner said.

“Climate change is real and these major storms can happen at any time,” he added. “These systems need to be weatherized … we need to open up the Texas grid.”

The exorbitant bills prompted Republican Gov. Greg Abbott to hold an emergency meeting with lawmakers on Saturday to address how the state can reduce the burden on consumers.

Read more:
Biden declares major disaster in Texas, more than 15 million told to boil water
Texas blackouts show how vulnerable power grid is to climate change
Texas grid failure ignites feud over Republican oversight of the energy industry

The Public Utility Commission of Texas also held an emergency meeting on Sunday to issue a moratorium on cutting customer power over non-payments. It also plans to restrict providers from sending customer invoices, Abbott announced at a press briefing on Sunday.

“Texans who have suffered through days of freezing cold without power should not be subjected to skyrocketing energy bills due to a spike in the energy market,” Abbott said at the briefing.

Rep. Michael McCaul, R-Texas., said Sunday during an interview on CNN that the state will use disaster relief funding from the federal government to support customers with high utility payments.

After more than 3 million people in Texas lost power last week, ERCOT said it’s returned to normal conditions and restored power for millions of customers. More than 30,000 people in Texas still didn’t have power as of 11:30 a.m. Sunday morning, according to recent data from PowerOutage.us.

More than 1,300 public water systems were disrupted from the extreme weather and more than 15 million people were under orders as of Saturday to boil their water, according to the Texas Commission on Environmental Quality.

President Joe Biden approved a major disaster declaration for 77 counties in Texas on Saturday, unlocking federal aid for Texans, grants for temporary housing and home repairs and low-cost loans to cover uninsured property losses. The state’s goal is to eventually have all 254 counties under the declaration.

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Energy

Airlines’ latest challenge: Rising jet fuel prices

A JetBlue Airways plane taxis next to American Airlines, Delta Air Lines and Alaska Airlines aircraft at Reagan National Airport (DCA) in Arlington, Virginia, on Monday, April 6, 2020.

Andrew Harrer | Bloomberg | Getty Images

The oil rally is taking jet fuel along for the ride, posing another headache for airlines still struggling from depressed travel demand in the Covid pandemic.

U.S. jet fuel prices reached a nearly 13-month high of $1.67 a gallon on Wednesday, according to S&P Global Platts data, a climb led by an arctic blast and winter storms that disrupted oil production, refining and transportation. Millions were left in the cold and the dark in Texas, which largely relies on natural gas for heat and power.

“We were expecting fuel to be at these levels by the second half of the year,” said Raymond James airline analyst Savanthi Syth. Costlier fuel can make it harder for airlines to stem their cash burn, a goal that has already been delayed due to weaker-than-expected demand.

Cost headwind

Spirit Airlines CFO Scott Haralson during a Feb. 11 earnings call cited higher fuel costs as being among the discount airline’s first-quarter challenges. The carrier expects fuel costs to be up 32% this quarter from the last three months of 2020. Greg Anderson, CFO of Allegiant Air parent Allegiant Travel Co., also cited higher fuel costs as a headwind during a Feb. 3 quarterly call.

Jet fuel production is one of airlines’ biggest expenses along with labor. Luckily for carriers, labor costs are currently supported by billions in federal aid, helping soften the blow of more expensive fuel, Syth said.

Consumption of jet fuel plunged over the last year as airlines sharply reduced flying amid a drop in air travel demand. That sent prices sharply lower and airlines’ fuel bills down with it. American Airlines, which stopped hedging fuel in 2014 when oil prices cratered, said in a securities filing this week that its $3.4 billion fuel bill last year made up just 12% of its costs, down from a 22% share in 2019 as the price dropped and its consumption roughly halved.

“Based on our 2021 forecasted mainline and regional fuel consumption, we estimate that a one cent per gallon increase in the price of aircraft fuel would increase our 2021 annual fuel expense by $38 million,” the company said in the annual filing.

Demand rebound

Jet fuel consumption in the U.S. so far this year is still off by almost a third from last year, according to a Citi report this week.

The supply disruptions were enough to drive up prices, but to sustain their climb travel demand needs to rebound as well, said S&P Global Platts analyst Lenny Rodriguez. The Transportation Security Administration’s daily airport screenings have averaged more than 810,000 a day this month compared with 2.1 million during the same period last year.

That weak demand makes refining jet fuel compared with other oil products less attractive.

“This is the laggard for all the oil products,” Rodriguez said.

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Biden team takes a major step in offering to start talks with Iran as Tehran’s sanctions deadline approaches

U.S. President Joe Biden speaks after signing an executive order related to American manufacturing in the South Court Auditorium of the White House complex on January 25, 2021 in Washington, DC.

Drew Angerer | Getty Images

DUBAI, United Arab Emirates — Iran and the U.S. are in a standoff.

President Joe Biden’s administration wants to revive the 2015 nuclear deal, but is demanding to see changes from Tehran before it will lift the heavy sanctions imposed on the country by the Trump team.

Meanwhile, Iran says it wants Washington to step up its game and make the first move, refusing to budge until those sanctions are lifted.

But the Biden administration on Thursday took a major step, joining with European partners in offering to begin talks with the Iranians for the first time in four years.

“The United States would accept an invitation from the European Union High Representative to attend a meeting … to discuss a diplomatic way forward on Iran’s nuclear program,” State Department spokesman Ned Price said in a statement.

The Biden team also rescinded the former Trump administration’s efforts to reimpose U.N. sanctions on Iran. Secretary of State Antony Blinken told European ministers in a call Thursday that it would work with them to restore the 2015 accord, which he described as “a key achievement of multilateral diplomacy,” according to a New York Times report.

It remains unclear whether Iran will agree to the talks.

Iran previously set a deadline of Sunday, Feb. 21, vowing that if oil and banking sanctions are not lifted by then, it will expel the U.N.’s nuclear inspectors from the country, ending outside access to its facilities. 

The political brinkmanship raises questions over Biden’s plans to salvage a deal which has effectively been on life support since former President Donald Trump pulled the U.S. out of it in 2018.

‘Much more difficult to achieve’

The Iranian nuclear deal, also called the Joint Comprehensive Plan of Action (JCPOA), was spearheaded by the Obama administration and involved several other world powers. It lifted international sanctions on Iran, offering the country of 83 million economic relief, in exchange for curbs to its nuclear program, which included mandated inspections by the U.N.’s International Atomic Energy Agency (IAEA).

Any removal of IAEA inspectors “would make an agreement much more difficult to achieve; without mechanisms for monitoring Iran’s nuclear program, mistrust from the U.S. and the remaining parties to the JCPOA would deepen,” Torbjorn Soltvedt, principal MENA analyst at Verisk Maplecroft, wrote in a research note this week.

The ultimatum is meant to pressure Washington into action. But it could backfire, says Behnam ben Taleblu, senior fellow at the Washington-based Foundation for Defense of Democracies. 

Iran’s deadline threat is “designed to grow risks and fears in Washington over the direction of the nuclear program. Risks and fears which Tehran hopes Washington will ameliorate with concessions and premature sanctions relief,” Taleblu told CNBC.

But the compounding nuclear violations — even under Biden — “may help drive Europe towards Washington, which now has a more limited Iran policy,” he warned. 

And the Islamic Republic hasn’t held back on breaching the deal’s parameters following Biden’s election, in moves that former JCPOA negotiators have described as “provocative” and “serious.” The stakes have been mounting since May 2019, one year after the Trump administration withdrew from the deal and started imposing “maximum pressure” sanctions on the country for what it called its “destabilizing regional behavior.” 

Iranian Supreme Leader Ali Khamenei addresses people via a live broadcast on state television on the occasion of the anniversary of the 1978 Qom protests in Tehran, Iran on January 08, 2021.

Anadolu Agency | Anadolu Agency | Getty Images

Tehran’s moves most recently included increasing its uranium enrichment and stockpile levels beyond the limits set out in the deal. And this month, IAEA inspectors confirmed they found a small amount of uranium metal in one of Iran’s nuclear facilities, which can be used to build the core of a nuclear bomb — but that Tehran insists is being used for nuclear energy development.

Iranian officials have previously stressed that the breaches are reversible once Washington offers sanctions relief. 

But that relief is unlikely anytime soon as Biden’s goals with the deal face a lack of support from much of Congress and his team wants to avoid looking “soft” on Iran.

A game of chicken?

According to Sanam Vakil, an Iran expert and deputy head of Chatham House’s MENA program, this isn’t as much of a game of chicken as it appears.

“It’s not really a game of chicken. It’s really about the Biden administration figuring out how they want to proceed and executing and transition, and domestic difficulties in the U.S. really sort of stymied what could have been a faster re-entry,” she said.

And the standoff, Vakil believes, is more a debate on the order in which certain concessions will be made. 

“What we’re seeing playing out in the public domain is a debate on sequencing,” she said.

“The Iranians are publicly saying ‘we need you to lift all of the sanctions before we do anything.’ And of course they’re going to say that because they need to know where the U.S. stands, what the U.S. red lines are — they have limited confidence currently in the process.”

All eyes on Iran’s election

Henry Rome, a regional analyst at Eurasia Group, says the Biden administration “is considering making an initial gesture to Iran, aimed at demonstrating commitment to returning to the JCPOA and prodding Iran to accept negotiations without giving away significant U.S. leverage.”

Such a move would be largely symbolic, but could include lifting sanctions on individuals, removing U.S. objection to an IMF loan or facilitating humanitarian trade.

“If the U.S. offers a tangible sign of progress before (Feb. 21), that date, this may be enough for the Iranian leadership to fudge those conditions,” of its deadline, Rome said.

Ultimately, what’s far more important to the survival of the deal and U.S.-Iran relations is what happens on June 18 — Iran’s presidential election, which could see a far more hardline and anti-American leader elected. 

The run-up to that election “will give a clearer indication of Supreme Leader Ayatollah Ali Khamenei’s willingness to endorse another serious effort to reach an accord” on the nuclear issue, Verisk’s Soltvedt said.

“An agreement between Iran and the U.S. before then is a remote prospect, and the risk of Khamenei walking away from the JCPOA this year will remain high.”

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JPMorgan says two factors could drive up oil prices by another $5 to $10 per barrel

SINGAPORE — JPMorgan says crude prices could see further upside ahead as oil continues to see strong gains so far this year.

It comes against the backdrop of an improving global outlook as major economies press ahead with their ongoing coronavirus vaccination campaigns.

“I think there’s room for oil prices to move a little bit higher in this environment but, you know, not thinking about a price of $80 or $90 a barrel. Maybe it goes up by $5 or $10 more from here,” Kerry Craig, global market strategist at JPMorgan Asset Management, told CNBC’s “Street Signs Asia” on Friday.

In the afternoon of Asia trading hours on Friday, international benchmark Brent crude futures were at $62.91 per barrel. U.S. crude futures changed hands at $59.34 per barrel. Both Brent and West Texas Intermediate crude futures have risen more than 20% each so far in 2021.

Oil prices have moderated in recent days after surging to their highest in more than a year.

Just this week, a deadly winter storm in southern U.S. resulted in days of power outages in Texas, wrecking havoc on the state’s energy infrastructure and taking millions of barrels per day of oil production offline. Energy prices popped as a result of that development.

Key drivers for higher oil prices

There are two things that will likely drive oil prices going forward, according to Craig.

Firstly, demand for oil is expected to pick up as the global economy recovers from the hit of the coronavirus pandemic, he said. However, that will be “curtailed to a certain extent” due to the low likelihood of international travel coming back in a big way soon. Travel is an “important source of demand,” he added.

On the supply side, he said: “We’re still relying on those OPEC+ members to keep that supply relatively curtailed and I think there’s still a question about that in terms of the amount of supply coming on relative to demand.”

OPEC and its allies, known collectively as OPEC+, have sought to navigate their way through a historically tumultuous period that has included an unparalleled collapse in oil prices as well as a major fuel demand shock amid the pandemic.

— CNBC’s Sam Meredith, Jeff Cox and Pippa Stevens contributed to this report.

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Generac CEO says demand for power generators is high: ‘We can’t make them fast enough’

Severe weather and associated power outages across the United States in the past year have elevated demand for backup generators, bottlenecking suppliers such as Generac.

As millions of Texas residents continue to battle through a dayslong massive power shut-off in response to unprecedented snowfall across the state, Generac CEO Aaron Jagdfeld said requests for alternative home powering sources have surged.

“We can’t make them fast enough, and we’re doing everything we can to supply more product in the market,” he said Wednesday on CNBC’s “Power Lunch.”

With demand for heat at extreme levels, utilities in Texas, an energy-independent state, cut off power to millions to reduce stress on power grids. The rolling shut-offs have led consumers to seek out automatic home backup generators, much like power shut-offs did during high heat and fire risks in California last year, Jagdfeld said.

The weather emergency has led to discussions about the reliability of power grids in the U.S. As California dealt with power outages last year, Jagdfeld said he expects large-scale changes to come to electric grids and infrastructure in due time.

Generac, which produces backup generators for residential and commercial usage, has been running a Wisconsin plant, where most of its products are made, at full capacity since the coronavirus pandemic hit and homebound Americans began taking on home improvement projects. Hurricane seasons have also affected order volumes.

Given the company’s backlog, local permitting processes and the contractors involved, it can take 20 weeks for residents to get a generator installed in their home, he said. Generac has about 7,000 dealers in its network, but the company needs more, he said. Services that handle inspections, gas meter upgrades and other parts of the installation process are also reportedly dealing with long queues.

“There’s just a backlog of everything,” he added.

The company announced earlier this month that it will open a 421,000-square-foot facility in South Carolina to boost manufacturing capabilities of home standby generators and associated energy technologies, serving the Southeast. Generac said the project would supply about 450 new jobs within two years.

Shares of Generac have more than tripled from 2020. The stock price is up 253% since the beginning of last year. In the past week, the stock has rallied 29% to $355.32 as of Wednesday’s close.

Generac reported revenues of nearly $2.49 billion in 2020, up 12.7% from $2.2 billion in 2019. The double-digit growth was powered by business in the second half of the year when revenues surged more than 22% compared with the 1% growth recorded in the first half of the year.

The U.S. economy experienced major business shutdowns in the first and second quarters of 2020 after the first cases of Covid-19 transmissions were reported in the country.

This week’s snowstorm hit multiple Southern states with frigid temperatures — single digits in some instances — that their residents are not accustomed to, leaving dozens dead and more than 3 million customers without power in the past three days. The storm has affected about 100 million people living in Texas, Arkansas and the Lower Mississippi Valley, according to the National Weather Service.

“I know there’s a lot of people suffering down there right now,” Jagdfeld said. “We’re doing our best to get as much product as we can into that market.”

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Ford invests $1 billion in German plant, targets move to ‘all-electric’ passenger vehicles in Europe by 2030

GEORGES GOBET | AFP | Getty Images

Ford is investing $1 billion in an electric vehicle production facility in Cologne, Germany, with the European arm of the automotive giant committing to go “all-in” on electric vehicles in the years ahead.

In plans announced Wednesday morning, Ford said its entire passenger vehicle range in Europe would be “zero-emissions capable, all-electric or plug-in hybrid” by the middle of 2026, with a “completely all-electric” offering by 2030. 

The investment in Cologne will see the company update an existing assembly plant, converting it into a facility focused on the production of electric vehicles.

“Our announcement today to transform our Cologne facility, the home of our operations in Germany for 90 years, is one of the most significant Ford has made in over a generation,” Stuart Rowley, Ford of Europe’s president, said in a statement.

“It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth,” Rowley added.

Elsewhere, the business wants its commercial vehicle segment in Europe to be zero-emissions capable, plug-in hybrid or all-electric by 2024.

A ‘transformative’ decade

With governments around the world announcing plans to move away from diesel and gasoline vehicles, Ford, alongside several other major carmakers, is attempting to ramp up its electric offering and challenge firms such as Elon Musk’s Tesla.

South Korean carmaker Kia, for instance, will launch its first dedicated electric vehicle this year, while Germany’s Volkswagen Group is investing approximately 35 billion euros (around $42.27 billion) in battery electric vehicles and says it wants to roll out roughly 70 all-electric models by 2030. 

Last month, the CEO of Daimler told CNBC that the automotive industry was “in the middle of a transformation.”

“Next to the things that we know well — to build, frankly, the world’s most desirable cars — there are two technological trends that we’re doubling down on: electrification and digitization,” Ola Källenius told CNBC’s Annette Weisbach.

The Stuttgart-headquartered firm was “pouring billions into these new technologies,” he added, stating they would “drive our path towards CO2-free driving.” This decade, he went on to claim, would be “transformative.”

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