Oil prices near $100 per barrel raise questions over demand destruction

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Supply cuts from heavyweight crude producers have helped drive oil prices near $100 per barrel — fueling some to consider the potential for future demand destruction.

Brent crude futures rose 63 cents per barrel from the Thursday settlement to $96.01 per barrel on Friday at 11 a.m. London time and sit well above prices observed in the first half of the year.

The gains could prove short lived, some analysts warn. Sushant Gupta, research director of Asia refining at Wood Mackenzie, on Monday said “there are all signs that we could potentially see $100 per barrel in quarter four,” but warned that global economic fragility and incoming seasonal demand drops in the first quarter would make this unsustainable long term. In a Friday report, ING analysts signaled the oil market is “clearly in overbought territory.”

At the heart of price support are a series of voluntary cuts that fall outside of the official policy of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. First is a 1.66 million-barrel-per-day decline implemented by some OPEC+ members until the end of 2024. Topping this, Saudi Arabia and Russia pledged to respectively remove another 1 million barrel per day of production and 300,000 barrels per day of exports until the end of this year.

This adds to a picture of improving Chinese demand — which analysts say could soon peak — and inventory drops

Some say buyers can weather the storm of high prices. Seven European refiners and traders, who spoke under anonymity because of contractual obligations, told CNBC that local buyers can withstand oil prices veering into triple digits without lowering their output runs. All of the sources pointed to firm refining margins, meaning the difference between the value of refined products and the price of the crude feedstock to generate them is favorable.

Uncertainty lingers over further China fuel export quotas, while Russia’s indefinite ban of its fuel exports — which Europe cannot purchase because of sanctions that followed Moscow’s full-scale invasion of Ukraine — has tightened availabilities of refined products and could particularly worsen global diesel shortages. Sanctions-disrupted access to Russian crude and OPEC+ cuts have shrunk availabilities of high-density and high-sulfur crude to Western buyers, encumbering their task to produce certain refined products.

Refinery margins so far have nevertheless been attractive enough that some refiners have lightened their seasonal maintenance to take advantage, one refiner said. Refined oil product demand could yet stay strong in the West, as Thanksgiving and winter vacations boost travel in the U.S. and Europe, and the hurricane season looms — which can historically disrupt both local refining and crude production. 

“We estimate a high-impact hurricane event this year could result in a temporary loss of monthly offshore crude oil production of about 1.5 million barrels per day (b/d) and a nearly equivalent temporary loss of refining capacity,” the U.S. Energy Information Administration said in July.

“Outages on that scale could increase monthly average U.S. retail gasoline prices by between 25 cents per gallon and 30 cents per gallon.”

‘Self-fulfilling prophecy’

Some European market participants polled by CNBC doubted triple-digit oil prices are sustainable in the long term, with three pointing to possible demand destruction — where customers gradually answer persistently high prices with fewer purchases. A fourth said demand destruction is a potential question, once prices hit $110 per barrel.

“Sometimes high oil prices can become a self-fulfilling prophecy,” Indian Energy Minister Hardeep Singh Puri warned in August. “The self-fulfilling prophecy means that at a particular point of time comes a tipping, and then there’s a fall of demand.”

One of the market sources also noted that steep backwardation — where current prices exceed future ones and a key metric to assess the viability of storage — discourages stocking refined products, leaving the market vulnerable to any disruptions.

“OPEC+ production cuts, including the voluntary extra cut by Saudi Arabia, are bearing fruit, lowering oil inventories and supporting prices,” UBS Strategist Giovanni Staunovo said in a Thursday note, pegging the bank’s oil price estimate at $90-100 per barrel over the coming months.

The oil price hike has benefitted Moscow despite sanctions. Under a program by the G7 largest global economies, non-G7 buyers may only use Western shipping and insurance to import Russian crude purchased at or below $60 per barrel.

But Moscow has been deploying its own dark fleet, and traders say Russia’s flagship Urals crude currently sells at roughly $8-10-per-barrel discounts to benchmark oil prices, implying values $25 per barrel above the G7 price cap. The Russian energy ministry did not respond to a CNBC request for comment.

OPEC+ move

An OPEC+ technical committee meets on Oct. 4 to review market fundamentals and individual production compliance. While incapable of adjusting OPEC+ policy, the Joint Ministerial Monitoring Committee can call an emergency ministerial meeting to do so. Three OPEC+ delegates, speaking anonymously because of the sensitivity of the discussions, told CNBC it is unlikely this upcoming JMMC meeting will result in policy tweaks.

The White House has previously vocally entreated OPEC+ producers to hike output, ease prices at the pump and alleviate inflation — but Washington has been largely silent in response to the production declines. In October last year, the U.S. levied accusations of coercion over other OPEC+ members against de-facto group leader Saudi Arabia, which depends on oil revenues for its economic diversification giga-projects.

The White House faces a difficult balancing act, as it pushes for a normalization of ties between Israel and Saudi Arabia, two top allies in the Middle East. Riyadh has also shown signs of steering closer toward China and Russia after rekindling relations with Iran through Beijing-mediated talks and receiving an invitation to join the emerging economies’ BRICS alliance. A spate of high-profile U.S. official visits to Saudi Arabia over the summer suggests ongoing discussions — though it remains to be seen if oil re-enters the diplomatic agenda.

It's not clear where the White House goes next to alleviate oil prices, says RBC's Helima Croft

RBC Head of Global Commodity Strategy Helima Croft, who says “we clearly see momentum” for Brent at $100 per barrel, stressed the absence of many options left in the U.S. toolkit.

“Will there be an energy component of a potential U.S.-Saudi deal? I think the Saudi administration would clearly like more Saudi barrels on the market, because, look, there are not a lot of great options for this administration to get prices down,” she said on Wednesday.

“They’ve already done the big [Strategic Petroleum Reserve] release, the question is are they really going do more … they’ve done deals with Iran, but those barrels are already in the market, so it’s not clear where the administration goes next for additional barrels.”

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Armenians find themselves pushed aside yet again

Jamie Dettmer is opinion editor at POLITICO Europe. 

Last week, U.N. Secretary-General António Guterres warned that the world is “inching ever closer to a great fracture in economic and financial systems and trade relations.”

That may be so, but not when it comes to Azerbaijan.

A country a third of the size of Britain and with a population of about 10 million, Azerbaijan has faced few problems in bridging geopolitical divisions. And recently, Baku has been offering a masterclass in how to exploit geography and geology to considerable advantage.

From Washington to Brussels, Moscow to Beijing, seemingly no one wants to fall out with Azerbaijan; everyone wants to be a friend. Even now, as Armenia has turned to the world for help, accusing Baku of attempted ethnic cleansing in disputed Nagorno-Karabakh — the land-locked and long-contested Armenian enclave in Azerbaijan.

Warning signs had been mounting in recent weeks that Baku might be planning a major offensive, which it dubbed an “anti-terrorist operation,” and Armenia had been sending up distress flares. But not only were these largely overlooked, Baku has since faced muted criticism for its assault as well.

Western reaction could change, though, if Azerbaijan were to now engage in mass ethnic cleansing — but Baku is canny enough to know that.

Since Russia invaded Ukraine, Azerbaijan has been courted by all sides, becoming one of the war’s beneficiaries.

On a visit to Baku last year, European Commission President Ursula von der Leyen had only warm words for the country’s autocratic leader Ilham Aliyev, saying she saw him as a reliable and trustworthy energy partner for the European Union.

Then, just a few weeks later, Alexander Lukashenko — Russian President Vladimir Putin’s satrap in Belarus — had no hesitation in describing Aliyev as “absolutely our man.”

Is there any other national leader who can be a pal of von der Leyen and Lukashenko at the same time?

Aliyev is also a friend of Turkey; Baku and Beijing count each other as strategic partners, with Azerbaijan participating in China’s Belt and Road Initiative; and the country has been working on expanding military cooperation with Israel as well. In 2020 — during the last big flare-up in this intractable conflict — Israel had supplied Azerbaijan with drones, alongside Turkey.

That’s an impressive list of mutually exclusive friends and suitors — and location and energy explain much.

Upon her arrival in Azerbaijan’s capital last year, von der Leyen wasn’t shy about highlighting Europe’s need to “diversify away from Russia” for its energy needs, announcing a deal with Baku to increase supplies from the southern gas corridor — the 3,500-kilometer pipeline bringing gas from the Caspian Sea to Europe.

She also noted that Azerbaijan “has a tremendous potential in renewable energy” in offshore wind and green hydrogen, enthusing that “gradually, Azerbaijan will evolve from being a fossil fuel supplier to becoming a very reliable and prominent renewable energy partner to the European Union.”

There was no mention of Azerbaijan’s poor human rights record, rampant corruption or any call for the scores of political prisoners to be released.

Azerbaijan uses oil and gas “to silence the EU on fundamental rights issues,” Philippe Dam of Human Rights Watch complained at the time. “The EU should not say a country is reliable when it is restricting the activities of civil society groups and crushing political dissent,” he added.

Eve Geddie, director of Amnesty International’s Brussels office, warned: “Ukraine serves as a reminder that repressive and unaccountable regimes are rarely reliable partners and that privileging short-term objectives at the expense of human rights is a recipe for disaster.”

But von der Leyen isn’t the first top EU official to speak of Azerbaijan as such a partner. In 2019, then EU Council President Donald Tusk also praised Azerbaijan for its reliability.

Since Russia invaded Ukraine, however, the EU’s courting has become even more determined — and, of course, the bloc isn’t alone. Rich in oil and gas and located between Russia, Iran, Armenia, Georgia and the Caspian Sea, Azerbaijan is a strategic prize, sitting “on the crossroads of former major empires, civilizations and regional and global powerhouses,” according to Fariz Ismailzade of ADA University in Baku.

And Azerbaijan’s growing importance in the latest great game in Central Asia is reflected in the increase in foreign diplomatic missions located in its capital — in 2005 there were just two dozen, now there are 85.

For Ankara, and Beijing — eager to expand their influence across Central Asia — Azerbaijan is a key player in regional energy projects, as well as the development of new regional railways and planned infrastructure and connectivity projects.

Thanks to strong linguistic, religious and cultural ties, Turkey has been Azerbaijan’s main regional ally since it gained independence. But Baku has been adept at making sure it keeps in with all its suitors. It realizes they all offer opportunities but could also be dangerous, should relations take a dive.

And this holds for all the key players in the region, whether it be the EU, Turkey, China or Russia. The reason Baku can get on with a highly diverse set of nations — and why there likely won’t be many serious repercussions for Baku with this latest military foray — is that no one wants to give geopolitical rivals an edge and upset the fragile equilibrium in Central Asia. That includes its traditional foe Iran – Baku and Tehran have in recent months been trying to build a détente after years of hostility.

For the Armenians, so often finding themselves wronged by history, this is highly unfortunate. They might have been better advised to follow Azerbaijan’s example and try to be everyone’s friend, instead of initially depending on Russia, then pivoting West — a pirouette that’s lost them any sympathy in Moscow.

But then again, Armenia hasn’t been blessed with proven reserves of oil or natural gas like its neighbor.



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Poland turns toward bets on offshore wind

The development of offshore wind farms in Poland has never before taken place on such a large scale. The PGE Group is the biggest investor in offshore wind farms in the Polish part of the Baltic Sea in terms of wind turbine capacity. As part of its offshore program, the PGE Group is currently implementing three offshore wind farm projects.

Two of them are the offshore wind power plants Baltica 2 and Baltica 3, which comprise the Baltica Offshore Wind Farm with a total capacity of 2.5GW. PGE is implementing this project together with the Danish partner Ørsted. Both phases of the Baltica offshore wind farm have location decisions, environmental decisions, and grid connection agreements with the operator, and have been granted the right to a Contract for Difference (CfD).

As part of its offshore program, the PGE Group is currently implementing three offshore wind farm projects.

Last April, PGE and Ørsted took a major step in the Baltica 2 project. They signed the first of the contracts for the supply of wind turbines. Subsequently, they also signed a contract for the supply of offshore substations in June. Baltica 2 is expected to start producing green energy in 2027, while the entire Baltica Offshore Wind Farm will be completed within this decade.

Independently of the Baltica Offshore Wind Farm, the PGE Group is developing a third project, Baltica 1. Commissioning is scheduled after 2030 and its capacity will be approximately 0.9GW. The project already has a location permit and a connection agreement. In May 2022, wind measurement studies for this project started, followed by environmental studies in autumn 2022. The energy produced by all three farms will supply nearly 5.5 million households in Poland.  This means that more than a third of all Polish households will be provided with energy from wind power.

Baltica 2 is expected to start producing green energy in 2027, while the entire Baltica Offshore Wind Farm will be completed within this decade.

At the same time, the PGE Group has received final decisions on new permits for the construction of artificial islands for five new areas to be developed in the Baltic Sea, which will enable the construction of further offshore wind power plants in the future. The total capacity potential from the new areas provides PGE with more than 3.9GW. Considering the projects currently under development (Baltica 2, Baltica 3 and Baltica 1) with a total capacity of approximately 3.4GW, PGE Capital Group’s offshore wind portfolio may increase to over 7.3GW by 2040.

Offshore wind — a new chapter for the Polish economy

A long-term vision for the development of the Polish offshore wind sector, based on the carefully assessed potential of this technology, will support the development of the energy sector in Poland. The benefits of offshore wind development in Poland should be considered in several aspects — first and foremost, due to their total capacity, offshore wind farms will become a very important new source of clean, green energy for Poland in just a few years.

“Offshore wind energy will make a significant contribution to Poland’s energy mix. The three projects currently under construction by the PGE Group, with a total capacity of almost 3.5GW, will generate electricity for almost 5.5 million households. All the investments planned for the Baltic Sea are crucial for strengthening Poland’s energy security. Regarding the Polish economy, in particular the economy of the entire Pomerania region, the construction of offshore wind farms will provide a strong development stimulus. This is not only about businesses closely related to wind energy, such as companies supplying components for offshore wind power plants. Jobs will also be created by businesses willing to join the development of this new sector and take advantage of the opportunities it brings,” said Wojciech Dąbrowski, president of the management board of PGE Polska Grupa Energetyczna S.A.

All the investments planned for the Baltic Sea are crucial for strengthening Poland’s energy security.

The construction of offshore wind farms will ensure Poland’s energy security

The development of offshore wind is also crucial to Poland’s energy security and independence. Thanks to the production of energy from renewable sources, there is no need to import fossil fuels from abroad or rely on dwindling domestic coal resources.

This means that Poland will not be dependent on external fuel suppliers or various international developments. The ability to generate electricity independently contributes to strengthening the country’s energy sovereignty.

Energy, environmental and social benefits

Poland has ambitions and capabilities to become one of the leaders in offshore wind energy development in the Baltic Sea and even in Europe. We have plenty of resources for the development of offshore wind farms because of our favorable geographical location and natural conditions — strong, stable winds and the relatively shallow considerable area of the Baltic Sea, located in the exclusive economic zone. The Baltic Sea has some of the best wind conditions not only in Europe but also in the world, which are comparable to those in the North Sea.

Offshore wind energy is a key element of sustainable development. For Poland, green wind energy means savings, security and energy independence at the same time. Electricity from renewable sources is less expensive than that generated from fossil fuels. By choosing green energy, consumers can save on their electricity bills while at the same time supporting the development of a green energy sector. As a zero-emission energy source, it contributes to achieving climate policy goals and minimizing negative environmental impact. It is a huge step towards reducing greenhouse gas emissions. The creation of an infrastructure for the construction of alternative energy sources with wind farms will ensure the diversification of energy sources.



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Oil prices are at 10-month highs. Here’s what Cramer thinks it means for two energy stocks

An oil pump jack in Great Plains, southeastern Wyoming.

Marli Miller | Universal Images Group | Getty Images

Oil prices are hovering around 10-month highs, as a stout summer rally extends into the fall and delivers additional gains for the Club’s energy stocks, Pioneer Natural Resources (PXD) and Coterra Energy (CTRA). And Jim Cramer believes it’s not too late to buy either of them.

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An escalating dispute at major gas facilities in Australia could drive up European prices, analysts say

Liquefied natural gas (LNG) storage units at Grain LNG importation terminal, operated by National Grid Plc, on the Isle of Grain on August 22, 2022 in Rochester, England.

Dan Kitwood | Getty Images News | Getty Images

The looming threat of strikes at Australian natural gas facilities will keep global gas markets on tenterhooks, energy analysts told CNBC, with traders fearing that a prolonged halt to production could squeeze global supplies and send European prices higher.

U.S. energy giant Chevron and unions representing workers at the Gorgon and Wheatstone projects in Western Australia are in daily talks this week to try to come to an agreement over pay and job security. The Fair Work Commission, Australia’s independent workplace relations tribunal, is mediating talks between both sides.

If a deal cannot be agreed, the strikes are scheduled to begin from 6 a.m. local time Thursday. The long-running dispute escalated even further on Tuesday as a union alliance announced plans to strike for two weeks from Sept. 14.

“In response to Chevron’s [duplicitous] claim that our EBA negotiations are ‘intractable’, the Offshore Alliance is escalating Protected Industrial Action to [demonstrate] that our bargaining negotiations are far from ‘intractable,'” the Offshore Alliance said in a Facebook post.

“Offshore Alliance members are yet to exercise their lawful workplace rights to take Protected Industrial Action and our bargaining claims will look more and more reasonable as Chevron’s Gorgon and Wheatstone LNG exports dry up.”

In response, a Chevron Australia spokesperson told CNBC, “We’re looking to narrow points of difference with Gorgon and Wheatstone downstream employees and their representatives through further bargaining mediated by the Fair Work Commission.”

There is so little flexibility in the market that the slightest provocation will cause large changes to the prices.

Jacob Mandel

Senior research associate for global energy markets at Aurora Energy Research

Fears of strike in Australia, one of the world’s biggest exporters of liquified natural gas (LNG), have recently pushed up European gas prices — and analysts expect near-term volatility to persist.

Jacob Mandel, senior research associate for global energy markets at U.K.-based consultancy Aurora Energy Research, said the global natural gas market was currently “very tight” and “very little supply flexibility” means that strike action in Australia could send European gas prices higher.

“Prices have moved quite significantly on basically little bits of news on what’s happened to these two facilities because there is so little flexibility in the market that the slightest provocation will cause large changes to the prices,” Mandel told CNBC via videoconference.

He said that European gas prices could climb to above 40 euros ($42.9) per megawatt hour if the strikes go ahead as planned. The front-month gas price at the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas trading, traded at 33.5 euros on Tuesday.

The TTF contract rose sharply to around 43 euros last month. TTF prices have since pared gains, however, and remain well below last summer’s extraordinary spike to more than 300 euros.

“I think it is extremely unlikely prices will go anywhere near where they were last September, where they hit these massive record peaks,” Mandel said. “Prices reached those peaks under extraordinary circumstances, which in theory could have been replicated. However, in Europe, we’ve taken many steps that could keep prices from reaching such a high.”

“It doesn’t mean that prices could increase above this 40 per megawatt hour level and if something else happens — a sudden winter storm, or something like this — certainly this can push [prices] higher,” he added.

Kaushal Ramesh, head of gas and LNG analytics at research firm Rystad Energy, said looming industrial action at Chevron’s Gorgon and Wheatstone facilities suggested near-term volatility could continue until a resolution is reached.

“We still don’t think there will be a material impact on production,” Ramesh said, citing the resolution of other similar disputes. He noted that it may become difficult for Chevron to prolong the strikes if they do go ahead.

“Whatever monetary impact there may be to Chevron from giving in to the workers’ demands is likely a fraction of lost revenue if production were to be substantially impacted,” Ramesh told CNBC via email.

“Thus, these are political developments, and things can get irrational, but so far, Asian buyers have not been too concerned. This winter, Japan and Korea will have an additional 6 GW of nuclear power available compared to the previous year.”

Another ‘big question mark’ for Europe

Wild price swings in energy markets in recent weeks come as the euro zone continues to wean itself off Russian fossil fuel exports following the Kremlin’s full-scale invasion of Ukraine.

Last month, the EU hit its target of filling gas storage facilities to 90% of capacity roughly two-and-a-half months ahead of schedule, bolstering hopes the bloc has secured enough fuel supplies to keep homes warm during winter. Nonetheless, the region’s gas market remains sensitive.

“Europe’s gas markets remain nervous, as seen in the jump in prices in August at the threat of an LNG worker strike in faraway Australia,” said Henning Gloystein, a director for energy, climate, and natural resources at political consultancy Eurasia Group.

“Real disruptions” are possible this winter, Gloystein said, including Norwegian winter storm outages or a cut of the remaining Russia gas to Europe. He warned that a stoppage of pipeline transit via Ukraine or a suspension of Russian LNG shipments were two notable risks for Europe.

One “big question mark” adding a risk premium to costs in Europe, Mandel said, is the future for the transit of Russian gas through Ukrainian territory, which is scheduled to expire at the end of next year.

Naftogaz CEO: We should discuss Russian gas transit deal with EU

Oleksiy Chernyshov, the chief executive of Ukraine’s largest oil and gas company Naftogaz, told CNBC in mid-August that the Russian gas transit agreement “is actually quite a complex issue.”

“I just wanted to make very clear Ukraine is servicing this transit actually in favor of European Union countries that are consuming Russian gas,” Chernyshov said. “We clearly understand that some of the countries cannot immediately get rid and stop consumption because they need it for the preparation for the winter.”

A spokesperson for the European Commission, the EU’s executive arm, told CNBC that the gas transit agreement is “still a long way from now” and they cannot speculate on what the situation would like in 18 months’ time. “It is also not for us to speculate nor comment on the two parties’ interest for a renewal of such contract,” they added.

The spokesperson said under the EU’s REPowerEU plan, the bloc’s objective is to “completely phase out Russian fossil fuel imports as soon as possible.” They noted that Russian gas now represents less than 10% of the EU’s pipeline imports, compared to roughly 50% before the energy crisis spurred by Russia’s full-scale invasion of Ukraine.

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Decline, fear and the AfD in Germany

Mathias Döpfner is chairman and CEO of Axel Springer, POLITICO’s parent company.

In Germany today, the right-wing populist Alternative for Germany (AfD) is maintaining a stable 20 percent in opinion polls — coming in two to four points ahead of the ruling center-left Social Democratic Party (SPD) and running hard on the heels of the center-right Christian Democratic Union (CDU).

In some federal states, the AfD is already the strongest party. In Thuringia, for example, it has reached 34 percent, meaning the party has three times as many supporters there as the SPD. And in some administrative districts, around half of those eligible to vote are leaning toward the AfD. According to one Forsa survey in June, the AfD is currently the strongest party in the east of Germany — a worrying trend with elections due this year in Bavaria and Hesse, and next year in Thuringia, Saxony and Brandenburg. And, of course, there are also the European Union elections in 2024.

However, this rapid rise should come as no surprise. The writing has been on the wall for a long time. And more than anything else, the party’s recent advances are a result of an increasing sense among broad swathes of the population that they aren’t being represented by traditional political and media elites.

This disconnect was first accelerated by the refugee crisis of 2015, then increased during the pandemic, and has since escalated in response to the increasing high-handedness of the “woke movement” and climate politics. Just a few weeks ago, a survey by the German Civil Service Association revealed trust in the government’s ability to do its job is at an all-time low, with 69 percent saying it is deeply out of its depth.

Meanwhile, opinion polls show the government fares particularly badly in Germany’s east. A rising number of people — including the otherwise stable but also staid middle classes — now feel enough is enough, and no other party is as good at exploiting this feeling as the AfD.

The problem, however, is the AfD isn’t a normal democratic party.

The regional offices of Germany’s domestic intelligence services in the federal states of Brandenburg, Saxony-Anhalt, Saxony, Lower Saxony and Baden-Württemberg have all classified their local AfD associations as “organizations of interest.”

And the same applies at the federal level. The national office of the domestic intelligence service, the remit of which includes protecting the German constitution, has also classified the national party of the AfD as “of interest.”

These concerns about the party’s commitment to the constitution aren’t unjustified. In a 2018 speech at the national conference of the party’s youth section, Junge Alternative, former AfD chairman Alexander Gauland said that “Hitler and the Nazis are just a speck of bird shit in a thousand years of successful German history.”

When speaking about the Holocaust Memorial in Berlin, Björn Höcke, group chairman of the AfD in Thuringia, said on 2017 that “We Germans — and I’m not talking about you patriots who have gathered here today. We Germans, our people, are the only people in the world to place a monument of shame in the heart of our capital city.”

And in a speech in the Bundestag in 2018, party boss Alice Weidel bandied about terms like “headscarf girls” and “knife-wielding men,” while her co-chairman Tino Chrupalla speaks of an “Umvolkung” — that is, an “ethnicity inversion” — which comes straight out of Nazi ideology.

This small sample of public statements leaves no doubt that such utterings aren’t slips of the tongue — they reflect these leaders’ core beliefs.

And while many vote for the AfD out of protest, more than anything else, the party feeds off resentment and fear, exploiting and fueling anger, hate and envy, pushing conspiracy theories to hit out at “those at the top,” as well as foreigners, Jews, the LGTBQ+ community or just about anyone who might be deemed different. And the party leaders’ blatant admiration for Russian President Vladimir Putin exposes their reverence for autocracy.

Failure to prevent the AfD’s rise could potentially first corrode, then shatter democracy and rule of law in Germany.

But how can a party like this, which is getting stronger in the polls, be dealt with? Is a ban the right way to go? They are always difficult to deal with, and it isn’t even an option at this stage. What about joining the AfD to form a coalition and temper the party? That is even more difficult, as it is unreasonable to argue that the AfD should be treated like other parties. The Nazis and Adolf Hitler had also been democratically elected when they seized power in 1933.

So, what options remain? Many politicians and journalists say we need to confront the AfD with critical arguments. Sounds good on the face of it. But people have already been doing that for a decade — with scant success.

This is why the only remaining option is to attempt what neither the AfD nor many politicians from established parties have been able to do: Start taking voters’ most important concerns and issues seriously, and seek to find solutions.

The fears that have allowed the AfD to become as big as it is today are clearly identifiable. When a recent survey by Infratest Dimap asked “What topics most influence your decision to vote for the AfD at the moment?” 65 percent said immigration, 47 percent said energy policies and 43 percent named the economy.

And in their handling of all three of these key issues, the older parties have demonstrated moral cowardice and a lack of honesty.

This is especially apparent when it comes to immigration.

Why is it so hard for centrist politicians to just come out and say a few simple truths? Germany is a land of immigration, and it must remain so if it wants to be economically successful. And modern migration policy needs a healthy balance between altruism and self-interest.

According to economists’ most recent estimations, Germany needs to bring in 1 to 1.5 million skilled individuals per year from abroad. What we need is an immigration of excellence and qualified workers. People from war zones and crisis regions should obviously be taken in. But beyond that, we can only take the migrants we need, the ones who will benefit us.

This means the social welfare benefits for immigrants require critical rethinking, with the goal of creating a situation where every immigrant would be able to and would have to actually start working immediately. Then add to this factors that are a matter of course in countries with a successful history of integration: learning the local language and respecting the constitution and the laws. And anyone who doesn’t must leave — and fast.

Germany’s current immigration policy is dysfunctional. Most politicians and journalists are fully aware of this, but they just won’t say it out loud. And all this does is strengthen the AfD, as well as other groups on the left and right that have no true respect for democracy.

Not speaking out about the problem is the biggest problem. Indeed, when issues are taboo, it doesn’t make the issues any smaller, just the demagogues stronger.

We’re seeing the same with energy policy. Everyone knows that in the short term, our energy needs can’t be met by wind and solar power alone. Anyone interested in reality knows decarbonization without nuclear power isn’t going to be feasible any time soon. And they know heat pumps and cutting vacation flights won’t solve the global carbon challenge — it will, however, weaken the German economy.

We need only look at one example: While just over 2 percent of global carbon emissions come from aviation, almost a third are caused by China — an increasing amount of which comes from coal-fired power stations. Ordinary Germans are very much aware the sacrifices they’re being asked to make, and the costs being piled on them, make no sense in the broader scheme of things, and they’re understandably upset.

In some cases, this makes them more likely to vote for the AfD.

This brings us to the third and final reason why people are so agitated. The EU, and above all Germany, has broken its promise about advancing prosperity and growth. Fewer young people now see a future for themselves in Germany; more and more service providers and companies are leaving; and the increasing number of immigrants without means is reducing the average GNP per capita. Germans aren’t becoming more prosperous — they’re becoming poorer.

Traditional politicians and political parties unable to offer change are thus on very shaky ground. They have disconnected themselves from their voters, and they are paving the way for populists who use bogeyman tactics and offer simplistic solutions that solve nothing.



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Oil giant led by COP28 boss to spend an ‘eyewatering’ $1 billion a month on fossil fuels this decade, Global Witness says

Sultan Al Jaber, chief executive of the UAE’s Abu Dhabi National Oil Company (ADNOC) and president of this year’s COP28 climate summit gestures during an interview as part of the 7th Ministerial on Climate Action (MoCA) in Brussels on July 13, 2023.

Francois Walschaerts | Afp | Getty Images

UAE oil giant ADNOC — run by the president of the COP28 climate conference — is expected to spend more than $1 billion every month this decade on fossil fuels, according to new analysis by international NGO Global Witness.

This is nearly seven times higher than its commitment to decarbonization projects over the same timeframe, the research says.

ADNOC, which recently became the first among its peers to bring forward its net-zero ambition to 2045, disputes Global Witness’ analysis and says the assumptions made are inaccurate.

It comes ahead of the COP28 climate summit, with Dubai set to host the U.N.’s annual conference from Nov. 30 through to Dec. 12. Viewed as one of the most significant climate conferences since 2015’s landmark Paris Agreement, COP28 will see global leaders gather to discuss how to progress in the fight against the climate crisis.

The person overseeing the talks, Sultan al-Jaber, is chief executive of ADNOC (the Abu Dhabi National Oil Company) — one of the world’s largest oil and gas firms. His position as both COP28 president and ADNOC CEO caused dismay among civil society groups and U.S. and EU lawmakers, although several government ministers have since defended his appointment.

Global Witness’ analysis, provided exclusively to CNBC, found that ADNOC is planning to spend an average of $1.14 billion a month on oil and gas production alone between now and 2030 — the same year in which the U.N. says the world must cut emissions by 45% to avoid global catastrophe.

It means that ADNOC is forecast to spend nearly seven times more on fossil fuels through to 2030 than it does on “low-carbon solution” projects.

By 2050, the year in which the U.N. says the entire world economy must achieve net-zero emissions, ADNOC is projected to have invested $387 billion in oil and gas. The burning of fossil fuels is the chief driver of the climate emergency.

A spokesperson at ADNOC told CNBC via email: “The analysis of, and assumptions made, regarding ADNOC’s capital expenditure program beyond the company’s current five-year business plan (2023 to 2027) are speculative and therefore incorrect.”

The Abu Dhabi energy group announced in January this year that it would allocate $15 billion for investment in “low-carbon solutions” by 2030, including investments in clean power, carbon capture and storage and electrification projects.

High-rise tower buildings along the central Sheikh Zayed Road in Dubai on July 3, 2023.

Karim Sahib | Afp | Getty Images

Global Witness arrived at its projections by analyzing ADNOC’s forecasted oil and gas capital expenditure, exploratory capital expenditure and operational expenditure for the period from 2023 to 2050. The data was sourced from Rystad Energy’s UCube database.

Rystad’s data is not available to the public, but is widely used and referenced by major oil and gas companies and international bodies.

“Fossil fuels companies like to burnish their green credentials, yet they rarely say the quiet part out loud: that they continue to throw eyewatering amounts at the same old polluting oil and gas that is accelerating the climate crisis,” said Patrick Galey, senior investigator at Global Witness.

“How [al-Jaber] can expect to lecture other nations on the need to decarbonise and be taken seriously is anyone’s guess, while he continues to provide vastly more funding to oil and gas than to renewable alternatives,” he added.

“He is a fossil fuel boss, plain and simple, saying one thing while his company does the other,” Galey said.

Established 30 years ago, Global Witness is a campaign group that receives funding from donors that include The Foundation to Promote Open Society, which is backed by liberal financier and billionaire George Soros, the European Climate Foundation, and the Quadrature Climate Foundation.

Among six campaign promises published last year, Global Witness says it seeks to “stop the oil and gas industry escalating global warming by making us dependent on gas” and to “ensure that the current energy transition is fair and responsible, serving people and the planet.”

The United Nations Framework Convention on Climate Change did not immediately respond to a request for comment on the analysis conducted by Global Witness. The Conference of the Parties (COP) is the supreme decision-making body of the UNFCCC.

Main priority for COP28

Al-Jaber was the founding CEO of Abu Dhabi state-owned renewable energy firm Masdar, which works in more than 40 countries worldwide and has invested in or committed to invest in renewable energy projects with a total value of over $30 billion.

Speaking earlier this year, al-Jaber said the main priority for the COP28 summit will be to keep alive the fight to limit global heating to 1.5 degrees Celsius.

The Paris Agreement aims to limit the increase in the global average temperature to “well below” 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit global heating to 1.5 degrees Celsius. Beyond the critical temperature threshold of 1.5 degrees Celsius, it becomes more likely that small changes can trigger dramatic shifts in Earth’s entire life support system.

The International Energy Agency says no new oil, gas or coal development is compatible with the goal of curbing global heating to 1.5 degrees Celsius.

In response to a request for comment from CNBC, an ADNOC spokesperson said that energy demand is increasing as the world’s population is expanding. “All of the current energy transition scenarios, including by the IEA, show that some level of oil and gas will be needed into the future,” the spokesperson said.

“As such, it is important that, in addition to accelerating investments in renewables and lower carbon energy solutions, we consider the least carbon intensive sources of oil and gas and further reduce their intensity to enable a fair, equitable, orderly, and responsible energy transition. This is the approach ADNOC is taking,” they added.

The spokesperson said its 2022 upstream emissions data confirmed the energy group as one of the least carbon-intensive producers worldwide. The company will seek to further reduce its carbon intensity by 25% and target near zero methane emissions by 2030, they added.

“As we reduce our emissions, we are also ramping up investments in renewables and zero carbon energies like hydrogen for our customers,” the spokesperson said.

A separate report published in April last year by Global Witness and Oil Change International found that 20 of the world’s biggest oil and gas companies were projected to spend $932 billion by the end of the decade to develop new oil and gas fields.

At that time, Russian state company Gazprom was estimated to spend the most on fossil fuel development and exploration projects through to 2030 ($139 billion), followed by U.S. oil majors ExxonMobil ($84 billion) and Chevron ($67 billion).

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‘Own what the Mother of All Bubbles crowd doesn’t.’ This market strategist expects stagflation and is investing for it now.

There’s always a bull market somewhere — if you can find it.

Keith McCullough encourages investors to join him in the hunt. You’ll need to be agnostic and open-minded, the CEO of investment service Hedgeye Risk Management says. If you’re wedded just to U.S. stocks, or the market’s latest darlings, you’re setting yourself up for disappointment — particularly in the hostile environment McCullough sees coming.

This coming challenge for U.S. stock investors, in a word, is stagflation, McCullough says. Stagflation — higher inflation plus slow- or no economic growth — is hardly a bullish outlook for stocks, but McCullough’s investment process looks for opportunties wherever they may be. Right now that’s led him to put money into health care, gold, Japan, India, Brazil and energy stocks, among others.

In this recent interview, which has been edited for length and clarity, McCullough takes the Federal Reserve and Chair Jerome Powell to the woodshed, offers a warning about the potential fallout from Powell’s upcoming speech at Jackson Hole, Wyo., and implores investors to discount happy talk and always watch what they do, not what they say.

MarketWatch: When we spoke in late May, you criticized the Federal Reserve for being obtuse and myopic in its response to inflation and, later, to the threat of recession. Has the Fed done anything since to give you more confidence?

McCullough: The Fed forecast of the probability of recession should be trusted as much as their “transitory” inflation forecast or a parlor game. People should not have confidence in the Fed’s forecast. The “no-landing” or “soft-landing” thesis is looking backwards. The Fed is grossly underestimating the future, doing what they always do, in looking at the recent past.

Their policy is wed to what they say. They claim they’re not going to cut interest rates until they get to their target. But any hint of the Fed arresting the tightening gives you more inflation. So there’s this perverse relationship where the Fed is the catalyst to bring back the inflation they’ve spent so much time fighting. 

Read: ‘The Fed is way late and they’ve already screwed it up.’ This stock strategist is banking on gold, silver and Treasurys to weather a recession.

MarketWatch: U.S. Inflation has come down quite signficantly over the past year. Doesn’t that show the Fed is well on the way to achieving its 2% target?

McCullough: A lot of people are peacocking and declaring victory over inflation when we’re about to have reflation that sticks. We have inflation heading back towards 3.5% and staying there.

Our inflation forecast is that it’s set to reaccelerate in the next two inflation reports, which will lead to another rate hike in September. The Fed’s view is that until they get to the 2% target they’re not done. A lot of people are really confident because inflation went from 9% to 3% that it’s getting closer to 2%, therefore the Fed is done. Given what Fed Chair Jerome Powell said, the next two inflation reports are critical in determining whether we hike rates in September. I think maybe even one in November. This is a major catalyst for the next leg down in the equity market.

The Fed is going to see inflation go higher, and they’ve already articulated to Wall Street that no matter what happens, that should constitute a rate hike. That’s a policy mistake. They’re going to continue to tighten into a slowdown. When the Fed tightens into a slowdown, things blow up.

MarketWatch: By “things blow up,” you mean the stock market.

McCullough: I don’t think the Fed cuts interest rates until the stock market crashes. The Fed is going to be tightening when the U.S. economy and corporate profits are at a low point, going into the fourth quarter. It’s not dissimilar from 1987 where all of a sudden a market that looked fine got annihilated in very short order. There are a lot of similarities to 1987 now; the market’s quick start in January, people in love with stocks. That’s a catalyst for the stock market to crash.

When the Fed has an inconvenient rule, particularly for the U.S. stock market, they just move the goal posts or change the rule. If they actually started to cut interest rates, inflation would go up faster. This is exactly what happened in the 1970s and what Powell explains is the risk of going dovish too soon – that he becomes [much-criticized former Fed chair] Arthur Burns. That’s why you had rolling recessions in the 1970s; the Fed would go dovish, devalue the U.S. dollar
DX00,
-0.21%
,
and the cost of living for Americans would reflate to levels that are prohibitive.

People can’t afford reflation at the gas pump, or in their health care. It’ll be fascinating to see how Powell pivots from fighting for the people to bailing out Wall Street from another stock market crash, which will therein create the next reflation.

‘The Federal Reserve has set the table for a major event in the U.S. stock market and the credit market.’

MarketWatch: Speaking of a Powell pivot, the Fed chair speaks at Jackson Hole this week. Last year he put markets on notice for rate hikes. What do you think he’ll say this time?

Powell’s going to see inflation accelerating. I think Jackson Hole is going to be a hawkish meeting. That might be the trigger for the stock market.

Take the bond market’s word for it.  The bond market is saying the Fed is going to remain tight and seriously consider another rate hike in September. The reasons why markets crash in October during recession is that the fourth quarter is when companies realize that there’s no soft landing and they need to guide down.

The Federal Reserve has set the table for a major event in the U.S. stock market and the credit market. We’re short high-yield and junk bonds through two ETFs: iShares iBoxx $ High Yield Corporate Bond
HYG
and SPDR Bloomberg High Yield Bond
JNK.
 On the equity side the best thing is to short the cyclicals; I would short the Russell 2000
RUT.

MarketWatch: What’s your advice to stock investors right now about how to reposition their portfolios?

McCullough: Own what the “Mother of All Bubbles” crowd doesn’t. The things we’re most bullish on include gold
GC00,
+0.21%
.
 The Fed is going to keep short term rates high and both the 10 year and 30 year go lower. Gold trades with real interest rates. I think gold can go a lot higher, towards 2,150. Our ETF for gold is SPDR Gold Shares
GLD.

Also, you can be long equities and not take on the heart-attack risk that is the U.S. stock market. I’m long Japanese equities — ETFs for this include iShares MSCI Japan
EWJ
and iShares MSCI Japan Small-Cap
SCJ.

We’re long India with iShares MSCI India
INDA
and iShares MSCI India Small-Cap
SMIN.
Both Japan and India are accelerating economically. Were also long Brazil iShares MSCI Brazil
EWZ,
which is weighted to energy. We are bullish on energy. 

MarketWatch: Clearly accelerating inflation and slowing economic growth is an unhealthy combination for both investors and consumers.

McCullough: What I’m looking for, with inflation reaccelerating, is stagflation.

Stagflation pays the rich and punishes the poor. You want to be the landlord. The prices of things people own are going to go up, and the prices of things you need to live are also going to go up. So for example, we are long energy, uranium and timber as stagflation plays. ETFs we’re using for that include Energy Select Sector SPDR
XLE,
Global X Uranium
URA,
and iShares Global Timber & Forestry
WOOD.

One positive thing that happens from stagflation is that because it’s so hard to find real consumption growth, there’s a premium on the growth you can find.

If there is something that actually accelerates, then those stocks will work, which puts a nice premium on stock picking. You can be long anything that is accelerating because so many things are decelerating. So avoid U.S. consumer, retailers, industrials and financials, which are all decelerating. Health care is our favorite sector, which we own through the ETFs Simplify Health Care
PINK
and SPDR S&P Health Care Equipment
XHE.

Instead, people are betting we’re going to go back to some crazy AI-led growth environment. Now everyone thinks everything is AI and rainbows and puppy dogs. I’m old enough to remember we were in a banking crisis in March. From an intermediate- to longer-term perspective, I don’t know why you wouldn’t want to protect yourself until this inflation cycle plays out.

Also read: Jackson Hole: Fed’s Powell could join rather than fight bond vigilantes as yields surge

More: Will August’s stock-market stumble turn into a rout? Here’s what to watch, says Fundstrat’s Tom Lee.

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Oil prices are finally rallying. Here’s what it means for three key energy stocks

Oil rig and pump of H&P Rig 488 in Stanton, Texas, on June 8, 2023.

Suzanne Cordeiro | AFP | Getty Images

A long-awaited rally in crude oil prices has helped the Club’s three oil-and-gas companies become some of our top-performing stocks over the past month. And with new signs the commodity could continue to rally this year, we’re sitting tight on our energy holdings.

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#Oil #prices #finally #rallying #Heres #means #key #energy #stocks

These non-tech stocks are ‘back from the dead.’ Here’s where we stand

Workers walk towards Halliburton Co. “sand castles” at an Anadarko Petroleum Corp. hydraulic fracturing (fracking) site north of Dacono, Colorado, U.S., on Tuesday, Aug. 12, 2014.

Jamie Schwaberow | Bloomberg | Getty Images

A number of Club stocks that were unloved on Wall Street earlier in the year have seen their fortunes rebound in recent months, including oilfield-services firm Halliburton (HAL) and industrial Caterpillar (CAT) — creating potential opportunities to lock in gains.  

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#nontech #stocks #dead #Heres #stand