Tag: Energy

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

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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.

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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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Here are our top 4 stocks and worst 4 stocks to start the second half of 2023

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 12, 2023. 

Brendan McDermid | Reuters

Two weeks into the second half of the year, we put together a quick look at the top four performers and the bottom four in Jim Cramer’s Charitable Trust, the stock portfolio we use for the Investing Club.

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With oil production in freefall, Alaska, America’s worst state for business, chases a new carbon boom

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An oil pipeline stretches across the landscape outside Prudhoe Bay in North Slope Borough, Alaska, May 25, 2019.

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Alaska can be a rugged and unforgiving place, and that’s not just its landscape. Its economy is prone to big booms and wrenching busts. Lately, it has seen more busts.

More than any other state, Alaska is dependent on oil. As much as 85% of the state’s unrestricted general fund revenue comes from oil production, according to state estimates. In some years, it has been well over 90%. But oil production has been in long-term decline in the state, which was once America’s No. 1 producer of crude but has been surpassed by several shale oil boom states, including Texas, New Mexico and North Dakota. Alaska’s crude production in 2022 was roughly equal to that of Oklahoma, and it hit the lowest level since 1976, according to Energy Department data.

This trend helps explain why Alaska‘s economy performed worse than any other state last year, according to the Commerce Department, shrinking by 2.4%. And it explains why the Last Frontier finished dead last in CNBC’s 2023 America’s Top States for Business rankings.

In addition to a last-place finish in the Economy category, Alaska ranks 49th in the Infrastructure, Education, and Access to Capital categories. It finished 48th in Cost of Doing Business. This is the seventh time since 2007 that Alaska has finished at the bottom, and the third time in the last five studies.

Alaska’s carbon turnaround plan for the future

Alaska isn’t giving up on crude. Recent approvals such as the controversial Willow Project have led state officials to forecast an increase in production in the years ahead. But Gov. Mike Dunleavy and the state legislature have a plan that they hope will reverse Alaska’s fortunes once and for all, by making the state less susceptible to gyrations in the oil market.

“Alaska was built on a promise that we would be north of the future. That we would be visionary,” Dunleavy, a Republican, said at a news conference May 23.

Dunleavy was marking the signing of SB 48, legislation that officially puts the state in the carbon business.

“Just like oil, just like gas, just like our timber, this is a commodity that can be monetized now,” he said.

The Tongass National Forest on Prince of Wales Island, Alaska, July 2, 2021.

The Washington Post | The Washington Post | Getty Images

Under the new law, Alaska will be able to sell so-called “carbon offset credits,” capitalizing on the state’s vast public forest lands. Companies that emit carbon will be able to buy the credits, effectively paying the state to preserve and protect its forests, thereby canceling out, or offsetting, those emissions.

What the state doesn’t spend on maintaining its forests, it can keep as revenue.

Alaska Natural Resources Commissioner John Boyle, who is working on the rules to implement the program, said in an interview with CNBC that the market for the new credits could be huge as companies discover the limits of carbon reduction technology.

“Across America, and in the rest of the world, you see a number of companies that have set very aggressive net zero (emission) targets for themselves,” he said. “Ultimately, in order for a lot of these companies to be able to hit the targets that they’ve set for themselves, they’re going to need to look for other options for offsets.”

The emissions offset market is growing

Carbon offset programs are already gaining popularity around the world. The California Air Resources Board operates an extensive offset program that the state says is an essential part of its program to reduce greenhouse gas emissions.

When Dunleavy unveiled the legislation in January, he noted that Alaska’s Native Corporations have generated $370 million in revenue selling offset credits since 2019.

The state has not offered any estimates of how much revenue its program could generate, but Boyle said it could begin making money soon.

“I don’t think it’s unfair to say that the state fully anticipates seeing revenue within a relatively short period of time, likely within the next 12 to 18 months,” Boyle said. “We fully expect to see some new revenues coming in as companies acquire our leases and do other things to prepare themselves to develop carbon offset projects.”

More coverage of the 2023 America’s Top States for Business

Carbon credits are controversial

Alaska is all in on the plan. The bill passed the state Senate unanimously; only two members of the House voted against it.

But outside Alaska, there is no shortage of skepticism.

“Multiple lines of evidence suggest that Alaska’s forest carbon offsets program could produce carbon credits that don’t represent real climate benefits,” wrote Freya Chay and Grayson Badgley of the climate research group CarbonPlan in a commentary published in May. 

They note that while the program promises to protect Alaska’s forests and the climate benefits they provide, it also promises not to reduce timber harvests. The researchers said the credits appear to be structured to “simply reward a landowner for doing what they already planned on doing.”

“Although this could be a win for the State budget, it would be a loss for the climate — and for the credibility of the voluntary carbon market,” they wrote.

Boyle argues that the funding from the offset credits will allow the state to manage its forests more effectively and efficiently. That way, he said, the state will eventually have larger forests — with more trees to capture carbon, and more timber left over to harvest.

“That gives you a margin by which, if you choose, you can do some selective timber harvesting, as long as you maintain a level that is appropriate with the baseline that’s been established,” he said.

Carbon credits are just the beginning of Alaska’s plan to transform its economy. Dunleavy has also proposed creating a “carbon sequestration” program, where the state would capture its carbon emissions — or accept shipments of carbon captured elsewhere — and inject them into underground storage beneath Alaska’s huge expanses of open land.

“There’s a real ability here to move the needle in managing the world’s carbon and storing it for geologically significant periods of time,” Boyle said.

They believe that there is also an ability to diversify Alaska’s economy and make it competitive again, while helping the planet at the same time.

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Germany’s economy is stagnating. And these 5 charts show how

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Germany entered a technical recession on May 25, and economists have predicted that GDP growth is set to stagnate for the rest of the year, painting a gloomy picture for Europe’s largest economy.

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With Germany already in a technical recession, economists predict that GDP growth is set to stagnate for the rest of the year and have painted a gloomy picture for Europe’s largest economy.

In May, the German statistics office revised its first-quarter GDP readings from zero to -0.3%, which followed a 0.5% contraction in the last quarter of 2022.

But a faltering gross domestic product isn’t the only figure that suggests that the German economy is stuttering.

Here are five charts that show how the historical engine of Europe is faring.

High inflation

The consumer price index measures the average change in the price of goods and services purchased by consumers, and is a solid indication of monetary value trends.

Germany’s inflation rate is expected to hit 6.4% for June, according to provisional data from the German statistics office, which is an increase from the 6.1% recorded for May. Despite the projected increase, the figure is still a significant decrease from its near-50-year high of 8.8% in October, but remains well above the country’s 2% target.

“It looks like, for at least the next couple of months, inflation will stay on very high levels. Expect maybe for the second half that inflation might come down to a certain extent,” Joachim Nagel, president of Germany’s central bank, the Bundesbank, told CNBC in March.

While inflation may start to sink, Germany’s central bank estimates that it won’t reach 2% until at least 2025. German consumers have felt the impacts of long-lasting high inflation as they’ve had to make their euros stretch further, but the financial pressure on households doesn’t look set to ease any time soon.

Interest rates

Germany’s place in the euro zone means that its interest rates are determined by the European Central Bank, giving the country limited autonomy when it comes to tackling sticky inflation. 

While the government can’t necessarily control inflation, it can mitigate the impact it has on the German population, Sylvain Broyer, chief EMEA economist at S&P Global Ratings told CNBC.

“What the fiscal authority can do in the face of high inflation is to alleviate the pain of inflation on the most fragile citizens,” he said.

Higher interest rates are taking their toll on business activity, economist says

The government introduced multiple relief packages in 2022, designed to help Germans cope with the rising cost of living brought about by high inflation, including increased child benefits and one-off payments for students and pensioners.

The European Central Bank has consistently raised rates since July 2022 as it attempts to bring down inflation across the region, and the main rate currently sits at 3.5% after a further 25-basis-point hike on June 15.

Energy prices

The current bout of inflation can largely be attributed to high global energy prices, which came as a result of pent-up pandemic demand followed by a post-pandemic recovery. Russia’s full-scale invasion of Ukraine then brought huge uncertainty to the market and caused a further spike in prices.

While some energy sources are starting to settle to their pre-war prices, the energy crisis is continuing to impact some of Germany’s biggest industries.

“Energy intensive industrial production is reduced substantially. The automobile sector [has also been] having difficulties for some time and substantial restructuring is still ahead,” Endowed Chair of Monetary Economics at Goethe University in Frankfurt, Volker Wieland, told CNBC.

Utilities costs are still expected to increase in 2023, according to a January report by Allianz. Electricity bills are expected to increase by around 35% this year, while industrial power prices are set to rise by around 75%, the report said.

Export figures

German exports unexpectedly nudged lower in May, coming to a total of 130.5 billion euros ($142 billion), which is a 0.1% drop compared to April, according to provisional data by the German statistics office. Analysts polled by Reuters had anticipated a 0.3% uptick month-on-month after April export figures surprised to the upside.

“The global interest rate hikes are naturally also dampening demand for products from Germany,” Veronika Grimm, professor of economics at Friedrich-Alexander-Universität Erlangen-Nürnberg, told CNBC.

But the fall in exports may not be as bad as the headline numbers suggest, S&P Global Ratings’ Broyer told CNBC, and he attributed the dip to a price effect reflecting factors such as the recent lower cost of energy.

“The foreign trade figures for May show that the terms of trade are continuing to recover. The German economy has already recouped half of the losses in terms of trade incurred over the last two years and the energy crisis,” he added.

China is Germany’s main business partner, with the countries having traded goods worth 298.9 billion euros between one another in 2022, and Germany has been buoyed by China’s much-hyped, post-pandemic re-opening.

Germany doesn't have a clear China strategy, says former vice chancellor

But Europe’s biggest economy has shown hesitation in further strengthening its trading relationship with Beijing, with the country’s Economy Minister and Vice Chancellor Robert Habeck saying that while trade is open, Germany is not “a stupid market” and needs “to be careful.”

Aging population

Germany has the largest aging population in Europe, with a growing percentage of Germans in retirement, and that demographic is only set to grow in the coming decades.

The number of people at retirement age (67 years or older) will rise by roughly 4 million by the middle of the 2030s, according to the German statistics office, bringing the total number of retirees to at least 20 million.

The growing elderly population has exacerbated concerns about the country’s pension system, which is “on the verge of collapse” according to Rainer Dulger, president of the Confederation of German Employers’ Associations, who spoke to Germany’s Bild newspaper in October.

Contributions to Germany’s public pension plans are expected to represent 12.2% of the nation’s GDP by 2070 under the current system, according to The 2021 Ageing Report published by the European Commission. That’s a 2-percentage-point increase on the 2019 figure, and one of the highest forecasted changes in the European Economic Area.

Combined with a labor shortage crisis that has prompted the country to overhaul its immigration rules to bring in more workers, and enthusiastic engagement with digitalization to make the most of the workers it does have, Germany’s quickly-aging population is having ripple effects throughout the country’s economy.

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OPEC chief says the search is on for new members of the oil producers’ group

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Haitham al-Ghais, secretary-general of the Organization of Petroleum Exporting Countries (OPEC), speaking at the Energy Asia Summit on June 26, 2023.

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The secretary-general of the Organization of the Petroleum Exporting Countries signaled that the influential producers’ alliance is actively open to recruiting new members.

Asked if he is trying to expand the OPEC coalition, the organization’s secretary-general, Haitham al-Ghais, told reporters on Wednesday, “I am, yes.”

The group currently has 13 members, predominantly based in the Middle East, North and West Africa, and South America. At stake for the organization of oil producers is a battle to reconcile an outlook of tighter crude supply in the second half of the year, current macroeconomic worries and inflationary concerns. OPEC members coordinate the amount of oil they produce in an effort to influence prices.

Ecuador exited the group in 2020 because of political circumstances, but in May was invited to rejoin the OPEC ranks, according to a letter from al-Ghais shared by the Ecuadorian Energy Ministry.

“The Organization sees as a top priority that Ecuador joins the OPEC family again,” the letter said. The Ecuadorian ministry did not reveal its response.

Al-Ghais would not be drawn into disclosing the names of potential new members. He mentioned recent visits to oil-producing countries, however, including allies that currently implement a joint production strategy with OPEC countries, in a group known as OPEC+.

“I was in Malaysia, I was in Brunei,” he said, stressing that he had not necessarily invited these countries to join the organization. “I was in Azerbaijan, I was in Mexico.”

Previous speculation about Guyana’s potential membership saw OPEC state in late June that, while the South American country is “an emerging player in the international oil market with significant potential,” it had not been invited to join.

Asked about the requirements to become an OPEC member, al-Ghais said: “They have to be a net [oil] exporter, substantial, they have to have similar goals as OPEC. This is all mentioned very clearly in our statute. And I think many countries that I just named actually fit this profile. So … work in progress.”

Unanimity

The secretary-general addressed reporters following an OPEC seminar conference in Vienna, where energy and oil ministers met on the sidelines.

No new policies were announced, but ministers expressed appreciation for the additional oil production cuts of OPEC+ members Saudi Arabia, Russia and Algeria.

On Monday, Saudi Arabia announced it would extend its voluntary 1 million barrels per day cut initially outlined for July into August, while fellow heavyweight Moscow said it would trim its exports by 500,000 barrels per day next month. Algeria also said it will reduce its production by 20,000 barrels per day in August.

All three countries and several other OPEC+ members in April declared a separate set of output cuts totaling over 1.6 million barrels per day, which they have extended until the end of 2024.

Al-Ghais emphasized that the voluntary reductions enacted by some OPEC+ countries did not suggest divisions in the policy views of coalition members.

“When people can sit down and go through an agreement that goes all the way through, with a clear vision, into 2025, I think that’s a sign of unanimity,” he said.

“These are sovereign country decisions. They are extra. We appreciate them. … It does not in any way insinuate that there is a fragmentation.”

There is a lot of ambiguity in the macroeconomic picture: OPEC secretary general

Speaking to CNBC’s Dan Murphy on Thursday, al-Ghais underscored the ongoing uncertainty that continues to cast a deep shadow on the oil price landscape.

“There is a lot of ambiguity, I would say, in terms of some of the economic macro picture. [You] talk about banking issues in the U.S. You talk about recession fears, you talk about inflation still being dealt with. And I always want to remind people that we are not out of the woods in terms of Covid,” he said.

“The first half of the year, it hasn’t really panned out the way it was expected not only by OPEC, I would say, but by most. So we’re thinking that it could materialize in the second half of the year, with China opening up, maybe at a more rigorous rate than we’ve seen so far, [with] hopefully a settling of the economic conditions in the European and the U.S. systems.”

OPEC officials have in recent months flagged a disconnect between supply-demand fundamentals and global oil prices, which have absorbed the aftershocks of banking and economic turbulence since the start of the year.

On Thursday, Brent oil futures with September expiry were up 12 cents per barrel from the previous settlement, hitting $76.77 per barrel at 12:43 p.m. London time.

Focus on investment

Echoing the comments of other OPEC officials, al-Ghais has also been advocating for simultaneous joint investment in fossil fuel projects and in renewables, in an effort to avoid energy supply deficits. Despite what he perceives as global underinvestment in hydrocarbons, he said that the OPEC alliance can still answer any potential supply crisis.

“Part of the decision to reduce production is also good because it gives us more spare capacity, and OPEC has always managed to step up in case of any shock globally,” al-Ghais said.

“Spare capacity is tight, I would say. … And our countries are investing. When I talk about underinvestment, most of our countries, if not all of them, are investing. … But it’s a global responsibility. OPEC cannot shoulder this on its own. We have to have everybody step up.” 

'What worries me is the medium to long-term supply, not the demand,' UAE energy minister says

Suhail al-Mazrouei, energy minister of the United Arab Emirates, likewise stressed focus on investment and availabilities.

“What’s important is not the price, what’s important is the level of investments that are coming to the market to balance the longer or the medium-term view of the supply,” he told CNBC’s Murphy on Wednesday. “If something worries me, that’s what worries me, the medium to long-term supply. Not the demand.”

The International Energy Agency in May foreshadowed an intense supply crunch, noting “tighter market balances we anticipate in the second half of the year, when demand is expected to eclipse supply by almost 2 mb/d.”

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OPEC+ prepares for weekend meeting after Saudi warns speculators to ‘watch out’

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Led by Saudi Arabia and Russia, OPEC+ agreed in early October to reduce production by 2 million barrels per day from November.

Vladimir Simicek | Afp | Getty Images

The OPEC+ alliance of oil producers will decide further production policy steps over the weekend, as crude prices reflect an ongoing struggle between supply-demand fundamentals and broader macro-economic concerns.

After convening remotely throughout the Covid-19 pandemic, OPEC+ has returned to in-person meetings and will gather in Vienna on June 4. The OPEC ministers gather for a separate meeting unlikely to address output on June 3.

Ministers face an oil market rattled by supply volatility, demand uncertainty, and a prospective recession, which could throttle transport fuel consumption. Since October, OPEC+ — a 23-member alliance including heavyweights Russia and Saudi Arabia — has lowered output by 2 million barrels per day in an effort to combat lower demand. Some members have also announced additional voluntary cuts totaling 1.6 million barrels per day in April.

Group members are expected to coagulate their individual positions and proposals in the 24-48 hours before the meeting, some OPEC+ delegates told CNBC, speaking on condition of anonymity — while public comments so far have been conflicting.

On May 23, Saudi energy minister Prince Abdulaziz bin Salman warned oil market speculators they could face further pain ahead, in comments some have read as hinting further supply cuts could be in the cards.

“I keep advising [speculators] that they will be ouching. They did ouch in April. I don’t have to show my cards, I’m not [a] poker player … but I would just tell them, watch out,” he said at the time.

Russia’s Deputy Prime Minister Alexander Novak later indicated that he expected no further steps from the OPEC+ meeting, but then said his comments were misinterpreted as downplaying an output cut, according to Russian state news agency Tass.

Russia and Saudi Arabia have been united in their public OPEC+ stance since a March 2020 dispute that led to the one-month dissolution of their oil partnership and an ensuing price war.

Moscow and Riyadh later mended ties through a new OPEC+ agreement to respond to a demand plunge driven by the Covid-19 pandemic — and have remained like-minded on OPEC+ matters since. Voiding the perception of a public rift, Saudi Foreign Minister Prince Faisal bin Farhan al-Saud and his Russian counterpart Sergey Lavrov on Thursday met on the sidelines of a BRICS summit in Cape Town.

The two reviewed the cooperation between their countries and “ways to strengthen & develop them in all fields, in addition to discussing the consolidation of bilateral & multilateral action,” according to the Saudi foreign ministry.

Two OPEC+ delegates, who did not want to be named due to the market sensitivity of the meeting, told CNBC that further output cuts were unlikely this weekend. One noted that this will remain the case unless demand stays low in China — where recovery has fallen short of expectations, in the wake of shedding strict Covid-19 restrictions.

A third source said that OPEC+, which prioritizes the state of global inventories over outright prices, would be comfortable with futures above $75 per barrel, while a fourth estimated near $70-80 per barrel.

Brent futures with August expiry were trading at $75.70 per barrel at 10:24 a.m. in London, up $1.42 per barrel from the Thursday settlement.

The OPEC+ group isn’t “after spikes” and seeks a “balanced market,” the fourth delegate told CNBC, stressing that the alliance must continue to strike a “precautionary” production strategy. Deep cuts also risk re-attracting U.S. ire, as Washington has historically criticized supply reductions that pile strain on consuming households.

‘Wait and see’?

Goldman Sachs’ analysts expect OPEC+ to keep production unchanged this weekend. However, they said in a note Wednesday that they see a “sizeable 35% subjective probability” of further OPEC cuts, as oil prices are “clearly below our $80-85/bbl estimate of the OPEC put. Very low positioning, the Saudi determination not to give speculators free rein, and the decision to meet in person also suggest that deeper cuts will likely be discussed.”

OPEC+ has waded stormy waters for the better part of the year. Oil markets have historically been steered by physical supply and demand fundamentals — which have been increasingly overshadowed by broader macro-economic concerns over the fuel consumption impact of high inflation, bolstering interest rates and the spring collapse of several U.S. and European banks.

OPEC+ delegates also said the group had been following U.S. debt ceiling negotiations, as the proposal of President Joe Biden and House Speaker Kevin McCarthy transited several debate and vote stages in a bid for the world’s largest economy to avoid defaulting on its bills.

“The impact of higher oil prices on the global economy will weigh heavily on the ministers’ minds,” Jorge Leon, senior vice president of oil market research at Rystad Energy, said in a Thursday note, adding that OPEC+ could maintain production as a precaution. “The ministers might therefore take a ‘wait and see’ approach and hold off taking any action. Demand forecasts remain lukewarm at best, so maintaining current output could be the most prudent course. “

Supply is also under question, given involuntary declines.

Roughly 450,000 barrels per day of northern Iraqi exports were frozen by a legal dispute between Baghdad, Ankara, and the Kurdistan Regional Government. Nigeria, typically West Africa’s largest oil producer, self-reported its April crude production at just 999,000 barrels per day following disruptions, according to OPEC’s Monthly Oil Market Report for May.

Meanwhile, the true extent of Russian output losses remains unclear, as vessels carrying Moscow’s crude turn off their satellite tracking and Russia looks to further shift its clientele east.



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Turkey’s runoff election is paralyzing key oil exports from northern Iraq

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A satellite image showing the port of Ceyhan centred on August 18, 2015 in Turkey.

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Turkey’s runoff election is compounding delays to restart roughly 450,000 barrels per day of Iraqi crude oil exports, as Ankara studies its relationship with Baghdad, analysts and market sources told CNBC.

Oil typically flows through Turkey from both the Iraqi state and the semi-autonomous Kurdistan Regional Government (KRG). More specifically, this Kirkuk crude flows down the Iraq-Turkey Pipeline linking the north of the Gulf country with Turkey’s Ceyhan port in the Mediterranean. But the flows have been paralyzed since March 25 by a legal dispute involving federal Iraq, the KRG and Turkey.

Resolution pends on the result of a second presidential vote this weekend, but a prolonged halt could reduce Iraqi crude production.

The KRG had previously trucked its crude exports across borders, until it linked its major oil-producing fields to the Iraq-Turkey pipeline and began shipping crude in 2014. Federal Baghdad denounced Erbil’s independent crude sales as illegal, threatening to ban customers of such supplies from purchasing Iraq’s larger Basra crude volumes.

After a nine-year suit, the International Chamber of Commerce’s Court of Arbitration in Paris found that Turkey violated the 1973 version of a pipeline transit agreement between Baghdad and Ankara over 2014-2018. Turkey was ordered to pay Iraq roughly $1.5 billion in damages, according to Reuters. A second arbitration suit covering 2018 to date is still ongoing.

The ICC verdict followed a domestic win for Baghdad, after Iraq’s federal court in February 2022 pronounced the KRG’s oil and gas legislation unconstitutional and invalidated its contracts with foreign firms. This decision led to U.S. companies deciding to exit contracts in Kurdistan and deterred some KRG oil buyers from further purchases.

Iraq’s oil minister Hayan Abdul-Ghani on May 23 said that Baghdad has informed Turkey it is able to restart flows through Ceyhan and awaits Ankara’s response.

“Our colleagues in Turkey said there are some evaluative issues that they have to take into account. And that resulted from the earthquake,” he said, noting that an Iraqi delegation will be sent at an unspecified time to Turkey to discuss the restart.

Can Gulf money save Turkey's economy?

Kirkuk crude is exported from the Botas terminal at Ceyhan in southern Turkey, separate from Azeri crude flows shipped out from the nearby Baku-Tblisi-Ceyhan port terminal. Botas resumed loadings the day after the devastating earthquake of Feb. 6 that killed at least a combined 50,000 people in Turkey and Syria, according to the U.N. The BTC terminal suffered a longer outage.

Several trade, shipping and oil producing sources — who could only comment anonymously because of contractual obligations — told CNBC that, following a request from Baghdad, Ankara was widely expected to resume Kirkuk crude exports from Ceyhan on May 13 — a day before presidential elections in Turkey, whose inconclusive first round on May 14 stymied the oil’s resumption.

Presidential purview

The sources stressed that Turkish authorities are loathe to take responsibility for the restart, while incumbent President Recep Tayyip Erdogan fights primary rival Kemal Kilicdaroglu to prolong his roughly two-decade rule.

“The main issue with the resumption of the oil through Ceyhan is the elections ongoing in Turkey. Another obstacle in front of the resumption of oil is the ongoing case at ICC in Paris against Turkey by Baghdad from 2018 until now. Ankara asks Baghdad to drop this case, but Baghdad has yet to do so,” political analyst and former Kurdistan official Lawk Ghafuri told CNBC.

“The ruling party in Turkey [Erdogan’s AKP] wants to settle the elections and then deal with KRG’s oil with Baghdad.” 

Other analysts further emphasized Turkey’s priority to avoid further legal disputes by insisting on a strict, clear agreement on the legality of oil exports between Baghdad and Erbil. Current deals between the two counterparties are political accords, rather than legislation.

“There are still lots of technicalities that need to be sorted out between the KRG and Baghdad. Although there has been an initial deal, the details have not been fleshed out in terms of how oil [is] to be exported and which side has control over the revenues,” Yerevan Saeed, research associate at the Arab Gulf Institute in Washington, told CNBC by email.

Turkey's unorthodox economic policy will be difficult to sustain, strategist says

In addition to deciding marketing distribution, Baghdad and Kurdistan might also have to rework the agreements under which foreign firms have prepaid sums to Erbil in exchange for oil volumes, as well as the reimbursement contracts for foreign producers of Kurdish oil, market sources say.

Saeed noted Ankara may stretch negotiations with Baghdad to cover water resources from the Euphrates River and Turkey’s military presence in Kurdistan and Sinjar.

Bilal Wahab, Wagner fellow at the Washington Institute for Near East Policy, agreed that control of the Kurdish oil export flows arms Turkey with the leverage to ask Baghdad to drop its fine and second arbitration suit, as well as redefine the scope of Ankara’s business relationship with Iraq.

“This arbitration award is forcing a decision on Ankara: should they continue doing business with Kurdistan, where this has led to legal trouble with federal Iraq, or should they use this as a bird in hand to segue into getting the chance to do business in Iraq? All in all, by shutting down the pipeline, Turkey is not losing a lot, maybe the transit fee,” he told CNBC by phone, referring to Kurdistan’s payment to transport crude along the Iraq-Turkey pipeline.

Winner talks all

An Erdogan loss in the presidential battle could prolong the oil stalemate, traders warn, with Kilicdaroglu likely to require independent negotiations with Iraq — in a diplomatic point unlikely to enjoy pride of place on the new leader’s agenda.

Third-party candidate Sinan Ogan’s Monday endorsement of Erdogan has strengthened Erdogan’s position as Turks head to the polls.

Domestically, Erdogan has enjoyed a tumultuous relationship with Turkey’s largest ethnic minority, which typically accounts for 15-20% of the Turkish population. While Erdogan has had frequent rapprochement with KRG Prime Minister Masrour Barzani, Wahab signals Turkey could still prioritize securing benefits from the oil export stalemate.

“I don’t think a victorious Erdogan would have any qualms about using the KRG as a leverage to get a good deal out of Baghdad: favourable terms for doing business in Iraq, dropping the fine that Turkey has to pay, or dropping some of the demands that Iraq has with regard to water [from the Euphrates] and Turkish military presence in Iraq,” he said.

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Norway faces backlash from campaigners for ‘reckless’ pursuit of Arctic oil and gas

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A view of fjords as they melt due to climate change near Svalbard Islands, in the Arctic Ocean in Norway on July 19, 2022.

Anadolu Agency | Anadolu Agency | Getty Images

The Norwegian government is calling on energy giants to ramp up oil and gas exploration projects in remote regions like the Arctic Barents Sea, defying a sense of palpable frustration among climate campaigners as the Nordic country seeks to shore up its position as Europe’s largest gas supplier.

The rethink in strategy comes as Norway strives to keep up with growing demand for its energy exports in the wake of Russia’s full-scale invasion of Ukraine.

Norway last year overtook Russia as Europe’s biggest natural gas supplier and says it is now seeking to maintain Europe’s energy security by exploring the Barents Sea for further resources.

Speaking in the town of Hammerfest late last month, Norway’s Petroleum and Energy Minister Terje Aasland reportedly said that the industry should “leave no stone unturned” in their pursuit for fresh hydrocarbon discoveries in the Barents Sea.

Aasland even described this policy as the oil and gas industry’s “social responsibility,” according to Bloomberg, saying undiscovered resources could help to maintain the country’s future production levels.

Norway oil and gas giant Equinor and Vår Energi, one of the country’s largest exploration and production companies, confirmed to CNBC that the minister recently issued this call.

A spokesperson for Norway’s petroleum and energy ministry, meanwhile, said that the message to energy giants was “to explore all economic oil and gas resources within the available areas, including in the Barents Sea.”

Norway has pumped oil and gas from its continental shelf, a relatively shallow section of seabed off its coast, for more than 50 years and it currently has several oil and gas fields either in production or under development.

Oil drilling in the Arctic is like pouring gasoline on a fire.

Frode Pleym

Head of Greenpeace Norway

It is estimated that roughly two-thirds of the country’s undiscovered oil resources lies off the country’s northern coast in the Arctic’s Barents Sea. And yet, the desire among energy companies to explore the Barents Sea for oil and gas has been relatively subdued in recent years, in part due to high costs and limited opportunities to export gas to markets.

At the start of the year, however, Norway said it planned to offer energy firms a record number of oil and gas exploration blocks in the Arctic.

Environmental campaigners at Friends of the Earth Norway, WWF-Norway and Greenpeace Norway have described the country’s lobbying for continued oil and gas expansion as “embarrassing,” “extremely reckless” and “a middle finger to the Paris Agreement.”

“Oil drilling in the Arctic is like pouring gasoline on a fire,” Frode Pleym, head of Greenpeace Norway, told CNBC via email.

“Both Norway and the oil corporations need to stop cynically exploiting Russia’s war in Ukraine,” Pleym said. “The aggressive and greedy oil policy of Norway do not only consolidate Oslo’s position as a top energy supplier to Europe, it locks a whole continent into future dependency on fossil fuels. The alternative to oil and gas is not more oil and gas, it is more energy efficiency and renewable energy.”

The burning of fossil fuels, such as coal, oil and gas, is the chief driver of the climate crisis.

‘We want to explore for more’

Norway has been one of the world’s top crude producers for the past half-century thanks to its gigantic North Sea petroleum deposits — the spoils of which have been used to provide a robust safety net for current and future generations.

Oil and gas companies believe the Barents Sea can play an important role in ensuring the long-term market access for gas, noting the development of the resources in this area should fit within the EU’s Arctic policy.

A spokesperson for Equinor told CNBC that the company hoped to see “new attractive acreage in the Barents Sea.” They added, “we want to explore for more and we think we will find more.”

Responding to the environmental concerns of Arctic oil and gas drilling, a spokerson at Equinor said, “We have a long track record of offshore operations in harsh environments with high standards on safety, security and sustainability.”

“We know the Barents region well and work together with the authorities to plan and execute our operations in a sustainable way with as little as possible impact on the environment.”

A LNG ship is pictured at the island Melkoya where Norwegian energy giant Equinor has built a facility for receiving and processing natural gas from the Snøhvit field in the Barents Sea.

Fredrik Varfjell | Afp | Getty Images

The Norwegian Petroleum Directorate, the government agency responsible for the regulation of petroleum resources, recently lamented the lack of exploration in the Barents Sea, saying its calculations show that such activity “is profitable in all ocean areas.”

Separately, a mid-April study from gas infrastructure operator Gassco said building a pipeline to transport gas produced in the Arctic Barents Sea could be worth re-examining due to the country stepping up its gas exports to Europe.

A spokesperson for Vår Energi described the Barents Sea as a strategic hub for oil and gas drilling, one that provides a “manageable, ice-free” part of the Arctic with weather and climate conditions like other parts of the Norwegian Continental Shelf.

It is for this reason, Vår Energi says, that the Barents Sea should not be compared to other Arctic regions characterized by harsher conditions, adding that the company abides by strict environmental regulations.

Climate campaign groups refute this logic, warning that any oil spill in this area would spell disaster to the rich but acutely vulnerable ecosystems and marine life.

‘A strong basis to lead on climate policy’

“Russia’s war against Ukraine does not justify a further push for Arctic oil and gas, as it can take around 15 years to go from exploration to production,” Truls Gulowsen, leader of Friends of the Earth Norway, told CNBC.

“Norway is making a huge profit off energy prices in Europe and few countries have such a strong basis to lead on climate policy,” Gulowsen said.

Ragnhild Waagaard, climate and energy lead in WWF-Norway, said it is understandable governments want to address the energy crisis and high energy costs causing real hardship for many people but warned that doubling down on fossil fuels will not help.

“Countries should rapidly boost their uptake of renewable energy, increase energy efficiency and reduce demand for energy. The choices we make now, and the way governments respond to the evolving energy crisis, will determine whether we succeed or fail,” Waagaard said.

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Moldova ramps up EU membership push amid fears of Russia-backed coup

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CHIȘINĂU, Moldova — Tens of thousands of Moldovans descended on the central square of the capital on Sunday, waving flags and homemade placards in support of the country’s push to join the EU and make a historic break with Moscow.

With Russia’s war raging just across the border in Ukraine, the government of this tiny Eastern European nation called the rally in an effort to overcome internal divisions and put pressure on Brussels to begin accession talks, almost a year after Moldova was granted EU candidate status.

“Joining the EU is the best way to protect our democracy and our institutions,” Moldova’s President Maia Sandu told POLITICO at Chișinău’s presidential palace, as a column of her supporters marched past outside. “I call on the EU to take a decision on beginning accession negotiations by the end of the year. We think we have enough support to move forward.”

Speaking alongside Sandu at what was billed as a “national assembly,” European Parliament President Roberta Metsola declared that “Europe is Moldova. Moldova is Europe!” The crowd, many holding Ukrainian flags and the gold-and-blue starred banner of the EU, let out a cheer. An orchestra on stage played the bloc’s anthem, Ode to Joy.

“In recent years, you have taken decisive steps and now you have the responsibility to see it through, even with this war on your border,” Metsola said. “The Republic of Moldova is ready for integration into the single European market.”

However, the jubilant rally comes amid warnings that Moscow is doing everything it can to keep the former Soviet republic within its self-declared sphere of influence.

In February, the president of neighboring Ukraine, Volodymyr Zelenskyy, warned that his country’s security forces had disrupted a plot to overthrow Moldova’s pro-Western government. Officials in Chișinău later said the Russian-backed effort could have involved sabotage, attacks on government buildings and hostage-taking. Moscow officially denies the claims.

“Despite previous efforts to stay neutral, Moldova is finding itself in the Kremlin’s crosshairs — whether they want to be or not, they’re party of this broader conflict in Ukraine,” said Arnold Dupuy, a senior fellow at the Atlantic Council think tank in Washington.

“There’s an effort by the Kremlin to turn the country into a ‘southern Kaliningrad,’ putting in place a friendly regime that allows them to attack the Ukrainians’ flanks,” Dupuy said. “But this hasn’t been as effective as the Kremlin hoped and they’ve actually strengthened the government’s hand to look to the EU and NATO for protection.”

Responding to the alleged coup attempt, Brussels last month announced it would deploy a civilian mission to Moldova to combat growing threats from Russia. According to Josep Borrell, the EU’s top diplomat, the deployment under the terms of the Common Security and Defense Policy, will provide “support to Moldova [to] protect its security, territorial integrity and sovereignty.”

Bumps on the road to Brussels

Last week, Sandu again called on Brussels to begin accession talks “as soon as possible” in order to protect Moldova from what she said were growing threats from Russia. “Nothing compares to what is happening in Ukraine, but we see the risks and we do believe that we can save our democracy only as part of the EU,” she said. A group of influential MEPs from across all of the main parties in the European Parliament have tabled a motion calling for the European Commission to start the negotiations by the end of the year.

But, after decades as one of Russia’s closest allies, Moldova knows its path to EU membership isn’t without obstacles.

“The challenge is huge,” said Tom de Waal, a senior fellow at Carnegie Europe. “They will need to overcome this oligarchic culture that has operated for 30 years where everything is informal, institutions are very weak and large parts of the bureaucracy are made viable by vested interests.”

At the same time, a frozen conflict over the breakaway region of Transnistria, in the east of Moldova, could complicate matters still further. The stretch of land along the border with Ukraine, home to almost half a million people, has been governed since the fall of the Soviet Union by pro-Moscow separatists, and around 1,500 Russian troops are stationed there despite Chișinău demanding they leave. It’s also home to one of the Continent’s largest weapons stockpiles, with a reported 20,000 tons of Soviet-era ammunition.

“Moldova cannot become a member of the EU with Russian troops on its territory against the will of the Republic of Moldova itself, so we will need to solve this before membership,” Romanian MEP Siegfried Mureșan, chair of the European Parliament’s delegation to the country, told POLITICO.

“We do not know now what a solution could look like, but the fact that we do not have an answer to this very specific element should not prevent us from advancing Moldova’s European integration in all other areas where we can,” Mureșan said.

While she denied that Brussels had sent any official signals that Moldova’s accession would depend on Russian troops leaving the country, Sandu said that “we do believe that in the next months and years there may be a geopolitical opportunity to resolve this conflict.”

Ties that bind

Even outside of Transnistria, Moscow maintains significant influence in Moldova. While Romanian is the country’s official language, Russian is widely used in daily life while the Kremlin’s state media helps shape public opinion — and in recent months has turned up the dial on its attacks on Sandu’s government.

A study by Chișinău-based pollster CBS Research in February found that while almost 54 percent of Moldovans say they would vote in favor of EU membership, close to a quarter say they would prefer closer alignment with Russia. Meanwhile, citizens were split on who to blame for the war in Ukraine, with 25 percent naming Russian President Vladimir Putin and 18 percent saying the U.S.

“Putin is not a fool,” said one elderly man who declined to give his name, shouting at passersby on the streets of the capital. “I hate Ukrainians.”

Outside of the capital, the pro-Russian ȘOR Party has held counter-protests in several regional cities.

Almost entirely dependent on Moscow for its energy needs, Moldova has seen Russia send the cost of gas skyrocketing in what many see as an attempt at blackmail. Along with an influx of Ukrainian refugees, the World Bank reported that Moldova’s GDP “contracted by 5.9 percent and inflation reached an average of 28.7 percent in 2022.”

“We will buy energy sources from democratic countries, and we will not support Russian aggression in exchange for cheap gas,” Sandu told POLITICO.

The Moldovan president, a former World Bank economist who was elected in 2020 on a wave of anti-corruption sentiment, faces a potentially contentious election battle next year. With the process of EU membership set to take years, or even decades, it remains to be seen whether the country will stay the course in the face of pressure from the Kremlin.

For Aurelia, a 40-year-old Moldovan who tied blue and yellow ribbons into her hair for Sunday’s rally, the choice is obvious. “We’ve been a part of the Russian world my whole life. Now we want to live well, and we want to live free.”



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Wall Street predicted a big surge for oil this year. But prices are now lower

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Oil prices were rattled by the collapse of several U.S. and European lenders earlier this spring, which discouraged volatility-adverse investors from historically riskier assets, such as commodities.

Bloomberg | Bloomberg | Getty Images

A surprise decision by several OPEC+ producers to voluntarily cut output earlier this month had pushed analyst oil price forecasts near $100 per barrel, but stagnating prices now point to a deepening divide between macroeconomic sentiment and supply-demand fundamentals.

Oil prices have once again lulled near the $80 per barrel threshold, nearly revisiting territory walked in early April, before members of the OPEC+ coalition announced a unilateral cut totaling 1.6 million barrels per day until the end of the year.

The production declines prompted some analysts to warn prices could surge to triple digits, with Goldman Sachs adjusting its Brent forecast up by $5 per barrel to $95 per barrel for December 2023.

Analysts now flag that broader financial turmoil has so far obstructed this bullish outlook, as supply-demand factors are outweighed by recessionary concerns.

“Oil markets have completely faded the boost from the surprise OPEC+ cut earlier this month, and we think this primarily reflects deep pessimism about the macro outlook, with little evidence of incremental weakness in demand so far,” Barclays analysts said in a Wednesday note.

“Weaker refining margins and freight demand have been in focus recently, but we believe markets might be reading too much into the implications of these trends for the demand outlook. We also think that markets might be underestimating OPEC+’s resolve to keep the inventory situation in check.”

“People really bet on a China reopening,” Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, told CNBC’s “Squawk Box” on Wednesday.

Beijing, the world’s largest importer of crude oil, reined in its purchases last year amid drastic “zero-Covid” restrictions that depressed transport fuel requirements. China has been progressively lifting its pandemic measures since the end of last year, and local crude oil demand is returning — but at a more “muted” pace, Croft noted.

“And the issue of the Fed is real. I think that is something that a lot of us got wrong in terms of the impact of, you know, the rate hikes, recession concerns,” she added.

“We have these OPEC cuts in place, we do have, you know, again, strong demand in India, China is reopening — this should be set up for a bullish story. People are still optimistic about the back half of the year, but the question is, can you get through the big macro wall of worry?”

Viktor Katona, lead crude analyst at Kpler, told CNBC by e-mail that oil prices have suffered from a “constant barrage of gloomy macroeconomic news that creates a negative sentiment background,” as well as market distrust in the implementation of the OPEC+ production cuts. Market participants often wait for a visible reflection — such as lower export rates — to factor in production cuts, which can create a disconnect when vessel loadings arise from stock inventories.

But Katona projected price-supportive tightness in the physical markets over the summer season:

“We still see July and August as being the tightest months of 2023, with demand surpassing supply by some 2 million b/d (barrels per day), so the overall direction is still the same,” he said, noting that, globally, consumers will be exiting their annual refinery maintenance periods that curb their intake by that time.

“Net length in crude futures contracts has fully recovered from the banking panic seen in March and net length in WTI is the highest since November 2022, so the belief that prices are to increase is definitely widely shared by the market.”

But China’s long-anticipated reopening may prove too little, too late. One trade source — who could only comment on condition of anonymity because of contractual obligations — said the market is waiting for concrete signs of physical inventory draws. Another pointed to generally poor refining margins in Asia and a “poor demand cycle.” Another said that China’s reopening has been fully factored into the current pricing, and Beijing’s needs are simply being met by Russian oil. Moscow has rerouted 20% of the oil it supplied to Europe to other markets such as Asia, Russian Deputy Prime Minister Alexander Novak said Wednesday, in comments reported by Reuters.

Kpler data indicates that China’s imports of Russian crude oil averaged 1.59 million barrels per day in March, up 68% from the same period in 2022. Croft says that Chinese buyers have been “beneficiaries of sanctions policies,” as Moscow’s slashed prices also pushed other sanctioned sellers, such as Venezuela and Iran, to discount their crude.

OPEC+ weight

Oil prices were rattled by the collapse of several U.S. and European lenders earlier this spring, which discouraged volatility-adverse investors from historically riskier assets, such as commodities.

OPEC+ sources told CNBC at the time that these sentiment-driven fears would likely be temporary and pushed aside by supply-demand realities. The group convenes to discuss policy at a ministerial level for one of two annual meetings in June — when Croft flags that Gulf producers will likely set the agenda.

“When you think about Russia, Russia makes involuntary cuts. They basically rebrand the sanctions problem as a production cut. It’s really a question, I think, right now, about Saudi Arabia and the other Gulf producers, what they want to do. Again, Russia’s happy to have anything that raises prices, but they’re not in the driver’s seat.”

Oil is unlikely to hit $100 per barrel well before the end of the year, says Truist

The weight of OPEC+ co-chair Russia within the group has been stifled by Western sanctions against its crude oil and oil product imports, in place since December and February, respectively.

As markets settle near $80 per barrel, Croft questioned what recourses still remain in the OPEC+ arsenal. “The question is right now, do they have more bullets to play, as we go into a June meeting?”

The latest cuts already spell a tight supply-demand balance that could hit households, the International Energy Agency warned in its latest monthly Oil Market Report.  

“Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices, especially in emerging and developing economies,” it said.

Biden’s bid

Historically a defender of curbing prices at the pump, the U.S. has repeatedly called on OPEC+ producers to lift supplies, waging a war of words with group Chair Saudi Arabia when the coalition instead opted for a 2 million barrels per day cut in October. The U.S.’ own shale production, “traditionally the most price-responsive source of more output, is currently limited by supply chain bottlenecks and higher costs,” the IEA warns.

Throughout Biden’s presidency, U.S. energy policy has been defined by a push toward climate awareness. Shortly after taking office, the head of state suspended new oil and natural gas leases on public lands and waters and kicked off a thorough review of existing permits for fossil fuel development. Biden has openly criticized the oil sector for raking in profit at the expense of consumers, in June last year claiming ExxonMobil “made more money than God.”

But crude oil supply shortages and soaring gasoline prices have pushed Biden — who on Tuesday announced his re-election campaign — to reconsider his tactic, Croft holds.

“You have President Biden coming into office, essentially saying, Keep the oil in the ground. And now when he is faced with higher retail gasoline prices, essentially they say to oil companies, no, put the money in the ground. So we have seen a significant pivot on oil policy from the Biden administration,” she said Wednesday.

“That said, the fully robust defense of the American oil and gas is usually on the Republican end of the House.”

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