2023-09-12 11:35:00 ET
Summary
- The IEA predicts that energy demand will peak before 2030; Occidental's subsidiary will sell 250,000 metric tons of carbon removal credits to Amazon.
- Oracle misses Q1 revenue estimates; U.S. v. Google antitrust trial in focus.
- Weekly CPI report to show little change in core inflation - Morgan Stanley.
Listen below or on the go on Apple Podcasts and Spotify
IEA says peak oil, coal demand hits before 2030 . (0:15) Amazon (AMZN) strikes carbon capture deal with Occidental (OXY). (1:20) United States v. Google begins. (3:21)
This is an abridged transcript of the podcast.
Our top story so far today:
The International Energy Agency now predicts that demand for coal, natural gas, and oil will likely peak before 2030.
The IEA says the decline in fossil fuel consumption will start this decade because of the ongoing shift to renewable power and wider electric vehicle adoption.
In an op-ed with the FT, executive director Fatih Birol said: "We are witnessing the beginning of the end of the fossil fuel era, and we have to prepare ourselves for the next era."
"This is the result of renewables increasingly outmatching gas for producing electricity, the rise of heat pumps, and Europe's accelerated shift away from gas following Russia's invasion of Ukraine," he added.
"Even in China, the world's largest coal consumer, the impressive growth of renewables and nuclear power, alongside a slower economy, point to a decrease in coal use soon."
Paul Donovan of UBS says, "This shifting demand reflects the evolution of economics."
"The economic problem is allocating limited resources amongst unlimited needs. Impact economics recognizes that people’s needs now include sustainability and diversity."
Also today, Occidental Petroleum's ( OXY ) 1PointFive carbon removal subsidiary said Amazon ( AMZN ) agreed to purchase 250,000 metric tons of carbon removal credits.
Amazon will buy the credits over 10 years from Stratos, which is the direct air capture plant Occidental is building in Texas.
Occidental is investing $1 billion in Stratos as direct air capture seeks to become a viable carbon removal solution to help organizations further climate goals.
The plant is designed to capture up to 500,000 metric tons of carbon dioxide per year when it becomes commercially operational in mid-2025.
In today’s market action, we’ll stick with the energy sector to start. Oil prices are gaining, with WTI crude (CL1:COM) up more than 1% and back above $88 per barrel.
ING says the tightness in the oil market and expectations that this will continue until the end of the year "suggest that prices will remain well supported."
Stocks are a little lower. The S&P (SP500), Dow (DJI), and Nasdaq ( COMP.IND ) are off less than 0.5%. Bond yields are steady as traders keep their powder dry ahead of the August CPI out Wednesday before the bell.
Among active stocks:
Oracle ( ORCL ) slumped after Q1 revenue missed estimates. But Wall Street remained mostly positive. Mizuho reiterated its Buy rating with a $150 price target. Analysts said that despite fiscal Q1 being the seasonally slowest quarter, Oracle delivered organic cloud revenue growth of 29% in constant currency.
MGM Resorts ( MGM ) appears to be on day two of a major system outage. A posting on its website early Tuesday indicated that the company is still suffering from a cybersecurity issue. The FBI has been called in to investigate the attack, which has impacted MGM's e-mail system, reservation systems, booking systems, hotel electronic key card systems, and some parts of the casino floors.
And U.S. automakers are in focus with a major strike just two days away. Negotiations between GM (GM), Ford (F), and Stellantis ( STLA ) and the United Auto Workers union are said to be just creeping along. The deadline for a deal is midnight Thursday.
In other news of note, the biggest antitrust trial of the modern digital era lands in court today: United States v. Google.
The battleground is search dominance.
The DOJ will argue that Google ( GOOG ) ( GOOGL ) did not cement its effective monopoly on online search through innovations but rather via exclusive contracts and deals that made it the default search engine on phones and browsers.
Google lawyers will argue that contracts struck with the likes of Apple (AAPL), Samsung (SSNLF), Firefox, and Verizon ( VZ ) are not exclusive and haven't prevented people from seeking out other search engines. They'll also argue that its product provides a better experience while zooming in on specific definitions and taking a broader outlook on web traffic.
And in the Wall Street Research Corner:
Morgan Stanley expects the big August CPI report out tomorrow will allow the Fed to stay on its current course.
Strategists predict core CPI to have risen 0.18% last month, a tick up from 0.16% in July and June.
And they say the most likely Fed outcome is "nothing," with the dot plot at the next meeting left "essentially unchanged, given that the risk of undershooting is still about even with overshooting."
"Our view remains that the Fed is done here, at a peak federal funds rate of 5.375%."
The market is pricing in a 91% chance that the FOMC stays steady next week, but the odds are split for November. Fed funds futures don’t price in cuts until June.
For further details see:
Wall Street Lunch: Fossil Fuel Era Gone By 2030