Analys

Going green? The unexpected investments helping to reduce vehicle emissions

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5 år sedan

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16 september, 2020

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Globally about 15% of the world’s Greenhouse Gas (GHG) emissions come from the transportation sector. Despite improving fuel efficiency in cars over the past seven decades, the fact that more people in the world use cars means that global emissions from the transport sector continue to rise. However, pollution abatement equipment can help reduce emissions from cars. Autocatalysts are a key technology in this regard.

Platinum and palladium in autocatalysts

Nitesh Shah, Director, Research, WisdomTree

An autocatalyst is a device installed in internal combustion engine cars that converts harmful pollutants into safer gases. Platinum group metals (PGM) including platinum, palladium and rhodium are key ingredients in the autocatalysts that generate this chemical conversion. Autocatalysts were first introduced in the mid-1970s and today, are used in almost all internal combustion engine vehicles (including hybrid vehicles). In addition, fuel cell vehicles also use platinum (not palladium or rhodium) as the main catalyst in the reactions to produce electricity and water from hydrogen fuel and water.

How important are autocatalysts for PGM demand?

In 2019, automobiles accounted for 34% of platinum demand and 84% of palladium demand. So, the auto industry is the key driver of demand for both platinum and palladium.

Vehicle sales versus regulation

Tightening emission regulations generally increases the demand for the platinum group metals. Demand for platinum group metals will also vary with the volume of vehicle sales. Historically it has been emission regulation that has had a greater influence on demand. According to World Platinum Investment Council’s calculations, global vehicle sales between 1990 and 2019 rose by 1.6 times whereas the combined demand for platinum, palladium and rhodium in cars rose by 6.2 times. The fact that the rise in automobile platinum group metal demand was more than the increase in car sales indicates that higher loadings have been the chief driver of demand growth. Emission regulations are continuing to tighten globally for both passenger and commercial vehicles.

Gasoline vs. diesel cars

Today, there are higher loadings of palladium in gasoline autocatalysts and higher loadings of platinum in diesel autocatalysts. However, both autocatalysts carry some loadings of each metal. The catalytic efficiency of each metal is influenced by engine temperature, fuel type, all fuel quality and durability of the autocatalyst’s washcoat. Diesel engines operate at lower temperatures than gasoline engines and run with a leaner gas stream containing lots of oxygen. Under these conditions, platinum is a more active catalyst for the conversion of carbon monoxide (CO) and hydrocarbons (HC) to harmless emissions. However, the addition of some palladium to the platinum catalyst can improve its thermal stability. This is an advantage when reducing diesel particulate matter from the exhaust. This process involves trapping the particulate matter in a filter and then raising the temperature of the system to oxidise the matter to CO2. At these higher temperatures, palladium improves the thermal durability of the catalyst, helping it perform optimally for the lifetime of the vehicle.

Diesel cars falling out of favour

Europe is the largest diesel passenger car market in the world. In most of the rest of the world, gasoline cars dominate. However, even in Europe, diesel cars have fallen out of favour following ‘Dieselgate’ and tightening particulate emissions standards across Europe, where diesel cars do not perform as well as their gasoline equivalents (see figure 01 below).

New passenger cars by fuel type in the European Union — Source: European Automobile Manufacturers Association. Data as of September 2020.

Platinum versus palladium price

In 2010, platinum used to trade close to 3 times the price of palladium. Dieselgate accelerated the trend of rising palladium relative to platinum prices. Today, platinum trades below half the price of palladium. Palladium’s growing demand and tightening supply have been a boon for prices (see figure 02 below).

Source: Bloomberg. Data from 01 September 2010 to 01 September 2020.

Economical to substitute?

With such a wide price differential between platinum and palladium, it’s a natural question to ask if platinum can be substituted for palladium? Industry experts including Johnson Matthey, believe there is some limited scope for substitution. Not necessarily in gasoline cars but more in terms of substituting out palladium in diesel cars with higher loadings of platinum. However, auto manufacturers are notoriously secretive about their technologies which makes it difficult to comment on what scale this will occur. In addition, it is rumoured that auto manufacturers are using their scarce engineers to develop electric vehicles and so auto manufacturers are averse to divert them to PGM substitution projects.

Trucking industry

While globally more passenger cars use gasoline than diesel, trucks generally use more diesel. Emission standards for trucks are tightening. Notably in India the government has tightened regulations to broadly match European standards in 2020⁵. China will implement similar standards phased between 2021 and 2023. This is likely to be a strong catalyst for platinum demand.

Car sales in COVID-19 era

Passenger car sales had fallen hard during the COVID-19 pandemic, but as lockdown conditions ease, car sales appear to be rebounding strongly in China, Europe, and US (see figure 03 below). China and US are predominantly gasoline markets so the rebound in sales there mainly helps boost palladium prices. The rebound in European car sales should also help platinum prices.

New passenger car registrations — Source: WisdomTree, Bloomberg. Data to 31 July 2020.

The concentration in supply

Supply in both platinum and palladium is highly concentrated. South Africa accounts for nearly 70% of platinum’s global supply while South Africa and Russia collectively provide around 70% of palladium supply globally. While platinum is expected to be in a slight supply surplus this year, palladium continues to be in an acute supply deficit with demand continuing to grow and supply relatively stable.

Conclusions

Both platinum and palladium are important materials for pollution abatement technology in cars. Platinum, which has been heavily utilised in diesel passenger cars, has fallen out of favour in recent years. However, with tightening regulations for commercial vehicles globally we are likely to see that demand rise. Palladium, which has seen growing demand and is in a supply deficit is likely to see constructive fundamentals for years to come.

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SKM Prisinformation Elcertifikat vecka 37, 2020

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Analys

Breaking some eggs in US shale

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4 dagar sedan

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5 augusti, 2025

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Lower as OPEC+ keeps fast-tracking redeployment of previous cuts. Brent closed down 1.3% yesterday to USD 68.76/b on the back of the news over the weekend that OPEC+ (V8) lifted its quota by 547 kb/d for September. Intraday it traded to a low of USD 68.0/b but then pushed higher as Trump threatened to slap sanctions on India if it continues to buy loads of Russian oil. An effort by Donald Trump to force Putin to a truce in Ukraine. This morning it is trading down 0.6% at USD 68.3/b which is just USD 1.3/b below its July average.

Bjarne Schieldrop, Chief analyst commodities, SEB

Only US shale can hand back the market share which OPEC+ is after. The overall picture in the oil market today and the coming 18 months is that OPEC+ is in the process of taking back market share which it lost over the past years in exchange for higher prices. There is only one source of oil supply which has sufficient reactivity and that is US shale. Average liquids production in the US is set to average 23.1 mb/d in 2025 which is up a whooping 3.4 mb/d since 2021 while it is only up 280 kb/d versus 2024.

Taking back market share is usually a messy business involving a deep trough in prices and significant economic pain for the involved parties. The original plan of OPEC+ (V8) was to tip-toe the 2.2 mb/d cuts gradually back into the market over the course to December 2026. Hoping that robust demand growth and slower non-OPEC+ supply growth would make room for the re-deployment without pushing oil prices down too much.

From tip-toing to fast-tracking. Though still not full aggression. US trade war, weaker global growth outlook and Trump insisting on a lower oil price, and persistent robust non-OPEC+ supply growth changed their minds. Now it is much more fast-track with the re-deployment of the 2.2 mb/d done already by September this year. Though with some adjustments. Lifting quotas is not immediately the same as lifting production as Russia and Iraq first have to pay down their production debt. The OPEC+ organization is also holding the door open for production cuts if need be. And the group is not blasting the market with oil. So far it has all been very orderly with limited impact on prices. Despite the fast-tracking.

The overall process is nonetheless still to take back market share. And that won’t be without pain. The good news for OPEC+ is of course that US shale now is cooling down when WTI is south of USD 65/b rather than heating up when WTI is north of USD 45/b as was the case before.

OPEC+ will have to break some eggs in the US shale oil patches to take back lost market share. The process is already in play. Global oil inventories have been building and they will build more and the oil price will be pushed lower.

A Brent average of USD 60/b in 2026 implies a low of the year of USD 45-47.5/b. Assume that an average Brent crude oil price of USD 60/b and an average WTI price of USD 57.5/b in 2026 is sufficient to drive US oil rig count down by another 100 rigs and US crude production down by 1.5 mb/d from Dec-25 to Dec-26. A Brent crude average of USD 60/b sounds like a nice price. Do remember though that over the course of a year Brent crude fluctuates +/- USD 10-15/b around the average. So if USD 60/b is the average price, then the low of the year is in the mid to the high USD 40ies/b.

US shale oil producers are likely bracing themselves for what’s in store. US shale oil producers are aware of what is in store. They can see that inventories are rising and they have been cutting rigs and drilling activity since mid-April. But significantly more is needed over the coming 18 months or so. The faster they cut the better off they will be. Cutting 5 drilling rigs per week to the end of the year, an additional total of 100 rigs, will likely drive US crude oil production down by 1.5 mb/d from Dec-25 to Dec-26 and come a long way of handing back the market share OPEC+ is after.

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Analys

More from OPEC+ means US shale has to gradually back off further

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5 dagar sedan

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4 augusti, 2025

Redaktionen

The OPEC+ subgroup V8 this weekend decided to fully unwind their voluntary cut of 2.2 mb/d. The September quota hike was set at 547 kb/d thereby unwinding the full 2.2 mb/d. This still leaves another layer of voluntary cuts of 1.6 mb/d which is likely to be unwind at some point.

Higher quotas however do not immediately translate to equally higher production. This because Russia and Iraq have ”production debts” of cumulative over-production which they need to pay back by holding production below the agreed quotas. I.e. they cannot (should not) lift production before Jan (Russia) and March (Iraq) next year.

Argus estimates that global oil stocks have increased by 180 mb so far this year but with large skews. Strong build in Asia while Europe and the US still have low inventories. US Gulf stocks are at the lowest level in 35 years. This strong skew is likely due to political sanctions towards Russian and Iranian oil exports and the shadow fleet used to export their oil. These sanctions naturally drive their oil exports to Asia and non-OECD countries. That is where the surplus over the past half year has been going and where inventories have been building. An area which has a much more opaque oil market. Relatively low visibility with respect to oil inventories and thus weaker price signals from inventory dynamics there.

This has helped shield Brent and WTI crude oil price benchmarks to some degree from the running, global surplus over the past half year. Brent crude averaged USD 73/b in December 2024 and at current USD 69.7/b it is not all that much lower today despite an estimated global stock build of 180 mb since the end of last year and a highly anticipated equally large stock build for the rest of the year.

What helps to blur the message from OPEC+ in its current process of unwinding cuts and taking back market share, is that, while lifting quotas, it is at the same time also quite explicit that this is not a one way street. That it may turn around make new cuts if need be.

This is very different from its previous efforts to take back market share from US shale oil producers. In its previous efforts it typically tried to shock US shale oil producers out of the market. But they came back very, very quickly.

When OPEC+ now is taking back market share from US shale oil it is more like it is exerting a continuous, gradually increasing pressure towards US shale oil rather than trying to shock it out of the market which it tried before. OPEC+ is now forcing US shale oil producers to gradually back off. US oil drilling rig count is down from 480 in Q1-25 to now 410 last week and it is typically falling by some 4-5 rigs per week currently. This has happened at an average WTI price of about USD 65/b. This is very different from earlier when US shale oil activity exploded when WTI went north of USD 45/b. This helps to give OPEC+ a lot of confidence.

Global oil inventories are set to rise further in H2-25 and crude oil prices will likely be forced lower though the global skew in terms of where inventories are building is muddying the picture. US shale oil activity will likely decline further in H2-25 as well with rig count down maybe another 100 rigs. Thus making room for more oil from OPEC+.

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Analys

Tightening fundamentals – bullish inventories from DOE

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1 månad sedan

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26 juni, 2025

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The latest weekly report from the US DOE showed a substantial drawdown across key petroleum categories, adding more upside potential to the fundamental picture.

Ole R. Hvalbye, Analyst Commodities, SEB

Commercial crude inventories (excl. SPR) fell by 5.8 million barrels, bringing total inventories down to 415.1 million barrels. Now sitting 11% below the five-year seasonal norm and placed in the lowest 2015-2022 range (see picture below).

Product inventories also tightened further last week. Gasoline inventories declined by 2.1 million barrels, with reductions seen in both finished gasoline and blending components. Current gasoline levels are about 3% below the five-year average for this time of year.

Among products, the most notable move came in diesel, where inventories dropped by almost 4.1 million barrels, deepening the deficit to around 20% below seasonal norms – continuing to underscore the persistent supply tightness in diesel markets.

The only area of inventory growth was in propane/propylene, which posted a significant 5.1-million-barrel build and now stands 9% above the five-year average.

Total commercial petroleum inventories (crude plus refined products) declined by 4.2 million barrels on the week, reinforcing the overall tightening of US crude and products.