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Hydrogen will take 25% of oil demand by 2050: Bank of America analyst

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Hydrogen is set to play a major role in the global energy markets over the coming decades, supplanting a large chunk of oil demand, according to Bank of America’s head of global thematic research.

Speaking to CNBC’s “Squawk Box Europe” on Friday morning, Haim Israel accepted that while oil and gas would still be needed going forward, it was nearing a peak in demand. “We think it’s peaking this decade, it’s soon — way sooner than what everybody thinks,” he said.  

Israel listed several factors which would affect oil and gas going forward, including cheaper renewable energy, regulation and the electrification of cars.

“We believe that hydrogen is going to take 25% of all oil demand by 2050,” he went on to state, adding that oil was “facing headwinds left and right. Yes, we’ll still need it, yes, it’s still going to be around, but the market share of oil is going to plummet.”

As noted by the U.S. Department of Energy, hydrogen “is an energy carrier, not an energy source,” meaning it’s a secondary energy source like electricity. The DOE adds that hydrogen “can deliver or store a tremendous amount of energy” and “can be used in fuel cells to generate electricity, or power and heat.”

Changing times?

In recent years, governments and companies around the world have announced goals to reduce their environmental footprint and move away from fossil fuels. Both the U.K. and European Union are, for example, targeting net zero greenhouse gas emissions by 2050. 

If these kinds of goals are to be met, the world’s energy mix will need to see a significant shift to renewable and low carbon sources, a mammoth undertaking. For his part, Bank of America’s Israel emphasized the importance of diversification for companies involved in fossil fuels.

“We … strongly believe that the ‘big oils’ need to think in different ways,” he said. “They need to think about not ‘big oil’ anymore but ‘big energy’ from here onwards, to go much more into renewable sources, to diversify their sources.”

In a sign of how things may be starting to change, a number of energy majors — who, it should be noted, remain big players in oil and gas — are now ramping up investment in renewables such as solar and wind. 

Last September, it was announced that BP had agreed to take 50% stakes in the Empire Wind and Beacon Wind projects from Norway’s Equinor. The $1.1 billion deal is due to close in the early part of 2021.

When fully up and running, Equinor says the Empire Wind and Beacon Wind projects, set to be located in waters off the East Coast of the United States, will each be able to power over 1 million homes.

Hopes for hydrogen

Hydrogen is another area starting to gain momentum. The EU has laid out plans to install 40 gigawatts of renewable hydrogen electrolyzers and produce as much as 10 million metric tons of renewable hydrogen by the year 2030.

Hydrogen can be produced in a number of ways. One includes using electrolysis, with an electric current splitting water into oxygen and hydrogen. If the electricity used in the process comes from a renewable source such as wind then it’s termed “green” or “renewable” hydrogen.

At the moment, the vast majority of hydrogen generation is based on fossil fuels. Nevertheless, recent years have seen major firms including Repsol, Siemens Energy and BP get involved in projects connected to “green hydrogen” production.

At the start of this week, it was announced that a subsidiary of German industrial giant Thyssenkrupp had been awarded an engineering contract to carry out the installation of an 88 megawatt water electrolysis plant for Hydro-Québec. The electricity for this project will come from hydropower.

A few days later, on Wednesday, Danish energy firm Orsted said it was pushing ahead with plans to develop a demonstration project which will harness offshore wind energy to produce green hydrogen.

The International Energy Agency says global dedicated hydrogen production amounts to roughly 70 million metric tons per year, and states that demand continues to grow, having increased “more than threefold” since 1975. According to the Paris-based organization, “less than 0.1% of global dedicated hydrogen production today comes from water electrolysis.”

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Stock futures jump after Senate passes $1.9 trillion Covid relief bill, Dow futures up 200 points

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Traders work on the floor of the New York Stock Exchange.

NYSE

U.S. stock futures jumped on Sunday evening as a new stimulus package from Washington headed toward final passage this week.

Futures contracts tied to the Dow Jones Industrial Average jumped 219 points, or 0.7%. Those for the S&P 500 and the Nasdaq 100 composite gained 0.5% and 0.6%, respectively.

The move in futures came after the Senate passed a $1.9 trillion economic relief and stimulus bill on Saturday, paving the way for extensions to unemployment benefits, another round of stimulus checks and aid to state and local governments. The Democrat-controlled House is expected to pass the bill later this week. President Joe Biden is expected to sign it into law before unemployment aid programs expire on March 14.

The fresh round of government spending could cause ripples in the U.S. Treasury market, where the benchmark 10-year yield has risen sharply in recent weeks. The yield rose as high as 1.62% on Friday after starting the calendar year below the 1% mark.

The rapid move in the bond marked has unnerved equity investors as well, contributing to weakness in stocks with high valuations.

Futures contracts tied to the 10-year fell 0.2% on Sunday night at the open of trading, implying higher yields.

“10-year yields finally caught up to other asset markets. This is putting pressure on valuations, especially for the most expensive stocks that had reached nosebleed valuations,” Mike Wilson, the chief U.S. equity strategist at Morgan Stanley, said in a note.

The stock market is coming off an afternoon rally on Friday that took some of the sting out of a rough week for high-flying momentum names. The tech-heavy Nasdaq finished with a week-to-date loss of 2.1%, while the S&P 500 gained 0.8%. The Dow, more reliant on cyclical stocks, rose 1.8%.

The Friday turnaround doesn’t signal that the recent weakness for the market is over, but the divergence between tech and cyclical plays shows that the bullish story remains intact, Morgan Stanley’s Wilson said.

“The bull market continues to be under the hood, with value and cyclicals leading the way. Growth stocks can rejoin the party once the valuation correction and repositioning is finished,” Wilson said.

On the economic front, investors will get a look at wholesale inventory data from January on Monday. Several economic measures in recent weeks have shown a recovery that is picking up steam, including a better-than-expected February jobs report released on Friday.

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U.S. will defend troops after rocket attack in Iraq, Lloyd Austin says

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U.S. Defense Secretary Lloyd Austin speaks to Defense Department personnel during a visit by U.S. President Joe Biden at the Pentagon in Arlington, Virginia, February 10, 2021.

Carlos Barria | Reuters

WASHINGTON – Secretary of Defense Lloyd Austin warned those responsible for carrying out last week’s rocket attack against an Iraqi base that hosts American troops will be held to account.

“The message to those that would carry out such an attack is that expect us to do what is necessary to defend ourselves,” Austin said in an interview with ABC that aired on Sunday.

“We’ll strike if that’s what we think we need to do at a time and place of our own choosing. We demand the right to protect our troops,” he said, adding that the U.S. is still assessing intelligence with its Iraqi partners.

Defense officials have previously said the attack had typical hallmarks of a strike by Iran-backed groups. Iran has denied involvement.

When asked if Iran would view a potential U.S. response as an escalation of tensions, the new Pentagon chief and retired Army four-star reiterated that Washington would do whatever is necessary to protect Americans and U.S. interests in the region.

“What they [Iranians] should draw from this, again, is that we’re going to defend our troops and our response will be thoughtful. It will be appropriate,” Austin said. “We would hope that they would choose to do the right things,” he added.

On Sunday, the U.S. military’s Central Command, which oversees the wars in the Middle East, flew its fourth bomber deployment to the region.

The show of force mission included two B-52H Stratofortress bombers alongside aircraft from Israel, Saudi Arabia, and Qatar at different points to “deter aggression and reassure partners and allies of the U.S. military’s commitment to security in the region.”

Last month, Iran rejected an invitation from global powers who signed the 2015 nuclear deal to discuss the regime’s potential return to the negotiating table, a significant setback in the Biden administration’s efforts to revive the Joint Comprehensive Plan of Action, or JCPOA.

The White House said that the Biden administration was disappointed with Iran’s decision to skip the informal meeting but would “reengage in meaningful diplomacy to achieve a mutual return to compliance with JCPOA commitments.”

President of Iran, Hassan Rouhani speaks during the National Combat Board Meeting with Coronavirus (Covid-19) in Tehran, Iran on Nov. 21, 2020.

Iranian Presidency Handout | Anadolu Agency | Getty Images

The Biden administration has previously said that it wants to revive the nuclear deal but won’t suspend sanctions until Tehran comes back into compliance. Tehran has refused to negotiate while U.S. sanctions remain in place.

The 2015 JCPOA, brokered by the Obama administration, lifted sanctions on Iran that had crippled its economy and cut its oil exports roughly in half. In exchange for billions of dollars in sanctions relief, Iran agreed to dismantle some of its nuclear program and open its facilities to more extensive international inspections.

The U.S. and its European allies believe Iran has ambitions to develop a nuclear bomb. Tehran has denied that allegation.

In 2018, then-President Donald Trump kept a campaign promise and withdrew the United States from the JCPOA calling it the “worst deal ever.” Following Washington’s exit from the landmark nuclear deal, other signatories of the pact ⁠have tried to keep the agreement alive. 

Washington’s tense relationship with Tehran took several turns for the worse under the Trump administration.

President Donald Trump speaks during a briefing on Hurricane Michael in the Oval Office of the White House in Washington, DC, October 10, 2018. 

Saul Loeb | AFP | Getty Images

People gather to protest the US air strike in Iraq that killed Iranian commander Qasem Soleimani, who headed Iran’s Revolutionary Guards’ elite Quds force in Sanaa, Yemen on January 6, 2020.

Mohammed Hamoud | Andalou Agency | Getty Images

Soleimani’s death led the regime to further scale back compliance with the international nuclear pact. In January 2020, Iran said it would no longer limit its uranium enrichment capacity or nuclear research.

In October, the United States unilaterally re-imposed U.N. sanctions on Tehran through a snapback process, which other U.N. Security Council members have previously said Washington does not have the authority to execute because it withdrew from the nuclear deal in 2018.

A month later, a top Iranian nuclear scientist was assassinated near Tehran, which led Iran’s government to allege that Israel was behind the attack with U.S. backing.

A view shows the scene of the attack that killed Prominent Iranian scientist Mohsen Fakhrizadeh, outside Tehran, Iran, November 27, 2020.

WANA via Reuters

During the summer of 2019, a string of attacks in the Persian Gulf set the U.S. and Iran on a path toward greater confrontation.

In June 2019, U.S. officials said an Iranian surface-to-air missile shot down an American military surveillance drone over the Strait of Hormuz. Iran said the aircraft was over its territory. That strike came a week after the U.S. blamed Iran for attacks on two oil tankers in the Persian Gulf region and after four tankers were attacked in May.

The U.S. that June slapped new sanctions on Iranian military leaders blamed for shooting down the drone. The measures also aimed to block financial resources for Iran’s Supreme Leader Ayatollah Khamenei.

Tensions soared again in September of 2019 when the U.S. blamed Iran for strikes in Saudi Arabia on the world’s largest crude processing plant and oil field. The strikes forced the kingdom to shut down half of its production operations.

The event triggered the largest spike in crude prices in decades and renewed concerns of a budding conflict in the Middle East.

The Pentagon described the strikes on the Saudi Arabian oil facilities as “sophisticated” and represented a “dramatic escalation” in tensions within the region.

All the while, Iran maintains that it was not behind the attacks.

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Chinese foreign minister calls for ‘non-interference’ between China, U.S.

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The flags of China, U.S. and the Chinese Communist Party are displayed in a flag stall at the Yiwu Wholesale Market in Yiwu, Zhejiang province, China, May 10, 2019.

Aly Song | Reuters

BEIJING — Chinese Foreign Minister Wang Yi said Sunday that the U.S. needs to remove “unreasonable restrictions” for the two countries’ relationship to move forward under President Joe Biden‘s administration.

Wang’s remarks come as tensions between the U.S. and China have escalated in the last few years under former President Donald Trump, whose term ended in January. So far, the Biden administration has maintained a tough position on China — calling the country a more assertive “competitor” — and raised concerns about Beijing’s stance around Taiwan, Hong Kong, Xinjiang and Tibet.

China’s central government considers those issues part of its domestic matters.

“Speaking of China-U.S. relations, I believe first of all both sides need to abide by the principle of non-interference in each others’ internal affairs,” Wang said. That’s according to an official English translation of his Mandarin-language remarks at a press conference held alongside the “Two Sessions” annual parliamentary meeting in Beijing, the country’s biggest political event of the year.

Biden-Xi phone call

Biden had raised “fundamental concerns” about Beijing’s actions on issues such as Hong Kong in a two-hour phone call with Chinese President Xi Jinping in February ahead of the Lunar New Year holiday, according to the White House. At the time, the two leaders also discussed how to counter the coronavirus pandemic, working together on climate change and preventing weapons proliferation.

Wang said Sunday the two countries could also cooperate on the economic recovery from the pandemic, and pointed to the phone call as a positive basis for rebuilding the bilateral relationship.

“We’re ready to work with the United States to follow through on the outcome of this important phone call and set China-U.S. relations on a new path of healthy and steady growth,” he said.

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