Gasoline price hits a new 7-year high 1:06
London (CNN Business) -
For the first time since late 2014, U.S. oil prices are back above $ 80 a barrel, a boon for the energy industry, hit during the pandemic, but a bad one. news for economic recovery as winter approaches.
What's happening:
West Texas Intermediate futures, America's benchmark crude, closed Monday at $ 80.52 a barrel.
The price for November delivery rose again on Tuesday, putting the commodity on its way to its fourth consecutive earnings session.
The recent spike in oil prices has boosted energy stocks.
The iShares US Energy ETF, an exchange traded fund that tracks the industry, has risen 51% so far this year, and is up nearly 8% so far in October.
The S&P 500 is up 16% in 2021 and of which 1.3% happened this month.
US oil prices rise to 7-year highs 1:07
UBS analyst Giovanni Staunovo says the conditions are in place for oil prices to remain high for some time.
Energy demand is about to get a boost from increased travel as some Asian destinations ease restrictions and the United States prepares to welcome vaccinated foreign tourists starting in November.
At the same time, rising natural gas and coal prices are encouraging some energy providers to turn to oil for electricity generation.
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"In much of Asia and Europe, [it is now] cheaper to burn crude than natural gas," Staunovo said.
In China, thermal coal futures rose 11% on Tuesday to hit an all-time high as mining centers face heavy rains and fatal accidents.
Coal stocks in most of India's power plants have fallen to critically low levels.
China and India, two of the world's largest economies, are facing a growing energy crisis
Staunovo predicts that US oil will trade around US $ 77 per barrel over the next 12 months, while Brent futures, the global benchmark, could remain around US $ 80 per barrel.
But some forecasts are even more bullish.
On Monday, Citigroup raised its outlook for Brent oil to $ 85 a barrel for the fourth quarter and said crude will likely hit $ 90 from time to time.
Bank of America has warned that a cold winter could lift Brent crude to $ 100 a barrel for the first time since 2014.
A reality check:
analysts warn that rising oil prices will not change the long-term outlook for the industry, as the energy transition eats up demand for fossil fuels.
On Monday, Chevron announced that it will try to reduce emissions from its operations to net zero by 2050, as shareholders pressure the company to do more for the climate crisis.
5 alternative energy sources to accelerate the switch from fossil fuels
"The long-term downtrend in the sector is still very present," Bespoke Investment Group recently told clients.
And the rebound in energy prices makes it more difficult to determine the trajectory of the world economy in the coming months, as some economists and investors highlight fears of "stagflation," the toxic combination of high inflation and stagnant growth.
Rising energy costs could weigh on businesses as factories would be forced to shut down production, while households facing higher energy bills could cut spending in other areas.
"There is a pretty strong tendency to think that some kind of stagflation is more likely to occur in the next 12 months," Deutsche Bank said in a research note this week following a survey of more than 600 global market professionals.
A global energy crisis is looming and there is no quick fix
Is China's real estate sector about to explode?
The news flow on Evergrande in recent weeks may seem insignificant.
A bonus payment not made here.
Another over there.
But the Chinese real estate conglomerate in crisis continues to have the ability to generate shock waves in the market and the economy.
This just happened:
Evergrande was silent about its fate Tuesday after it reportedly failed to make interest payments on another international bond.
This is the third such deadline that he appears to have missed in recent weeks, reports my CNN Business colleague Michelle Toh.
The question is whether Beijing will rescue or restructure Evergrande, and whether that will be enough to prevent contagion.
What is Evergrande ?: 5 things you should know about the problems of the Chinese conglomerate that is on the edge of the abyss
Other Chinese real estate companies with large debts are also under pressure.
On Monday, developer Sinic Holdings said it "probably" will default on some of the payments on its bonds that are due this year, while Modern Land asked investors for more time to repay a $ 250 million bond.
Two independent directors of Fantasia Holdings, a Shenzhen-based luxury apartment developer that defaulted on some bonds last week, announced their resignations.
Remember: real estate is extremely important to China's economy.
UBS estimates that it drives a quarter of the country's economic growth, although some believe the contribution is even greater.
It also generates significant income for local governments and is a key driver of household wealth.
This puts pressure on the government to intervene if it appears that the situation may spiral out of control.
Investors worry that China's housing market could be a bubble waiting to burst
UBS considers Evergrande's debt restructuring to be "inevitable."
But there are also risks for the sector in general.
Although the bank already foresees a "modest real estate slowdown" in which new housing projects will fall 10% in the second half of the year, it also warns of the worst possible scenario, in which new projects will collapse more than 20% and real estate investment falls 10%.
This would put a significant burden on China's economy, hurting production just as factory production slows down.
Thousands of flight cancellations send Southwest shares down
This is not a good time to fly with Southwest, or to own shares in the company.
The shares fell more than 4% on Monday after the company canceled thousands of flights over the weekend.
The disruptions continued on Monday, when the company had to cancel about 10% of its scheduled flights, according to the aviation monitoring website FlightAware.
Southwest Airlines canceled more than 1,000 flights on Sunday
The company blamed the cancellations on air traffic control problems and staff shortages in Florida, as well as bad weather, reports my CNN Business colleague Ramishah Maruf.
The company affirms that the return to normality of the operations was "more difficult and prolonged" due to the reductions of hours and personnel during the pandemic.
"We have continued to work diligently throughout the weekend to reestablish our operations, focusing on replenishing aircraft and crews to serve our customers," the airline said.
The airline rejected speculation that the collapse was the result of employee concerns about its vaccination mandate, which was announced last week to comply with federal regulations.
One step back: This has been a difficult year for Southwest.
According to the flight tracking service Cirium, the airline had the worst performance in terms of punctuality and the highest percentage of canceled flights of the four main airlines in the country in June and July.
And the passengers aren't the only ones who are upset.
Pilots, flight attendants and mechanics unions have complained about Southwest's operations.
What are Southwest Airlines passengers entitled to after cancellations?
Its shares are still up nearly 11% this year, outperforming rivals Delta Air Lines and JetBlue.
But American Airlines and United appear to be taking better advantage of the travel rally, pushing their shares up about 28% and 14%, respectively.
What is expected this week
This Tuesday the latest update of the International Monetary Fund on the world economy will be published.
Also this Tuesday: US job vacancies data for August are released.
Tomorrow: Results season begins with results from JPMorgan Chase, BlackRock and Delta Air Lines.
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