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Toyota to Resume Production After Japan’s Deadly Earthquake

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Car Production at Toyota's Derbyshire Plant
  • Toyota to Resume Production After Japan’s Deadly Earthquake

Toyota Motor Corporation said on Monday that it would gradually restart production in Japan on Tuesday and be back to normal output on Thursday after it suspended almost all vehicle assembly plants in its home market following a deadly earthquake in northern Japan that triggered widespread blackouts.

A report obtained on Tuesday via Automotive News said Toyota and its affiliates would resume work at select lines across several plants in Japan, including those making parts for overseas production.

The remaining lines should be up starting on Thursday, the company said.

Toyota spokesman Jean-Yves Jault said the company was still evaluating whether the Japan suspension would have any impact on production in North American or elsewhere overseas.

Toyota said late last week it would halt almost all auto production in Japan because power outages left one of its factories and those of suppliers in the dark.

The earthquake hit the northernmost island of Hokkaido early Thursday, killing a reported 44 people and leaving the entire island and more than five million people without power. Authorities worked over the weekend to restore electricity.

The blackouts hit Toyota’s supply line. The automaker has a plant in Tomakomai, Hokkaido, that makes automatic transmissions, continuously variable transmissions and transfer cases.

That plant was expected to resume operation on Monday. But Toyota also sources parts from two key suppliers in the region that lost power. Denso, Toyota’s biggest supplier, has a plant in Chitose, Hokkaido that makes electronics parts such as semiconductor sensors. A Denso spokesman said it resumed partial operation on Monday, but Denso could not say when it would be restored to normal output.

Another Toyota Group mainstay, Aisin Seiki, had three Hokkaido factories knocked out. Those plants, which did not sustain serious damage, make water pumps, timing chain case covers and belts for continuously variable transmissions, among other components.

Aisin restarted one of the plants last weekend and was expected to bring the others back online either on Monday or Tuesday, a company spokesman said.

Toyota’s operations in Japan churn out an average of 13,000 cars a day, and the automaker is expected to have lost at least that much output through its partial shutdown.

Nissan did not experience any production interruptions from the quake because it has no manufacturing facilities in Hokkaido. Nissan does have a proving ground there, however, and operations there were temporarily suspended due to the power outage.

Honda was operating as normal on Monday, the report stated. Spokesman Teruhiko Tatebe said there was some minor damage at suppliers but added that Honda was able to maintain steady production due to sufficient stock of parts.

Toyota said it also had enough parts inventory to keep operating after the quake, at least in the initial days. But it opted to suspend operations nationwide in order to maintain a balanced inventory and because the outlook for restoring power in Hokkaido was unclear.

“In that case, the TPS [Toyota Production System] principles guide us to stop all the lines and check and visualise the problem and consider countermeasures,” Jault said, adding, “This would also lead to a smoother re-start afterwards.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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