US oil refineries race against dwindling supply

0:02Good morning from the Financial Times. Today is Thursday, July 23rd. And this is your FT News Briefing. Tesla had a rough second quarter, and U.S. oil refiners are trying to keep up with demand. Plus, Deutsche Bank got hit with another raid yesterday. Every time the bank thinks that they can look into the future, something from the past pops up. And the question is, when will this actually stop? I'm Mark Filippino, and here's the news you need to start your day.

0:43Tesla is not doing so hot. The company's profits dropped unexpectedly in the second quarter, even though demand for its electric vehicles was up, especially in Europe. Sales in the U.S. remained low after the Trump administration scrapped incentives for electric vehicles, forcing Tesla to sell its cars at lower prices. The company has also lost a crucial source of income from selling regulatory credits to other car makers to offset their emissions. In addition, Tesla reported its first cash burn since early 2024. It recorded$1.1 billion in negative free cash flow. Tesla's capital expenditures more than doubled as it pivots from electric vehicles to semiconductors and humanoid robots.

1:24Its share price dropped in after-hours trading.

1:33U.S. refineries are working fast to get the U.S. and international markets products like gasoline, jet fuel, and diesel. The demand for oil and fuel has surged since tensions escalated again between the U.S. and Iran. But the U.S. is nearing the end of its capacity to take from strategic petroleum reserves. This sets the stage for a potential rise in prices of both oil and refined products. Joining me now to discuss this is Stephanie Finley, the FT's correspondent in Houston. Hi, Steph. Hi, how's it going? I'm doing well. So just how depleted is the U.S. inventory of crude oil right now? Well, the U.S.

2:09strategic petroleum reserves are now down to around 300 million barrels. By the time it hits 200 million barrels, the reserve will hit its operational minimums, which means you can't take more out, otherwise you risk damaging the integrity of the caverns, which are actually salt caverns in Texas and Louisiana. So the U.S. has drawn down its reserves. Those reserves aren't infinite. And with that, we're looking at a further tightening of the oil market once those reserves can no longer be drawn from. And what does it mean for the U.S. economy if these stockpiles stay depleted? If the stockpiles stay depleted, then there's no longer a mechanism to cushion the crude prices.

2:53Crude oil is one of the biggest inputs into gasoline prices, which are already at record highs as a result of the war. And we could see that for further adding pressure on those prices. And so we'll expect to see higher crude prices, which will transfer into higher gas prices, which will add inflation into the U.S. economy. So I mentioned U.S. refiners. What are they doing to try and meet the demand for things like jet fuel and gasoline and diesel, given the state of the strategic petroleum reserves? We're seeing oil refineries in the U.S. step up to try and meet that demand from the global market.

3:32The refineries in the Midwest and the Rockies are actually running at over 100 percent capacity to try and make up for the shortfall. Some of them have even deferred maintenance, which opens the door for breakdowns. And also with the refineries running so hot, there could be big disruption if something like a natural disaster, like a hurricane happens, which would spread into the global market and raise prices of the refined products like gas, jet fuel and diesel. I guess the question that I have, Steph, is are these refineries producing enough to make a difference? There is still a shortfall.

4:12Renewed hostilities between Washington and Tehran have choked supplies after the ceasefire has broken down. We've seen Ukrainian drone strikes on Russian infrastructure also damage their refining capacity. So this has put more pressure on U.S. oil refiners to produce. The U.S. is producing a lot, but it's not enough to make up for that shortfall or make up for the shortfall coming out of Asia where refiners have been starved of oil in order to produce the products. Steph Finley is the FT's Houston correspondent. Thanks, Steph. Thanks very much.

4:53UK inflation fell more than expected in June. It hit a 15-month low of 2.6%. A drop in petrol prices and retail costs are to thank for June's figure. This is good news for Prime Minister Andy Burnham. He moved into Downing Street this week promising to cut the cost of living. He's already announced a plan to get rid of value-added tax on household electric bills and also to cap bus fares. But it might not all be smooth sailing for Burnham. As we just heard, the war in Iran continues to escalate, and economists are warning that June's price relief might be short-lived.

5:33German authorities raided the headquarters of Deutsche Bank for the third time this year, yesterday. It's a big deal for Germany's largest lender that's been trying to rehab its image after years of scandals. But this latest raid could threaten that recovery. Here to explain what's going on is the FT's Frankfurt correspondent Florian Mueller. Hi Florian. Hi Ben. So what's going on? Why has Deutsche Bank been raided three times this year? Most of these raids are connected to the bank's past. It's actually the first raid which happened this year was in January. And it was connected to a probe into the bank's anti-money laundering controls.

6:13Basically, the suspicion is that Deutsche Bank filed some reports too late about transactions which involved companies linked to a Russian oligarch. The second raid, which happened a little bit over a week ago, was related to an ex-employee who was working in the retail branch of the bank at the ground floor of its Twin Tower headquarters, who is alleged to have embezzled a six-figure sum from customers of the bank. The raid, which happened yesterday, is again connected to something which already happened years ago. In this case, it's about some tax swapping agreements, which a subsidiary of Deutsche Bank went into back between the years of 2008 and 2010, which were probably designed in a way to avoid paying withholding tax on the dividends.

7:09So really different cases. Do they have anything in common? All of those situations are quite different. The common denominator there is most of them are things which happened quite some years in the past, but they continue to haunt the bank. So even though the bank nowadays is in a much better state than it was a couple of years ago, still a lot of these legacy cases come back and prosecutors are still busy working through all of the compliance issues, which happened years and years ago at the bank. What does Deutsche Bank have to say about these investigations? So the bank has maintained that they are cooperating with the authorities.

7:50And they've also said that they have invested a lot into strengthening their controls over the past couple of years, and that the bank is now in a much more stable state than it used to be. So the recent rates this year are actually bringing up a lot of memories of earlier times when the bank was, for example, in 2018, really struggling with profitability. And then a lot of rates happened related to a lot of different scandals, which at the time actually risked the survival of the bank. That's what some insiders have told me. So compared to those years, now the bank is in a much better state. Florian, aside from the legal ramifications, what does this do to Deutsche Bank's business?

8:37So I think that each investigation individually is not such a big deal, but just the pure fact that they keep popping up at a moment when the bank actually wants to look at growth and when they think or want to make their investors think that they're worth the trust and the money again. It's a constant nuisance for the bank. And it's a little bit like, how shall I say, like a time bomb. Every time the bank thinks that they can look into the future, something from the past pops up. And so the question is, when will this actually stop? Florian Mueller is the FT's Frankfurt correspondent. Thanks, Florian.

9:17Thanks for having me.

9:24Before we go, a U.S. startup has received approval from the European Union to sell a bionic eye that can restore sight for the blind. The implant is called Prima and it's a breakthrough for companies working to connect brains with computers. The Eye will be produced by the California-based company Science Corp. Its founder also co-founded Neuralink, the brain-computer interface startup alongside Elon Musk. Patients could see the device roll out in the next few months. It has the potential to help hundreds of thousands of people affected by the type of eye disease that it is designed to treat.

10:01You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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