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Some of the world’s biggest oil exporters shocked the market over the weekend by announcing they would cut oil production by more than 1.6 million barrels a day.
OPEC+, an alliance between the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC oil-producing countries, including Russia, Mexico and Kazakhstan; it is said on the Sunday that falls at the beginning of the month of May, running through the end of the year. The news sent both Brent crude futures — the global oil benchmark — and WTI — the US benchmark — up about 6% in Monday trading.
OPEC+ was formed in 2016 to coordinate and stabilize oil production and stabilize global oil prices. Its members produce about 40% of the world’s crude oil and have a significant impact on the global economy.
What does Putin mean? OPEC+’s decision to cut oil production could have big implications for Russia.
After Russia invaded Ukraine last year, the United States and the United Kingdom immediately stopped buying oil from the country. The European Union has also stopped importing Russian oil sent to sea.
The G7 members — an organization of leaders from some of the world’s largest economies: Canada, France, Germany, Italy, Japan, Britain and the United States — also imposed a price cap of $60 per barrel on oil exported from Russia. keeping the country’s taxes low. If oil prices continue to rise, some analysts have speculated that the US and other Western countries may have to pay that price cap.
US Treasury Secretary Janet Yellen said Monday that the changes could lead to an increase in the price of caps — though not yet. “Certainly, it is that if it is seen to review it, it can be changed, but I do not see what is appropriate at this time,” he told reporters.
“I don’t know that this is significant enough to have any impact on the appropriate level of the price cap,” he added.
Russia has also recently announced that it will cut oil production by 500,000 barrels per day until the end of this year.
Last week, Putin admitted that Western sanctions could deal a blow to the Russian economy.
“The illegitimate restrictions imposed on the Russian economy may indeed have a negative effect in the medium term,” Putin said in a televised address on Wednesday reported by state news agency TASS.
Putin said Russia’s economy had strengthened since July, partly due to stronger ties with “kingdoms of the East and South”, likely referring to China and some African countries.
Russia, China and Arabia; The OPEC+ announcement this week came as a surprise. The group has already cut two million barrels by October 2022 and Saudi Arabia has previously said its production quotas will remain the same through the end of the year.
“The move to reduce supply is quite odd,” wrote Warren Patterson, ING’s head of commodity strategy in a Monday note.
“Oil prices recovered in part from the turmoil seen in financial markets following developments in the financial sector,” he wrote. “In the meantime, the oil base is expected to tighten as we move through the year. Before these cuts, we were already expecting the oil market to have a fairly significant deficit over the second half or 2023. Let’s see, this will be even bigger now.
Saudi Arabia stated that the cut was “a precautionary measure designed to support the stability of the oil market”, but Patterson said it was likely to “lead to further volatility in the market” later this year as less readily available oil approaches inflationary factors. .
Still, there are significant changes in global alliances with Russia, China and Arabia moving around oil prices, analysts at ClearView Energy Partners said. More expensive oil could help Russia pay for its war in Ukraine and also boost taxes in Saudi Arabia.
Meanwhile, the White House has spoken out against OPEC’s decision. “We think the cuts are appropriate at this time given the uncertainty in the marketplace — and we’ve made that clear,” National Security Council spokesman John Kirby said Monday.
– Paul LeBlanc and Hanna Ziady contributed to this report
The crisis sparked by the recent collapses of Silicon Valley Bank and Signature Bank is not over yet and will ripple through the economy for years to come, said JPMorgan Chase CEO Jamie Dimon on Tuesday.
In these closely observed annuals letters to partners; The chief executive of the largest bank in the United States has outlined the financial system meltdown’s huge damage to all banks and urged lawyers to think carefully before responding with regulatory advice.
“These crimes are not good for banks of any size,” Dimon wrote, responding to reports that a large financial institution benefited from the collapse of SVB and the Bank, as cautious customers sought safety by moving billions of dollars worth of money to large banks.
In a note last month, Wells Fargo, based on analyst Mike Mayo, wrote that “Goliath is winning”. JPMorgan in particular, he said, has benefited from more deposits “in these less certain times.”
“Any crisis that affects the confidence of Americans in banks will hurt all banks – that was known even before this crisis,” said Dimon. While it is true that this crisis is “benefiting” the larger banks due to the influx of deposits from smaller institutions, the idea that this meltdown is not beneficial to them at all is absurd.
The failures of SVB and Signature Bank, he argued, had little to do with banks bypassing the rules and SVB’s high exposure rate and large amount of uninsured deposits were already known to both regulators and the market at large.
Current regulations, Dimon argued, can actually lull banks into complacency without actually addressing real banking system-wide issues. Dwelling on these provisions, he wrote, “an immense, uncomplicated mind, the business of the passing of ts and the deception of i’s was done.”
And while regulatory change will likely be the outcome of the recent banking crisis, Dimon argued that “it’s very important that we avoid the kind of clumsy, whack-a-mole or politically motivated responses that often result in the opposite of what people intended.” Regulations, he says, are often placed on one side. framework, but they have adverse effects in other areas and just make things more complicated.
The Federal Deposit Insurance Corporation said it plans to propose new rule changes in May, while the Federal Reserve is currently conducting an internal review to assess how many changes need to be made. In the Congress of Legislators, as Sen. Sherrod Brown has suggested that new laws to regulate banks are in the works.
But, Dimon wrote, “the debate will not always be about more or less regulation, but about which regulatory mix will keep America’s banking system the best in the world.”
Dimon’s letter to allies touched on several pressing issues, including climate change. “The window for action to avert the most obvious impacts of global climate change is closing,” he wrote, expressing his frustration with the slow growth in investments in clean energy technologies.
“Permitting amendments are desperately needed to allow investment of any kind to happen at the right time,” he wrote.
One way to do that? “We also need to evoke significant dominance,” he proposed. “We are simply not getting sufficient investments fast enough for grid, solar, wind and pipeline projects.”
The most prominent area is the power of public property to take private property, provided good compensation is provided to the owner.
