Connect with us

Economics

OPEC+ delivers “slap to the face” with a minuscule 86-second lifeline; US crude inventories rise unexpectedly

During the much-awaited OPEC+ meeting, member countries led by Saudi Arabia and Russia agreed to increase their collective output target by 100,00 bpd…

Published

on

During the much-awaited OPEC+ meeting, member countries led by Saudi Arabia and Russia agreed to increase their collective output target by 100,00 bpd (barrels per day) come September. This is a drop in the proverbial ocean with producers catering to a global market of approximately 10 million bpd.

A Reuters report noted that this increase would satisfy only an additional “86 seconds of global oil demand” per day.

Although a small or even no increase at all was in line with market expectations, analysts were surprised by the less-than-token improvement in the output ceiling, prompting some to interpret this as a deliberate attempt to humiliate the US.

For instance, Robert Yawger, executive director of energy futures at Mizuho Securities, stated that this “is a slap to the face for President Biden.”

This outcome would have been very disappointing for the President who made a special trip to meet with Saudi authorities last month.

To add salt to injury, the OPEC+ decision comes a day after the US cleared $5.3 billion in missile sales to both the UAE and Saudi Arabia.

Prices slide

Prices were steady after the OPEC+ announcement, with Brent trading slightly above $100.

However, with the publication of Energy Information Administration (EIA) data, prices have crashed by over 3%, with Brent trading at $97.3 and WTI as low as $91.2, at the time of writing.

The EIA reported an unexpectedly large build in US oil inventories which rose by 4.5 million barrels for the week to July 29. Gasoline stocks were also up 200,000 barrels in the week ending July 29th, potentially reflecting a moderation in consumer demand as the US exits the driving season.

As per market surveys, both these figures were expecting a drawdown, in line with the previous week, but stocks have surprised to the upside raising concerns of demand sustainability.

American conundrum

The US is tussling with four-decade high inflation rates and gasoline prices in excess of $5 across several major cities. The administration is desperate to ease the market tightness and bring down costs.

An argument could be made that any increase at all would be deemed to be symbolic since the OPEC+ countries have long been struggling to meet their quotas in any case.

With the onset of the pandemic in 2020, followed by a sudden drop in aggregate demand, laying-off of skilled labour, disrupted supply chains and chronic underinvestment in these countries, OPEC+ members simply do not have sufficient spare capacity to meaningfully increase global output.

The only two countries that may have the ability to increase production sizably are Saudi Arabia and the UAE. For Saudi Arabia, this would be a challenging task due to many of the same reasons listed above, in addition to which, most untapped reserves are in “untested fields” and would take months to operationalize.

Moreover, Saudi hydrocarbon law requires that any official increase in production targets be met for a minimum of at least 1 year. The Kingdom is unlikely to want to boost supplies significantly for such a lengthy period, as a deep recession is widely expected.  Ramping up production would only lead to cutting off windfall profits that member countries are presently enjoying.

Lastly, the Saudi government would be unwilling to cross its Russian ally by hiking production targets too fast. Given the strict sanctions that the West has imposed on Putin’s Moscow, Russian export channels have dried up and a tight global oil market is supportive of Russian revenues for the time being.

Would OPEC+ expansion do the US much good?

Market estimates reported that combined OPEC+ output is running at nearly 3 million bpd below-assigned quotas.

Despite these challenges, one must question if the US is trying to solve the right problem. Even if a substantial increase in crude oil output were to materialize, refinery capacity in most countries, including the US is very tight.

The overall tightness in the petroleum chain is driven by refined products, due to the lack of refining capacity which can’t easily be rectified.

It is unlikely that any increase in global output would make a tangible difference at the pumps, although a favourable outcome may have boosted the President’s ratings at home.

In the United States, the operating rate of refineries was registered at 91%, down from 92.2% the week earlier. This leaves limited room for the processing of any additional crude.

Any relief is likely to come from slipping demand, as the summer driving season in the US draws to a close.

Ongoing actions

Speaking with Bloomberg, Amos Hochstein, an energy adviser to the Biden administration stated that oil prices would need to fall below $90 to meaningfully improve the situation for U.S. households.

Although a long shot in itself, the Biden administration has also invited top Irani officials back to the negotiating table to discuss the possible easing of sanctions to improve international oil exports from the country.

The rising demand for ESG-compliant investments and alternative fuels is continuing to pressure long-term expansion in energy infrastructure.

The International Monetary Fund in its latest estimates cut global growth forecasts to 3.2% and 2.9% in 2022 and 2023. Given the anticipated slowdown in economic activity, the market is unlikely to see a significant injection of new oil sources and additional volumes, although receding demand may lead to easing prices.

The post OPEC+ delivers “slap to the face” with a minuscule 86-second lifeline; US crude inventories rise unexpectedly appeared first on Invezz.

Read More

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Spread & Containment

War, peace and security: The pandemic’s impact on women and girls in Nepal and Sri Lanka

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to improve the lives of women and girls in postwar countries…

Published

on

Nepalese girls rest for observation after receiving the Moderna vaccine for COVID-19 in Kathmandu, Nepal. (AP Photo/Niranjan Shrestha)

Attention to the pandemic’s impacts on women has largely focused on the Global North, ignoring countries like Nepal and Sri Lanka, which continue to deal with prolonged effects of war. While the Nepalese Civil War concluded in 2006 and the Sri Lankan Civil War concluded in 2009, internal conflicts continue.

As scholars of gender and war, our work focuses on the United Nations Security Council Resolution 1325 on women, peace and security. And our recently published paper examines COVID-19’s impacts on women and girls in Nepal and Sri Lanka, looking at policy responses and their repercussions on the women, peace and security agenda.

COVID-19 has disproportionately and negatively impacted women in part because most are the primary family caregivers and the pandemic has increased women’s caring duties.

This pattern is even more pronounced in war-affected countries where the compounding factors of war and the pandemic leave women generally more vulnerable. These nations exist at the margins of the international system and suffer from what the World Bank terms “fragility, conflict and violence.”

Women, labour and gender-based violence

Gendered labour precarity is not new to Nepal or Sri Lanka and the pandemic has only eroded women’s already poor economic prospects.

Prior to COVID-19, Tharshani (pseudonym), a Sri Lankan mother of three and head of her household, was able to make ends meet. But when the pandemic hit, lockdowns prevented Tharshani from selling the chickens she raises for market. She was forced to take loans from her neighbours and her family had to skip meals.

Some 1.7 million women in Sri Lanka work in the informal sector, where no state employment protections exist and not working means no wages. COVID-19 is exacerbating women’s struggles with poverty and forcing them to take on debilitating debts.

Although Sri Lankan men also face increased labour precarity, due to gender discrimination and sexism in the job market, women are forced into the informal sector — the jobs hardest hit by the pandemic.

Two women sit in chairs, wearing face masks
Sri Lankan women chat after getting inoculated against the coronavirus in Colombo, Sri Lanka, in August 2021. (AP Photo/Eranga Jayawardena)

The pandemic has also led to women and girls facing increased gender-based violence.

In Nepal, between March 2020 and June 2021, there was an increase in cases of gender-based violence. Over 1,750 incidents were reported in the media, of which rape and sexual assault represented 82 per cent. Pandemic lockdowns also led to new vulnerabilities for women who sought out quarantine shelters — in Lamkichuha, Nepal, a woman was allegedly gang-raped at a quarantine facility.

Gender-based violence is more prevalent among women and girls of low caste in Nepal and the pandemic has made it worse. The Samata Foundation reported 90 cases of gender-based violence faced by women and girls of low caste within the first six months of the pandemic.

What’s next?

While COVID-19 recovery efforts are generally focused on preparing for future pandemics and economic recovery, the women, peace and security agenda can also address the needs of some of those most marginalized when it comes to COVID-19 recovery.

The women, peace and security agenda promotes women’s participation in peace and security matters with a focus on helping women facing violent conflict. By incorporating women’s perspectives, issues and concerns in the context of COVID-19 recovery, policies and activities can help address issues that disproportionately impact most women in war-affected countries.

These issues are: precarious gendered labor market, a surge in care work, the rising feminization of poverty and increased gender-based violence.

A girl in a face mask stares out a window
The women, peace and security agenda can help address the needs of some of those most marginalized. (AP Photo/Niranjan Shrestha)

Policies could include efforts to create living-wage jobs for women that come with state benefits, emergency funding for women heads of household (so they can avoid taking out predatory loans) and increasing the number of resources (like shelters and legal services) for women experiencing domestic gender-based violence.

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to achieve the agenda’s aims of improving the lives of women and girls in postwar countries like Nepal and Sri Lanka.

Luna KC is a Postdoctoral Researcher at the Research Network-Women Peace Security, McGill University. This project is funded by the Government of Canada Mobilizing Insights in Defence and Security (MINDS) program.

Crystal Whetstone does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading

Economics

Target Sets Sights on Holiday Season, Has Plan for High Inventory

Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.

Published

on

Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.

Target's  (TGT) - Get Target Corporation Report strategy is paying off as the company's stock falls on heavy volume following its earnings release. 

Normally, a profit miss as wide as Target's, 39 cents per share vs. expectations of 72 cents per share, would result in a bigger drop than Target's, but the retailer has been prepping the market for this miss all summer. 

The inventory the company built up during the height of the pandemic, as Americans shopped more from home, needs to go, and the only way get rid of the excess product is deep discounts. 

"Back in June, we announced that our team would be undertaking a bold effort to rightsize our inventory position in the categories for which demand patterns have radically changed," CEO Brian Cornell said during the company's earnings call. "While this decision had a meaningful short-term impact on our financial results, we strongly believe it was the best path forward."

Now, looking forward the company sees some overhang for the third quarter, but expects a big holiday season ahead. 

While some fear a recession and what it might do to the economy, Target is convinced that the holiday season will be strong.

Image source: John Smith/VIEWpress.

Target Aims for Holiday Season

While Target is focused on the back-to-school season currently underway, the company expects "spillover" from its inventory issues to be present during the third quarter to the tune of $200 million. 

But the company's own checks suggest that its shoppers are excited about the holiday season. 

"The one thing that seems to be very consistent is a guest and consumer who says they want to celebrate the holiday seasons so we certainly expect that they are going to be celebrating Halloween this year and actively trick or treating and hosting parties with friends and family," Cornell said.

"We know they're looking forward to Thanksgiving and they're going to look forward to celebrating the Christmas holidays and that comes down each and every week as we survey consumers and talk to our guests so that gives us great optimism for our ability to perform during these key holiday seasons"

Real Money

Elevate Your Portfolio

Get actionable market insights from a team of experts who actually invest, trade, and manage money for a living

  • Daily Market Commentary
  • Actionable Trading Ideas
  • Investment Advice

Not only does Target expect a strong quarter, but the company also expects favorable comps as fourth quarter headwinds from a year ago aren't present this time around. 

"Guests already have their sights set on upcoming holidays and seasonal moments in Q3 and beyond," Cornell said.

Target's Q2 Collapse

Target said adjusted earnings for the three months ending in July were pegged at 39 cents per share, down 89% from the same period last year and well shy of the Street consensus forecast of 72 cents per share.

Group revenues, Target said, rose 3.5% to $26 billion, essentially matching analysts' estimates of a $26.04 billion tally. Target said same-store sales rose 2.6%, again shy of the Refinitiv forecast of 3.2%, while operating margins fell to 1.2%, below the group's July guidance of a 2% level. 

Earlier this summer, Target cautioned that its bigger-than-expected 35% build-up in overall inventories over the first quarter would trigger price cuts, adding that deeper discounts would be needed to shift the excess goods onto a customer base that was already pulling back on discretionary spending.

Walmart  (WMT) - Get Walmart Inc. Report, Target's larger big box rival, said Tuesday that improving spending trends, as well as actions the group has taken to shift excess inventory, will ease some of the pressures it expects to face in terms of overall profits over the back half of the year.

Walmart said adjusted earnings for the three months ended in July came in at $1.77 per share, down one penny from the same period last year but well ahead of the Street consensus forecast of $1.62 per share.

Group revenues, the company said, were tabbed at $152.9 billion, an 8.4% increase from last year that topped analysts' estimates of $150.81 billion. U.S. same-store sales rose 6.5% from last year, the company said, firmly topping the Refinitiv forecast. 

Read More

Continue Reading

Economics

Why Is No One at Nike Working This Week?

And will the move gain broader acceptance among American employers?

Published

on

And will the move gain broader acceptance among American employers?

You go into an office, pull at the door and find that it doesn't give and nobody's there. 

It may sound like the start of the common rushing-to-the-office-on-a-Saturday nightmare but, more and more, collective time off is being embraced by employees as part of a push for a better work culture.

While professional social media platform LinkedIn  (MSFT) - Get Microsoft Corporation Report and dating app Bumble  (BMBL) - Get Bumble Inc. Report had already experimented with collective time off for workers, the corporate ripples truly began with Nike  (NKE) - Get Nike Inc. Report.

In August 2021, the activewear giant announced that it was giving the 11,000-plus employees at its Oregon headquarters the week off to "power down" and "destress" from stress brought on by the covid-19 pandemic.

"In a year (or two) unlike any other, taking time for rest and recovery is key to performing well and staying sane," Matt Marrazzos, Nike's senior manager of global marketing science, wrote to employees at the time.

Nike Is On Vacation Right Now

The experiment was, not exactly unexpectedly, very well-received — a year later, the company instituted its second annual "Well-Being Week." Both the corporate headquarters in Beaverton, Ore., and three Air Manufacturing design labs with over 1,500 employees are closed for a collective paid vacation from Aug. 15 to 19.

"We knew it would be impactful, but I was blown away by the feedback from our teammates [...]," Nike's Chief Human Resources Officer Monique Matheson wrote in a LinkedIn post.

"Because everyone was away at the same time, teammates said they could unplug – really unplug, without worrying about what was happening back at the office or getting anxiety about the emails piling up."

Shutterstock/TheStreet

Of course, the time off only applies to corporate employees. To keep the stores running and online orders fulfilled but not exacerbate the differences between blue and white collar workers, Nike gave its retail and distribution employees a week's worth of paid days off that they can use as they see fit.

Nike has tied the change to its commitment to prioritize mental health. In the last year, it launched everything from a "marathon of mental health" to a podcast that discusses how exercise can be used to manage anxiety and depression.

Rippling Through the Corporate World?

But as corporations are often criticized for turning mental health into positive PR without actually doing much for employees, the collective week off was perhaps the most significant thing the company did for workers' mental health.

Real Money

Elevate Your Portfolio

Get actionable market insights from a team of experts who actually invest, trade, and manage money for a living

  • Daily Market Commentary
  • Actionable Trading Ideas
  • Investment Advice

The practice of set office closures has long been common practice in many European countries. In France, not only corporate offices but even restaurants and retail stores empty out over the month of August for what is culturally considered sacred vacation time. 

But as American work culture prioritizes individual choice and "keeping business going" above all else, the practice has been seen as radical by many corporate heads and particularly small businesses that may find it more difficult to have such a prolonged drop in business. 

But in many ways, the conversations mirror some companies' resistance to remote work despite the fact that one-fourth of white-collar jobs in the U.S. are expected to be fully remote by 2023

"This is the kind of perk that makes employees want to stay," industry analyst Shep Hyken wrote in a comment for RetailWire. "And knowing they can’t completely shut the entire company down, I like the way they are compensating the distribution and retail store employees."

Read More

Continue Reading

Trending