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Oil price shock leaves markets on edge – business live Oil price shock leaves markets on edge – business live
(33 minutes later)
David Madden, market analyst at CMC Markets UK, sums up the morning:
This morning equity markets are mixed as traders remain cautious about the political situation in the Middle East. Tensions in the region have been heightened in the wake of the attack in Saudi Arabia over the weekend.
Oil is a touch lower after the mammoth move yesterday, but it is massively up on the week, and that highlights the fear about disruption to production.
The macroeconomic outlook is a little soft, as the Chinese economy is slowing down, the German manufacturing sector is in contraction, plus the uncertainty in relation to Brexit, so higher oil prices are likely to make matters worse for the global economy.
Could Saudi Aramco follow WeWork’s lead, and delay its IPO?
Saturday’s attacks have thrown Aramco’s stock market float plans into fresh uncertainty. Investors must be more concerned that its oil facilities are vulnerable to attack, and concerned that geopolitical risks are rising.
Piers Hillier, chief investment officer at Royal London Asset Management, says investors will probably demand a higher “risk premium” when Aramco eventually comes to market.
“Oil futures curves for 3-10 years out have moved up about $1.25 from around the $50 mark. So while the spot market has jumped, reflecting near-term impacts on immediate oil availability and supply chain issues, the longer-term price has taken this in its stride, up 2-3%, with a modest bump up in prices, leading to an uptick in oil stocks or around 3-4%.
It would seem logical that Aramco’s IPO will be delayed while the damage is assessed but beyond this we would expect that the risk premium that investors will require should the IPO go ahead will now be higher.”
Saudi Aramco has reportedly warned some clients that there will be delays to their oil deliveries, following last weekend’s attack.Saudi Aramco has reportedly warned some clients that there will be delays to their oil deliveries, following last weekend’s attack.
According to Bloomberg, at least four clients have been warned to expect delays of either days, or weeks. But, they’ve also been reassured that they’ll get their order eventuallyAccording to Bloomberg, at least four clients have been warned to expect delays of either days, or weeks. But, they’ve also been reassured that they’ll get their order eventually
Reuters has more details:Reuters has more details:
Saudi Aramco informed PetroChina on Tuesday that its loadings of light crude oil for October will be delayed by about 10 days, said a senior Chinese state oil source with knowledge of the matter.Saudi Aramco informed PetroChina on Tuesday that its loadings of light crude oil for October will be delayed by about 10 days, said a senior Chinese state oil source with knowledge of the matter.
However, Aramco, the state oil company of Saudi Arabia, will still supply the same grades and volumes of light crude oil requested for October nominations, the source said.However, Aramco, the state oil company of Saudi Arabia, will still supply the same grades and volumes of light crude oil requested for October nominations, the source said.
The Chinese state refiner was also told that its September-loading light crude cargoes will be swapped to heavier grades with no change in volumes or delays, the source said.The Chinese state refiner was also told that its September-loading light crude cargoes will be swapped to heavier grades with no change in volumes or delays, the source said.
“The (loading dates and volumes of) September cargoes are too prompt to be changed, as Aramco may be still assessing the damages to its facilities,” said the source.“The (loading dates and volumes of) September cargoes are too prompt to be changed, as Aramco may be still assessing the damages to its facilities,” said the source.
Just in: German investors are even gloomier about their current economic situation, but slightly more optimistic about the future.Just in: German investors are even gloomier about their current economic situation, but slightly more optimistic about the future.
That’s according to the Munich-based ZEW Institute.That’s according to the Munich-based ZEW Institute.
Its monthly survey showed that investors are still concerned about Brexit, and the US-China trade war. But, they’re also hopeful that the European Central Bank’s new stimulus package, announced last week, will boost growth.Its monthly survey showed that investors are still concerned about Brexit, and the US-China trade war. But, they’re also hopeful that the European Central Bank’s new stimulus package, announced last week, will boost growth.
ZEW reports that:ZEW reports that:
Current conditions index: fell to -19.9, down from 13.5 in August. Worse than expected.Current conditions index: fell to -19.9, down from 13.5 in August. Worse than expected.
Economic sentiment index: up to -22.5, from -44.1 in August. Better than expected.Economic sentiment index: up to -22.5, from -44.1 in August. Better than expected.
Bittersweet news for #Germany 's economy: #ZEW Current Conditions falls further to -19.9 in Sep from prev-13.5 and more than exp -15.0 (lowest since June 2010)ZEW Economic Sentiment rises to -22.5 from prev -44.1 and more than exp -38.8@graemewearden pic.twitter.com/WCqUExOFKcBittersweet news for #Germany 's economy: #ZEW Current Conditions falls further to -19.9 in Sep from prev-13.5 and more than exp -15.0 (lowest since June 2010)ZEW Economic Sentiment rises to -22.5 from prev -44.1 and more than exp -38.8@graemewearden pic.twitter.com/WCqUExOFKc
US energy secretary Rick Perry is trying to calm the markets again.US energy secretary Rick Perry is trying to calm the markets again.
Perry, who’s attending an energy conference in Vienna, told reporters that the US is confident that markets are “well-supplied”.Perry, who’s attending an energy conference in Vienna, told reporters that the US is confident that markets are “well-supplied”.
He said:He said:
“With regard to energy markets, the president has directed me to release oil from the Strategic Petroleum Reserve if that is needed to offset any potential disruptions.“With regard to energy markets, the president has directed me to release oil from the Strategic Petroleum Reserve if that is needed to offset any potential disruptions.
But looking at the supply numbers we are confident that the markets remain well-supplied.”But looking at the supply numbers we are confident that the markets remain well-supplied.”
Traders may not entirely share Perry’s confidence. As this tweet shows, the Brent crude oil price surged by a record amount yesterday, after the Saudi attack knocked out 5% of global output.Traders may not entirely share Perry’s confidence. As this tweet shows, the Brent crude oil price surged by a record amount yesterday, after the Saudi attack knocked out 5% of global output.
BRENT front-month futures prices surged +14.6% on Sep 16 following the attack on Abqaiq, an increase of 6.65 standard deviations, and the largest percentage one-day price rise on record (corrected): pic.twitter.com/dDR2UgA6aUBRENT front-month futures prices surged +14.6% on Sep 16 following the attack on Abqaiq, an increase of 6.65 standard deviations, and the largest percentage one-day price rise on record (corrected): pic.twitter.com/dDR2UgA6aU
The markets are concerned that:The markets are concerned that:
a) supplies won’t be restored quickly,a) supplies won’t be restored quickly,
b) the shortfall won’t be fully covered by other countriesb) the shortfall won’t be fully covered by other countries
c) Military retaliation against Iran (who deny involvement) could disrupt supplies furtherc) Military retaliation against Iran (who deny involvement) could disrupt supplies further
China’s government has condemned the attack on the Saudi Aramco oil facilities, but also called for calm.China’s government has condemned the attack on the Saudi Aramco oil facilities, but also called for calm.
Chinese foreign ministry spokeswoman Hua Chunying told reporters in Beijing:Chinese foreign ministry spokeswoman Hua Chunying told reporters in Beijing:
“China condemns this attack on Saudi Arabia’s oil facilities and opposes any attacks on civilians or civilian facilities,”“China condemns this attack on Saudi Arabia’s oil facilities and opposes any attacks on civilians or civilian facilities,”
She added that relevant parties must “to avoid taking actions that bring about an escalation in regional tensions”.She added that relevant parties must “to avoid taking actions that bring about an escalation in regional tensions”.
Asia-Pacific stock markets have closed for the day, with losses in China (-1.68%) and Hong Kong (-1.1%), but small gains in Australia (+0.3%).Asia-Pacific stock markets have closed for the day, with losses in China (-1.68%) and Hong Kong (-1.1%), but small gains in Australia (+0.3%).
APAC Closing Prices:#ASX 6695.3 +0.33%#NIKKEI 22001.32 +0.06%#HSI 26790.24 -1.23%#HSHARES 10502.37 -1.18%#CSI300 3891.22 -1.68%APAC Closing Prices:#ASX 6695.3 +0.33%#NIKKEI 22001.32 +0.06%#HSI 26790.24 -1.23%#HSHARES 10502.37 -1.18%#CSI300 3891.22 -1.68%
The Brent crude oil price is rising again, back over $69 and heading towards fresh four-month highs.The Brent crude oil price is rising again, back over $69 and heading towards fresh four-month highs.
As you can see here, it spiked dramatically yesterday after the Saudi oil attack, surging by 14% -- a move usually only seen in times of war and economic crisis.As you can see here, it spiked dramatically yesterday after the Saudi oil attack, surging by 14% -- a move usually only seen in times of war and economic crisis.
Donald Trump’s pledge to release oil from America’s reserves helped to stabilise the oil price.... but investors remain concerned that Saudi Arabia’s oil facilities may not be fixed for weeks...Donald Trump’s pledge to release oil from America’s reserves helped to stabilise the oil price.... but investors remain concerned that Saudi Arabia’s oil facilities may not be fixed for weeks...
Neil Mellor of BNY Mellon says:Neil Mellor of BNY Mellon says:
Brent crude prices spiked on Sunday’s news, with the front-end contract rising $12 from around the $60 mark in New York on Friday. That prices steadied thereafter was undoubtedly in part due to President Trump’s immediate assurances that oil would be released from the strategic reserve. But prices have since risen to fresh highs amid the realization that supply-related risks are seemingly on the rise.Brent crude prices spiked on Sunday’s news, with the front-end contract rising $12 from around the $60 mark in New York on Friday. That prices steadied thereafter was undoubtedly in part due to President Trump’s immediate assurances that oil would be released from the strategic reserve. But prices have since risen to fresh highs amid the realization that supply-related risks are seemingly on the rise.
Most immediately, it is unclear when the oil facilities – which produce more than 5% of global supply – will be up and running once more. Certainly, Aramco stated on Sunday that it was looking to have restored around one-third of lost output by yesterday evening. However, a source close to the matter told Reuters that the return to full oil capacity could take “weeks, not days”.Most immediately, it is unclear when the oil facilities – which produce more than 5% of global supply – will be up and running once more. Certainly, Aramco stated on Sunday that it was looking to have restored around one-third of lost output by yesterday evening. However, a source close to the matter told Reuters that the return to full oil capacity could take “weeks, not days”.
Shares in cruise operator Carnival have dropped by 3% in early trading, to the bottom of the FTSE 100 losers column.Shares in cruise operator Carnival have dropped by 3% in early trading, to the bottom of the FTSE 100 losers column.
Higher oil prices will eat into its profits, and could also hurt economic growth - possibly meaning fewer people can pay for that trip of a lifetime....Higher oil prices will eat into its profits, and could also hurt economic growth - possibly meaning fewer people can pay for that trip of a lifetime....
Shares in oil giant have risen again this morning, as investors anticipate higher crude prices.Shares in oil giant have risen again this morning, as investors anticipate higher crude prices.
BP and Royal Dutch Shell topped the FTSE 100 risers at the open, up around 1%.BP and Royal Dutch Shell topped the FTSE 100 risers at the open, up around 1%.
WeWork’s business model is pretty simple -- it buys offices, and then rents it out to businesses, or individual workers who might want an occasional hot-desk.WeWork’s business model is pretty simple -- it buys offices, and then rents it out to businesses, or individual workers who might want an occasional hot-desk.
The idea is that WeWork handles everything -- from paying the utility bills to restocking the printer -- along with some enticing downtime options including video games and table football. For a while there was even unlimited free beer.The idea is that WeWork handles everything -- from paying the utility bills to restocking the printer -- along with some enticing downtime options including video games and table football. For a while there was even unlimited free beer.
But ultimately, it’s office rental -- so a $47bn valuation always looked toppy.But ultimately, it’s office rental -- so a $47bn valuation always looked toppy.
Last week, my colleague Nils Pratley outlined the four reasons investors weren’t keen on backing the IPO.Last week, my colleague Nils Pratley outlined the four reasons investors weren’t keen on backing the IPO.
As Nils put it:As Nils put it:
Co-founder Adam Neumann wasn’t obviously living up to the spirit of collective endeavour when his investment vehicle was paid $5.9m by the company for the right to use the trademarked word “we”. The sum has been repaid but how was the arrangement ever approved?Co-founder Adam Neumann wasn’t obviously living up to the spirit of collective endeavour when his investment vehicle was paid $5.9m by the company for the right to use the trademarked word “we”. The sum has been repaid but how was the arrangement ever approved?
WeWork looks like a bubble waiting to burstWeWork looks like a bubble waiting to burst
The We Company, the parent of WeWork, insists that its float will still take place by the end of the year (just not next week).The We Company, the parent of WeWork, insists that its float will still take place by the end of the year (just not next week).
In a statement following the postponement of its IPO, it says:In a statement following the postponement of its IPO, it says:
“The We Company is looking forward to our upcoming [initial public offering], which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment.”“The We Company is looking forward to our upcoming [initial public offering], which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment.”
But... the delay is going to cause problems.But... the delay is going to cause problems.
WeWork needs to raise at least $3bn through a float to unlock a new $6bn debt facility from its banks. As WeWork is currently loss-making, it would have to raise cash elsewhere if it lost that credit line. No wonder it hopes to press on.WeWork needs to raise at least $3bn through a float to unlock a new $6bn debt facility from its banks. As WeWork is currently loss-making, it would have to raise cash elsewhere if it lost that credit line. No wonder it hopes to press on.
Ironically the delay could be good news for Japanese tech investor SoftBank, a major investor in We. Last year it injected $3bn, in a move valuing We at around $45bn. Had We only floated at, $20bn, SoftBank’s investment wouldn’t look very rosy.Ironically the delay could be good news for Japanese tech investor SoftBank, a major investor in We. Last year it injected $3bn, in a move valuing We at around $45bn. Had We only floated at, $20bn, SoftBank’s investment wouldn’t look very rosy.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are extremely edgy today as investors worry about rising tensions in the Middle East.Global stock markets are extremely edgy today as investors worry about rising tensions in the Middle East.
Last weekend’s attack on Saudi Arabia’s massive oil facility at Abqaiq, and America’s threat of military response, has knocked shares around the world and driven oil prices alarmingly higher.Last weekend’s attack on Saudi Arabia’s massive oil facility at Abqaiq, and America’s threat of military response, has knocked shares around the world and driven oil prices alarmingly higher.
Fears of supply shortages drove crude prices alarmingly higher on Monday, up over 14%. Brent crude spiked to $69 per barrel, the biggest one-day jump since the 1980s. US crude finished at $62, the biggest one-day move since the financial crisis.Fears of supply shortages drove crude prices alarmingly higher on Monday, up over 14%. Brent crude spiked to $69 per barrel, the biggest one-day jump since the 1980s. US crude finished at $62, the biggest one-day move since the financial crisis.
The jump in oil prices has hit airline stocks. Higher crude prices could mean slower global growth -- hurting banks, industrial firms and consumer goods makers.The jump in oil prices has hit airline stocks. Higher crude prices could mean slower global growth -- hurting banks, industrial firms and consumer goods makers.
Last night, the US Dow Jones lost 142 points, or 0.5%. Stocks have fallen in Asia overnight, with China’s CSI 300 index losing 1.7% and Hong Kong’s Hang Seng dropping by 1,5%.Last night, the US Dow Jones lost 142 points, or 0.5%. Stocks have fallen in Asia overnight, with China’s CSI 300 index losing 1.7% and Hong Kong’s Hang Seng dropping by 1,5%.
Donald Trump has insisted that he doesn’t want war in the Middle East, but Washington are also insisting the attacks has Tehran’s fingerprints on it.Donald Trump has insisted that he doesn’t want war in the Middle East, but Washington are also insisting the attacks has Tehran’s fingerprints on it.
Remember when Iran shot down a drone, saying knowingly that it was in their “airspace” when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a very big lie. Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?Remember when Iran shot down a drone, saying knowingly that it was in their “airspace” when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a very big lie. Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?
Stephen Innes, Asia Pacific market strategist at AxiTrader, says investors worry that an oil price shock could push the global economy down:Stephen Innes, Asia Pacific market strategist at AxiTrader, says investors worry that an oil price shock could push the global economy down:
Global equity markets are stabilising after the drone attack but remain in a state of limbo trying to access the economic damage of a possible lengthy oil price shocker, keeping in mind that every recession since 1973 has included an oil price shock, versus the favourable medium-term S&P 500 correlation to higher oil prices.Global equity markets are stabilising after the drone attack but remain in a state of limbo trying to access the economic damage of a possible lengthy oil price shocker, keeping in mind that every recession since 1973 has included an oil price shock, versus the favourable medium-term S&P 500 correlation to higher oil prices.
All the while, nervously evaluating the possibility of a joint military response from the U.S. and Saudi Arabia.All the while, nervously evaluating the possibility of a joint military response from the U.S. and Saudi Arabia.
Saudi oil attacks push prices up by highest amount since 1988Saudi oil attacks push prices up by highest amount since 1988
The other big news of the morning is that WeWork, the office space sharing firm, has postponed its controversial stock market flotation.The other big news of the morning is that WeWork, the office space sharing firm, has postponed its controversial stock market flotation.
WeWork was forced to pull its IPO after getting a lukewarm, bordering on chilly, reception from potential investors.WeWork was forced to pull its IPO after getting a lukewarm, bordering on chilly, reception from potential investors.
The office sharing firm was once valued by major investor SoftBank at $47bn (£37.8bn), but was forced to slash its ambitions as Wall Street baulked at its heavy losses, complicated corporate structure, and founder Adam Neumann’s grip on the company.The office sharing firm was once valued by major investor SoftBank at $47bn (£37.8bn), but was forced to slash its ambitions as Wall Street baulked at its heavy losses, complicated corporate structure, and founder Adam Neumann’s grip on the company.
It had been planning an investor roadshow to market the shares this week, ahead of a trading debut next week - but this is now on pause.It had been planning an investor roadshow to market the shares this week, ahead of a trading debut next week - but this is now on pause.
This is obviously a blow to the company, which had been under pressure to complete the IPO to unlock new funding.This is obviously a blow to the company, which had been under pressure to complete the IPO to unlock new funding.
As the Financial Times puts it:As the Financial Times puts it:
The delay to the IPO will also block WeWork from accessing a $6bn loan that had been provided by a consortium of banks, contingent on a successful IPO this year. If WeWork is unable to finalise its listing in 2019 it could be forced to draw up new financing plans.The delay to the IPO will also block WeWork from accessing a $6bn loan that had been provided by a consortium of banks, contingent on a successful IPO this year. If WeWork is unable to finalise its listing in 2019 it could be forced to draw up new financing plans.
While the company is still set to receive a $1.5bn capital injection from SoftBank in 2020 as part of an earlier agreed deal, the cash cost of its global expansion has depleted its reserves and proven a key issue for investors.While the company is still set to receive a $1.5bn capital injection from SoftBank in 2020 as part of an earlier agreed deal, the cash cost of its global expansion has depleted its reserves and proven a key issue for investors.
Traders will also have a eye on the UK Supreme Court. Eleven of Britain’s top judges will hear today whether Boris Johnson acted unlawfully when he advised the Queen to suspend parliament for five weeks.Traders will also have a eye on the UK Supreme Court. Eleven of Britain’s top judges will hear today whether Boris Johnson acted unlawfully when he advised the Queen to suspend parliament for five weeks.
Supreme court to hear claims suspension of parliament is unlawfulSupreme court to hear claims suspension of parliament is unlawful
The agendaThe agenda
10am BST: ZEW survey of German investor confidence10am BST: ZEW survey of German investor confidence
2.15pm BST: US industrial production figures for August (forecast to rise by 0.2%, up from -0.2%).2.15pm BST: US industrial production figures for August (forecast to rise by 0.2%, up from -0.2%).