With the recent disruption in oil production, futures prices are gyrating wildly. What is driving this volatility?
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30th of August, 2021
30th of August, 2021, 9:52 a.m. ET
30th of August, 2021, 9:52 a.m. ET
Residents in Gulf Hills, Miss., lined up at gas stations on Friday as Hurricane Ida approached. Credit… Associated Press/Hannah Ruhoff/The Sun Herald
On Monday, energy markets were tumultuous as investors reacted to Hurricane Ida’s immediate impact while simultaneously attempting to assess the economic impact of the coronavirus’s increasing hospitalizations in the United States.
After rising more than 4% when trading began, gasoline futures were 2 percent higher. The US benchmark, West Texas Intermediate oil, also rose at initially, but then fell into negative territory, ending the day 0.8 percent down.
Before Hurricane Ida made landfall in Louisiana on Sunday, oil and gas firms in the Gulf of Mexico shut down more than 90% of production, making this the first hurricane of the year to severely affect those sectors.
Federal authorities said on Saturday that almost half of the area’s manned production platforms had been evacuated. BP, Chevron, Phillips 66, and Shell are among the firms that have shut down their operations.
The outage may have an impact on fuel prices throughout the area ahead of Labor Day, which is usually one of the busiest shopping days of the year.
“It’s a bit speculative to predict what’s going to happen right now,” Tom Kloza, the worldwide head of energy analysis at Oil Price Information Service, said. “This may result in a little price increase.”
The timeframe of the oil industry’s recovery from the storm, according to ING analysts, may influence pricing.
“The key issue is whether offshore oil production or processing capacity will provide a faster return,” the analysts said in a note. “If the former, we might see an increase of crude oil inventories,” which could put downward pressure on prices.
As economies across the world reopen from lockdowns and energy demand rises, oil prices have steadily rebounded from their epidemic lows. However, an already fragile recovery has been jeopardized by an increase in coronavirus infections caused by the highly infectious Delta strain, and the suspension of oil production in the Gulf of Mexico may exacerbate the problem.
In the United States, the daily average for hospitalized Covid-19 patients has surpassed 100,000, a number not seen since last winter, when most Americans were vaccinated. On Monday, the European Union is likely to propose that member states impose new travel restrictions on Americans who want to visit Europe.
Southern Louisiana power providers are preparing for major disruptions. Cleco and Entergy, two major power companies in the New Orleans region, said they were bracing for extensive flooding and had enlisted the help of thousands of extra employees and contractors. Customers in the hardest-hit regions may face “weeks of power outages,” according to Entergy.
In Sydney, Australia, a nurse administers the AstraZeneca vaccination to a patient. Credit… Reuters/Loren Elliott
AstraZeneca stated on Monday that it had required that its U.S.-based staff who are returning to work or visiting customers be vaccinated against the coronavirus.
The requirement also extended to workers of the drugmaker’s Alexion Pharmaceuticals division, which is located in Boston, according to the company’s headquarters in Cambridge, England. Those with medical, religious, or other limitations will be accommodated.
“We must follow the evidence to protect the health and well-being of our workers and communities,” an AstraZeneca spokesperson said in a statement.
According to AstraZeneca’s website, the coronavirus vaccine has been approved for use in 87 countries and 913 million doses have been delivered. In the United States, the vaccine has not been approved for use.
Pfizer, a New York-based rival, has mandated that all of its U.S. workers and contractors get vaccinated or submit to weekly Covid-19 testing. Requests for comment from Johnson & Johnson and Moderna, both of which have vaccines approved for use in the United States, were not immediately returned.
This month, Facebook launched Workrooms, a virtual conference room service. Credit… via Reuters/Facebook
Horizon Workrooms, a new virtual reality service from Facebook, will enable users to put on a virtual reality headset, create an avatar, and sit among coworkers in computer-generated business settings.
It isn’t the only firm investing in corporate virtual reality. You may use Roomkey to conduct virtual fireside talks, Gather to travel around a gamified workplace environment, or Gather to put on a virtual expo event (on MootUp).
According to ARtillery Intelligence, the industry is expected to be valued $4 billion in 2023. According to the DealBook newsletter, not all experts are confident that meetings in the “metaverse” would take off fast. The following are the three reasons they gave:
Even in virtual reality, content reigns supreme. Last year, Florian Couret, the director of BNP Paribas Real Estate’s immersive lab, utilized virtual reality headsets to conduct meetings with colleagues in five European nations. However, the experiment came to an end. “You can meet in virtual reality with the finest technologies in the world, but if the material isn’t engaging, nobody cares,” he added.
According to Darrell West, a senior scholar at the Brookings Institution, employee opposition will be a significant stumbling block. Gamers may already be living in the metaverse, but employees, he claims, are creatures of habit. Mr. West believes virtual reality is too “far away from our normal modes of contact” to be used in the workplace anytime soon.
A more robust broadband infrastructure is required. Mr. West said, “Connectivity is still a major issue.” Firms and software companies would have to spend a lot more money in infrastructure if they want genuine virtual office spaces, he said.
Despite the challenges, several sectors have already begun to use the technology. During the pandemic, mixed-reality headsets were used in ICUs to bring extra knowledge into the room without risking viral infection, according to Alexandros Sigaras, an associate professor of research at Weill Cornell Medicine. He has meetings in virtual reality on a daily basis and thinks the technology has applications in many kinds of businesses.
Elizabeth Holmes, the founder of Theranos, is accused of defrauding investors, physicians, and patients. Credit… Reuters/Kate Munsch
Consumer confidence: The Conference Board’s consumer confidence index for August is scheduled to be released. Consumer confidence may be ebbing following mostly stable findings from the previous month, as the Delta variation spread in August. The University of Michigan’s consumer sentiment index, another indicator of consumer confidence, fell sharply in August.
Jury selection for the trial of Elizabeth Holmes, the discredited founder of the blood-testing startup Theranos, has begun in San Jose, California. Ms. Holmes has pleaded not guilty to charges of defrauding investors, physicians, and patients, and faces up to 20 years in prison if convicted.
Meeting of OPEC+: After agreeing in July to raise production by 400,000 barrels per day each month starting in August, the Organization of Petroleum Exporting Countries and its allies are scheduled to convene. Analysts believe the alliance will approve the timetable, despite worries that the Delta version might jeopardize the global recovery.
Earnings of Campbell: Campbell’s Soup, Prego pasta sauce, and Swanson broth manufacturer Campbell’s is scheduled to release its financial results for the quarter ending Aug. 1. Will rising inflationary pressures and supply chain constraints have an impact on the company’s bottom line?
After announcing the largest monthly increase in hiring in almost a year for July, the Labor Department is scheduled to issue its monthly employment report for August. Bloomberg polled economists who predicted a 750,000 job growth, but they’ll be watching to see whether the fast rate of hiring continues, or if the Delta variant’s persistent epidemic hindered sectors attempting to recover their footing.
The Securities Exchange Commission’s head, Gary Genslery, has made SPAC regulation a top priority. Credit… The New York Times’ Kayana Szymczak
The financial world took note when 49 prominent national law firms joined together on Friday to denounce litigation targeting special purpose acquisition companies, according to the DealBook newsletter.
SPACs, or special purpose vehicles, have lately been targeted in high-profile shareholder lawsuits that question their basic structure, beginning with a case against the $4 billion blank-check company headed by billionaire investor William Ackman, which prompted him to reconsider his strategy.
SPACs spend their money in short-term investments such as Treasury notes while looking for a merger candidate. According to the complaints, since these financial entities are investment funds rather than operational businesses, they should be subject to the Investment Act of 1940’s tighter supervision (which would dampen the freewheeling SPAC market).
The cases were brought by two renowned securities law academics, Yale’s John Morley and Columbia’s Robert Jackson, a former commissioner of the Securities and Exchange Commission who currently teaches at Columbia. The academics sued two other SPACs after suing Mr. Ackman.
One of the main legal advisors to SPACs, Kirkland & Ellis, helped gather other firms to publish a statement saying the cases were “without factual or legal foundation.” Some of the signatories, such as Simpson and Thatcher, have limited experience with SPACs. Organizers said that they are demonstrating for the sake of principle.
Kirkland & Ellis partner Christian Nagler stated, “The market has already pushed some change.” “Otherwise, rather than suing, it could be done by establishing norms and laws.”
The companies also sought to counter the attention brought to the cases by Mr. Morley’s and Mr. Jackson’s reputations. White & Case’s Joel Rubinstein stated, “We really needed something strong to take away that P.R. narrative.”
Of fact, the law firms defending SPACs are defending both their clients’ money and their beliefs. What were Mr. Morley and Mr. Jackson’s motives for pursuing these cases? Due to pending litigation, the academics refused to comment.
According to the law firms’ letter, the SEC has examined over 1,000 SPAC I.P.O.s over the last two decades and has never demanded that the vehicles be registered under the Investment Company Act of 1940.
SPACs, on the other hand, were “a quiet backwater for 18 years and a boomtown over the past 18 months,” according to William Birdthistle, a Chicago-Kent College of Law Investment Act expert. Just because the S.E.C. has always done things a certain way doesn’t guarantee it will continue to do so, particularly under Gary Gensler’s tough-talking leadership.
The S.E.C. may decide to submit papers in the cases, but that would just feed further speculation about the lawsuit’s motivations. The Securities and Exchange Commission did not reply to a request for comment.
Credit… Fuchs, Thomas
New mobile money applications are presenting themselves as part of the answer to a persistent problem: a lack of financial awareness, especially among young people in the United States.
According to Ann Carrns of The New York Times, the applications provide sleek instructional films and tools while allowing children and adolescents to save, spend, and even invest in stocks. Researchers and financial advisors have taken notice of the applications, which they say may help engage and educate young users while also raising concerns that without careful parental engagement, the apps might promote poor financial behavior.
Financial literacy in the United States has been stagnant for some time, despite the fact that more states are mandating it to be taught in schools.
Fintech startups view the applications as a way to get consumers to join up early by providing personal financial education as well as spending and saving capabilities.
Here are a few noteworthy apps:
Copper touts itself as the “only bank that educates adolescents about money,” with short, upbeat films and a financial literacy exam for teens and their parents to take.
Step, a teen-focused app, provides a secured credit card that can be used to make a deposit that acts as collateral; users may spend up to the deposit amount and develop credit while doing so.
Greenlight started out as a way for parents to keep track of their children’s tasks and give them an allowance. It now offers cash back on its debit card, as well as the ability for youngsters to invest via a brokerage account established in their parent’s name.
According to Affirm, Amazon and Affirm are testing a monthly payment option that will be available to more consumers in the coming months. Credit… The New York Times/Hiroko Masuike
Customers of Amazon will soon have another payment option when checking out.
On Friday, Affirm, a “buy now, pay later” payment service that enables consumers to pay for goods in installments, said that it had struck an agreement with Amazon.
Customers will be able to utilize Affirm on purchases of $50 or more, including furniture, home goods, electronics, and fashion, and pay in monthly installments, according to Affirm. Customers will be able to see the entire purchase price upfront after they have been authorized, and they will not be charged any late or hidden costs, according to the firm.
Affirm said the service is now being tested with a small number of consumers and will be made more widely accessible to shoppers in the coming months. According to Affirm, some purchases, such as those from Whole Foods Market, Amazon Fresh, and certain digital purchases like movies and books, will not be eligible.
“Amazon is constantly seeking to provide flexible payment alternatives, and Affirm offers just that by providing transparent pay-over-time solutions that consumers may select depending on their needs,” an Amazon spokesperson said.
Consumers are increasingly turning to services that allow them to buy now and pay later. Last month, Square, the payments company led by Twitter CEO Jack Dorsey, agreed to buy Afterpay for $29 billion in a massive transaction. Millions of small businesses that use Square’s app to handle credit card transactions will now have the option to pay in installments.
Affirm has already partnered with 12,000 retailers, including Walmart and Peloton, and its stock has soared more than 30% in after-hours trade. According to an August research study from FT Partners, an investment banking business focusing on financial technology, Peloton accounted for 30% of the company’s total sales in the first fiscal quarter of 2021. This was up from 14% in the same quarter the previous year.
Amazon’s collaboration with Affirm is the company’s first with a buy-now, pay-later service in the United States; it already has a relationship with Zip in Australia, where similar alternatives are more well-established. Amazon has previously offered monthly payment plans to a limited group of consumers who purchased specific goods. Customers with the Amazon.com Store Card, the Amazon Rewards Visa Card, and qualifying Citi credit card members were also eligible for payment plans.
Stocks in the United States moved higher in early trade Monday after setting a new high last week. The S&P 500 gained 0.2 percent, while the Nasdaq gained 0.4 percent.
Oil prices fluctuated as investors reacted to Hurricane Ida, which shut down more than 90% of Gulf of Mexico production, making it the first hurricane of the year to severely affect those sectors. Futures for West Texas Intermediate oil, the US benchmark, fluctuated between gains and losses.
European market indices were mixed on Monday, with the Stoxx Europe 600 remaining unchanged.
Affirm’s stock was up more than 41% in early trade after the buy now, pay later payment service revealed on Friday that it had struck an agreement with Amazon that would enable consumers to pay in installments for their purchases.