World

Oil prices rose Wednesday as OPEC and Russia-led allies prepare to announce a big cut in output.

Stocks markets diverged following Tuesday’s surge on hopes the US Federal Reserve could temper its rate hike campaign.

The pound continued to suffer against the dollar over fears for Britain’s recession-threatened economy, losing around one percent. 

The main focus has been the oil market. “There will be a lot of attention on just how big this (oil output) cut is,” said AJ Bell investment director Russ Mould.

“Speculation they could be double the volume previously flagged… has been behind the recent surge in crude.”

Major oil producers led by Saudi Arabia and Russia were on Wednesday expected to announce a large cut in output to prop up prices despite Western concerns over energy-fuelled inflation.

The 13-nation OPEC cartel and its 10 Russian-led allies are reportedly considering a reduction of up to two million barrels per day at a meeting in Vienna — the biggest cut since 2020.

In a reminder of the global economic turmoil, the World Trade Organization (WTO) dramatically lowered its global trade forecast for 2023.

“Today the global economy faces multi-prong crises. Monetary tightening is weighing on growth across much of the world,” WTO Director-General Ngozi Okonjo-Iweala told reporters in Geneva.

Presenting a revision of their annual trade forecast, WTO economists said they still anticipated global economic growth rising 2.8 percent this year.

Hong Kong stocks soared Wednesday following a public holiday, catching up with the previous day’s global rally.

In corporate news, Elon Musk has offered to push through with his buyout of Twitter at the original agreed price.

The world’s richest man said in a filing with the Securities and Exchange Commission that he sent Twitter a letter vowing to honour the contract.

The latest twist in the long-running saga came ahead of the high-stakes court battle launched by Twitter in an attempt to hold the Tesla chief to the $44-billion deal he signed in April.

– Key figures around 1100 GMT –

Brent North Sea crude: UP 0.9 percent at $92.57 per barrel

West Texas Intermediate: UP 0.7 percent at $87.10 per barrel

London – FTSE 100: DOWN 1.0 percent at 7,016.57 points

Frankfurt – DAX: DOWN 0.8 percent at 12,570.82

Paris – CAC 40: DOWN 0.7 percent at 5,996.54

EURO STOXX 50: DOWN 0.8 percent at 3,456.56

Tokyo – Nikkei 225: UP 0.5 percent at 27,120.53 (close)

Hong Kong – Hang Seng Index: UP 5.9 percent at 18,087.97 (close)

Shanghai – Composite: Closed for a holiday

New York – Dow: UP 2.8 percent at 30,316.32 (close)

Pound/dollar: DOWN at $1.1372 from $1.1477 on Tuesday

Euro/dollar: DOWN at $0.9926 from $0.9992

Euro/pound: UP at 87.27 pence from 87.03 pence

Dollar/yen: UP at 144.34 yen from 144.09 yen

burs-bcp/rfj/lcm

The World Trade Organization on Wednesday dramatically lowered its global trade forecast for 2023, as Russia’s war in Ukraine and other shocks take their toll on the world economy.

Presenting a revision of their annual trade forecast, WTO economists said they expected the volume of global merchandise trade to grow 3.5 percent this year, which is slightly higher than their expectations in April.

But they forecast it would grow by only one percent in 2023 — dramatically down from their expectations of 3.4-percent growth six months ago.

“The picture for 2023 has darkened considerably,” WTO Director-General Ngozi Okonjo-Iweala told reporters in Geneva.

“Today the global economy faces multi-prong crises. Monetary tightening is weighing on growth across much of the world.” 

As for the global economy as a whole, WTO economists stuck with their April forecast of 2.8-percent GDP growth this year, but said growth in 2023 was now expected to be just 2.3 percent — down a full percentage point from the previous forecast.

By way of comparison, the Organisation for Economic Co-operation and Development has maintained its 2022 forecast at three percent, and expects 2.2 percent growth next year.

The International Monetary Fund meanwhile forecasts growth at 3.2 percent this year and 2.9 percent in 2023.

– ‘Overly optimistic’ –

The WTO pointed out that its April forecasts were presented only weeks into the start of Russia’s full-scale war in Ukraine, making them very uncertain.

The estimates for 2023 “now appear overly optimistic, as energy prices have skyrocketed, inflation has become more broad-based, and the war shows no sign of letting up,” it said.

The WTO said surging energy prices in Europe, stemming from the war in Ukraine, were expected to squeeze household spending and raise manufacturing costs on the continent.

Meanwhile monetary policy tightening in the United States was hitting the housing, motor vehicle and fixed investment sectors, and China was still grappling with Covid-19 outbreaks and production disruptions.

Furthermore, the growing import bills for fuel, food and fertiliser risked leading to more food insecurity and debt distress in developing countries, the WTO said.

If its new forecasts pan out, world trade will slow considerably next year, but will still continue to grow.

But the global trade body stressed that it still remained very unclear how things would pan out.

“There’s a great deal of uncertainty in the estimates going forward, simply because of the nature of the conflict” in Ukraine, WTO senior economist Coleman Nee told reporters. 

– ‘Huge impact’ –

If the war “worsens rather than gets better, then that’s going to have a huge impact,” Okonjo-Iweala agreed, adding though that if the situation in Ukraine improves, that would have a “positive impact” on global trade growth.

Such uncertainty leaves WTO economists with a broad spectrum of possibilities for how global trade will evolve in 2023, ranging from a decline of 2.8 percent to a hike of as much as 4.6 percent. 

Last week, Okonjo-Iweala warned that Russia’s war in Ukraine, the climate crisis, food price and energy shocks plus the aftermath of the Covid-19 pandemic were creating the conditions for a world recession.

“Now we have to weather what looks like an oncoming recession,” she told the opening of the WTO’s annual public forum in Geneva.

On Wednesday, she acknowledged that monetary “policymakers are confronted with unenviable choices as they try to find an optimal balance among tackling inflation, maintaining full employment, and advancing important policy goals such as transitioning to clean energy.”

The EU is “ready to discuss” a price cap on gas within the bloc to bring down soaring energy costs, European Commission chief Ursula von der Leyen said Wednesday.

Her comment, to the European Parliament, signalled a shift in tone after powerhouse EU country Germany had expressed worries that a broad price cap might divert supplies for Europe.

It comes after 15 EU countries — more than half the bloc — made a joint call for the EU to impose a price ceiling on how much it would pay for gas piped or shipped in, as the northern hemisphere winter sets in.

Europe is facing an energy crunch as the price of electricity generation skyrockets because of a massive surge in the price of gas.

Russia, which used to be Europe’s main gas supplier, has turned off the taps after being hit by EU sanctions over the war in Ukraine that, while not touching gas, crimped sales of its more lucrative oil exports.

“We are ready to discuss a cap on the price of gas that is used to generate electricity,” Von der Leyen told MEPs sitting in Strasbourg, France.

“This cap would also be a first step on the way to a structural reform and overall reform of our electricity market.”

She added that “we also have to look at gas prices beyond the electricity market”.

– Still being ‘fleshed out’ –

Her spokesman, Eric Mamer, later explained that the proposal was still being “fleshed out” and would be detailed in a letter to EU leaders ahead of a Friday summit in Prague.

But he did say that the idea was “related to the wholesale market of gas trading in Europe” and not directly on the price paid for imported gas.

He acknowledged however that “there are links between the price of gas traded within Europe and the price of the gas that we buy from outside”.

Brussels has been amenable to a cap on pipeline gas to hurt Russia and deprive it of cash for its Ukraine invasion.

But it has resisted a cap on liquified natural gas (LNG), fearing that sellers might simply divert to higher-paying markets, further starving Europe of gas.

Germany, traditionally the biggest beneficiary of Russian gas, had also rebuffed the idea. But it has come under pressure from other EU countries after it announced a 200-billion-euro ($199-billion) fund to shield its own consumers from soaring prices.

Von der Leyen admitted a price cap “entails drawbacks in terms of security of supply of gas”.

But she argued that “the situation has critically evolved” and now, “more member states are open for it and we are better prepared”.

She noted that Europe’s stockpile of gas for winter had reached 90 percent of capacity, exceeding a target set.

She also said any price cap would be “a temporary solution” and that “exceptional times require exceptional emergency measures”.

Elon Musk’s pursuit of Twitter was a melodrama from the beginning — a mercurial billionaire locked in a bitter fight with his favorite social media platform.

After months of recriminations and attempts to cancel his attempt to buy, Musk on Tuesday called a truce and agreed to honor his initial offer.

Here are the main ups and downs of the saga: 

– ‘Passionate believer’ –

Musk is a long-time Twitter user with more than 100 million followers, using the platform as a megaphone for his corporate and personal ambitions.

In an April 4 regulatory filing, he revealed he had splashed out nearly $2.9 billion on a 9.2 percent stake in the company.

Twitter shares soared, Musk got a seat on the board, and CEO Parag Agrawal called him “a passionate believer and intense critic of the service”, saying it was “exactly what we need”.

Both sides appeared to be getting along famously.

– ‘Poison pill’ –

But it took less than a week for things to fall apart.

Musk decided against joining the board, and Agrawal said it was “for the best”.

Musk then launched a hostile takeover bid, an April 13 filing showed, and Twitter adopted a “poison pill” defense that would allow shareholders to buy additional stock.

– Deal back on –

Then Twitter reversed course and on April 25 revealed that it would sell after all in a deal that valued the firm at $44 billion.

Musk parted with $8.4 billion in shares in Tesla, pledged up to $21 billion from his personal fortune and got some friends to stake him a few billion.

The billionaire mogul, known for his provocative messages, set out plans to allow former US president Donald Trump back on to the platform.

– See you in court –

Then it was Musk’s turn to get cold feet. He said on May 13 the deal was “temporarily on hold” while he sought details of spam and fake accounts on the platform.

After two months of very public fighting over the issue, he called off the deal and accused Twitter of making “misleading” statements.

The company quickly launched legal action to enforce the deal.

– Rapprochement –

Both sides had been gearing up for a lengthy and hugely expensive showdown at the Delaware Chancery Court.

Musk had been buoyed by whistleblower revelations that portrayed the company as cavalier with its bot counting and lax on security.

Twitter, however, believed the agreement it had with Musk was watertight.

Then, on Tuesday, Musk revealed — on Twitter, of course — that he had agreed to close the deal at the price he had initially offered.

“I think that Musk realized he was not going to win that trial,” said law professor Carl Tobias.

– The future is ‘X’ –

In his tweet on Tuesday, Musk said the acquisition would be an “accelerant” towards creating “X”, which he said would be “the everything app”.

He offered no further detail.

He had previously told Twitter staff that he envisaged a platform with one billion users, but he was hazy on issues like potential staff layoffs and free-speech limits.

Text messages revealed during the legal process showed how he briefly considered making a blockchain-based social media app.

But before the future of Twitter can even be discussed, either side could still quibble over the details of the sale.

The potential of a courtroom showdown has receded but remains a possibility.

Major oil producers led by Saudi Arabia and Russia were expected Wednesday to agree on a major cut in output to prop up prices despite Western concerns over energy-fuelled inflation.

The 13-nation OPEC cartel and its 10 Russian-led allies is reportedly considering a reduction of up to two million barrels per day at a meeting in Vienna — the biggest cut since 2020.

Such a move could turbocharge crude prices, further aggravating inflation which has reached decades-high levels in many countries and is contributing to a global economic slowdown.

US President Joe Biden personally appealed to Saudi leaders in July to boost production in order to tame prices which soared following Russia’s invasion of Ukraine earlier this year. 

But crude price have fallen in recent months on concerns over dwindling demand and fears over a possible global recession.

“With consumers only just breathing a sigh of relief after being forced to pay record prices at the pump, today’s cut is not going to go down well,” said Craig Erlam, an analyst at trading platform OANDA. 

Ministers from the Saudi-led Organization of the Petroleum Exporting Countries and its partners will discuss their next move at their first in-person meeting at the group’s headquarters in Vienna since March 2020.

They were tight-lipped as they arrived for the gathering on Tuesday.

“Let’s wait… We will have to listen to the technical team,” the energy minister of the United Arab Emirates, Suhail al-Mazrouei, told reporters, adding that the group was still reviewing market data.

– Geopolitical tensions –

Collectively known as OPEC+, the alliance drastically slashed output by almost 10 million barrels per day (bpd) in April 2020 to reverse a massive drop in crude prices caused by Covid lockdowns.

OPEC+ began to raise production last year after the market improved. Output returned to pre-pandemic levels this year, but only on paper as some members have struggled to meet their quotas.

The group agreed last month on a small, symbolic cut of 100,000 bpd from October, the first in more than a year.

Bloomberg, the financial news agency, said OPEC+ officials were discussing the removal of about two million bpd out of the market from November, twice as much as earlier predictions.

Consumer countries have pushed for months for OPEC+ to open taps more widely to bring down prices — calls that the group has largely ignored.

“Knowing that Russia is willing to cut output, the move could also be perceived as another escalation of the geopolitical tensions” between Moscow and the West, said Ipek Ozkardeskaya, a Swissquote bank analyst.

The OPEC+ discussion also comes as Western nations mull imposing a price cap on Russian oil while an EU ban on most crude from Russia comes into effect in December. 

– US elections –

Biden made a controversial trip to Saudi Arabia in July in part to convince the kingdom to loosen the production taps. The trip saw Biden meet Crown Prince Mohammed bin Salman despite his promise to make Riyadh a “pariah” following the 2018 killing of journalist Jamal Khashoggi.

A major cut now would be “something that will not be well received by the White House ahead of next month’s midterm elections,” said Tama Varga, analyst at PV Energy, referring to congressional elections.

While such a cut could anger Washington, several OPEC+ nations have struggled to meet their quotas in the first place.

Prices soared close to $140 per barrel in the aftermath of Russia’s invasion of Ukraine in late February but fell as low as below $90 more recently.

After rallying earlier this week on speculation over the OPEC+ cut, the international benchmark, Brent North Sea crude, was slightly down on Wednesday, hovering above $91.

According to UBS bank, a cut of at least 500,000 bpd would be necessary to stop the price plunge.