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Good evening.
Oil prices jumped today after yesterday’s surprise announcement of a cut in production from Opec+ members that has threatened to reignite inflationary pressures as well as tensions between Saudi Arabia and the US.
The reduction of more than 1mn barrels a day, including 500,000 from Saudi Arabia — 5 per cent of its output — was unusual for being announced outside a formal Opec+ meeting, suggesting an element of urgency among the cartel members. Russia said it would extend its existing 500,000 b/d cut until the end of the year.
As our explainer details, the move is an attempt by Opec+ to prop up or push higher oil prices, which recently fell towards $70 a barrel as banking turmoil led to a sell-off of risky assets, down from the $100 levels of last year.
The move could exacerbate strains between Saudi Arabia and the US, which last year pushed for the kingdom to pump more oil in an attempt to restrain surging energy costs. Washington will also be annoyed at the Saudis’ determination to keep working with Russia, which helped form the expanded Opec+ group in 2016. Saudi Aramco, the world’s largest oil major, has also just strengthened its ties with China through two refinery deals.
The Opec+ announcement pushed up shares in other oil companies, which are benefiting from the rush to shore up supplies as energy security trumps climate concerns. Despite passing significant legislation to accelerate the development of green tech, President Joe Biden has recently given the green light to drilling in Alaska and boasted that oil output would soon hit record highs.
And in the UK, a new front in the war between environmental campaigners and fossil-fuel companies has opened up at Rosebank, a vast oilfield off the Shetland Islands, where a $4.5bn project owned by Norway’s Equinor aims to drill for up to 300mn barrels of oil and gas, more than double the size of the nearby Cambo field.
The likely approval by regulators was reflected in the enthusiasm of energy secretary Grant Shapps, who said last week: “Unless you can explain how we can transition (to net zero) without oil and gas, we need oil and gas.”
In the meantime, banks that had been forecasting higher crude prices are doubling down, with Goldman Sachs raising its year-end target from $90 a barrel to $95 a barrel. More expensive oil also complicates central bank attempts to restrain inflation, forcing them to keep lifting interest rates or keep them higher for longer.
Need to know: UK and Europe economy
The UK promised greater transparency over new legislation that gives ministers the ability to block deals on national security grounds. The measures were introduced partly because of concerns over China buying up UK assets but corporate advisers say they are having a chilling effect on deal making and inward investing.
Sinn Féin’s Michelle O’Neill, Northern Ireland’s first minister-designate, urged the US to “drum up” investment in the region now that post-Brexit trade arrangements had been clarified.
Finnish prime minister Sanna Marin conceded defeat in the country’s general election as centre-right opposition leader Petteri Orpo claimed a mandate to form a new coalition government. Voters’ nervousness over the economy will make other European leaders take note. Finland officially joins Nato tomorrow.
In other election news, Montenegro voters ousted President Milo Đukanović after 30 years in power, replacing him with Jakov Milatović, a 37-year-old banker who promised to speed up the country’s accession talks with the EU. In Bulgaria, the centre-right GERB party of ex-prime minister Boyko Borisov appeared to be the winner of the country’s parliamentary elections but there was also a strong result for the pro-Russian Revival party.
Join Stephen Bush and other FT journalists and experts on April 19 at 13:00 BST for a live Inside Politics discussion on the outlook for the UK economy and politics in the run-up to next year’s general election. You can sign up here and submit questions to the speakers.
Need to know: Global economy
“Don’t do to others what you don’t want others to do to you,” was China’s none-too-subtle warning to Japan about joining the west’s chip wars by curbing exports of semiconductor manufacturing equipment. Back at home, President Xi Jinping has launched a charm offensive to convince investors the country is open for business. Our Big Read has the details.
Western businesses could struggle to loosen ties with China given the lack of alternative ports in other parts of Asia that are capable of handling today’s mega-container ships.
Speakers at a climate and health conference in the United Arab Emirates were told not to protest or “criticise corporations”, raising the alarm among campaigners ahead of the country’s hosting of the UN COP28 climate summit this year.
Need to know: business
Switzerland’s federal prosecutor opened an investigation into the state-backed takeover of Credit Suisse by its larger rival UBS. CS is bracing for a shareholder backlash over the rescue. The head of Julius Baer, one of the country’s biggest banks, warned the country not to jeopardise its status as banker to the super-rich.
Cinema chain Cineworld announced a debt restructuring plan to help bring it out of Chapter 11 bankruptcy proceedings.
UK businesses are bracing for a “week of woe” as new taxes kick in at the same time as government subsidies on energy bills and R&D investment start to wane.
Only 5 per cent of FTSE 100 companies have “credible” climate transition plans, according to EY, despite statements saying they are committed to slashing emissions.
Lithium shortages could hit the EU’s transition to electric cars, posing a challenge to its planned phasing out of new petrol and diesel vehicles by 2030. Our Big Read explains how China is winning the race for Africa’s lithium.
AI correspondent Madhumita Murgia pits OpenAi’s Chat GPT-4 against Google’s Bard in a battle of the chatbots, asking them to pick stocks, write an advertising slogan and imagine a conversation between Xi Jinping and Vladimir Putin. New anti-plagiarism software is aiming to catch cheating students submitting AI-created essays.
The World of Work
Quiet quitting. Sunday scaries. Bare minimum Mondays. Columnist Pilita Clark ponders the new buzzwords that have cropped up since the pandemic started and what they reveal about how we view our jobs.
Some believe that “boomerang” bosses bring stability when they return to their former companies in times of crisis. However, the data suggests otherwise.
Some good news
US researchers at MIT have designed a new type of nanoparticle that can be administered to the lungs where it can perform a gene editing function, potentially offering an inhalable treatment for diseases such as cystic fibrosis.
