Premarket stocks: What the OPEC cuts mean for Putin and Russia

New York (CNN) Some of the world’s biggest oil exporters shocked markets over the weekend by announcing they would cut oil production by more than 1.6 million barrels a day.

OPEC+, an alliance between the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-oil-producing countries including Russia, Mexico and Kazakhstan, said on Sunday that the cuts would begin in May and continue until the end. of the year. The news sent both Brent crude futures – the global oil benchmark – and WTI – the US benchmark – up around 6% in Monday trading.

OPEC+ was formed in 2016 to coordinate and regulate oil production and stabilize global oil prices. Its members produce about 40% of the world’s crude oil and have a significant impact on the global economy.

What it means for Putin: OPEC+’s decision to cut oil production could have big implications for Russia.

After Russia invaded Ukraine last year, the United States and the United Kingdom immediately stopped buying oil from the country. The European Union also banned the import of Russian oil shipped by sea.

Members of the G7 – an organization of leaders from some of the world’s largest economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – have also set a $60-a-barrel price cap for oil. exported from Russia. , keeping the country’s income artificially low. If oil prices continue to rise, some analysts have speculated that the US and other Western countries may have to loosen that price cap.

US Treasury Secretary Janet Yellen said on Monday that the changes could lead to a reassessment of the price cap – though not yet. “Of course, this is something that, if we decided it was appropriate to review it, could be changed, but I don’t see it as appropriate at this point,” she told reporters.

“I don’t know that this is significant enough to have any impact on the appropriate level of the price cap,” she added.

Russia also recently announced that it will cut its oil production by 500,000 barrels per day by the end of this year.

Only last week Putin admitted that Western sanctions could deal a blow to the Russian economy.

“The illegal restrictions imposed on the Russian economy may have a negative impact on it in the medium term,” Putin said in televised remarks on Wednesday reported by the state-run TASS news agency.

Putin said Russia’s economy was growing as of July, thanks in part to stronger ties with “Eastern and Southern countries,” possibly referring to China and some African countries.

Russia, China and Saudi Arabia: The OPEC+ announcement came as a surprise this week. The group had already announced it would cut two million barrels per day in October 2022, and Saudi Arabia previously said its production quotas would remain the same until the end of the year.

“The move to reduce supply is quite strange,” Warren Patterson, head of commodities strategy at ING, wrote in a note on Monday.

“Oil prices have partially recovered from the turmoil observed in financial markets following developments in the banking sector,” he wrote. “Meanwhile, oil fundamentals are expected to tighten as we move through the year. Prior to these cuts, we already expected the oil market to see a fairly significant deficit during the second half or 2023. Clearly, this will be even more big now.”

Saudi Arabia said the cut is a “precautionary measure aimed at supporting oil market stability”, but Patterson says it is likely to “lead to further volatility in the market” later this year as less available oil will to increase inflationary achievements. .

Still, the changes signal shifting global alliances with Russia, China and Saudi Arabia over oil prices, analysts at ClearView Energy Partners said. Higher-priced oil could help Russia pay for its war on Ukraine and also boost revenues in Saudi Arabia.

Meanwhile, the White House has spoken out against OPEC’s decision. “We don’t think cuts are advisable at this time given the uncertainty of the market — and we’ve made that clear,” National Security Council spokesman John Kirby said Monday.

— CNN’s Paul LeBlanc and Hanna Ziady contributed to this report

JPMorgan’s Jamie Dimon warns banking crisis will be felt for ‘years to come’

The crisis caused by the recent collapses of Silicon Valley Bank and Signature Bank is far from over and will ripple through the economy for years to come, JPMorgan Chase CEO Jamie Dimon said Tuesday.

In his closely-watched annual letter to shareholders, the chief executive of the largest bank in the United States described the toll the financial crisis has had on all banks and urged lawmakers to think carefully before they respond. with regulatory policy.

“These failures were not good for banks of any size,” Dimon wrote, responding to reports that a major financial institution profited greatly from the collapse of SVB and Signature Bank as cautious customers sought safety by moving billions of dollars worth of cash to big banks.

In a note last month, Wells Fargo banking analyst Mike Mayo wrote “Goliath is winning.” JPMorgan in particular, he said, was benefiting from more deposits “in these less certain times.”

“Any crisis that hurts Americans’ confidence in their banks hurts all banks — a fact that was known even before this crisis,” Dimon said. “While it is true that this banking crisis ‘benefited’ the larger banks due to the influx of deposits they received from smaller institutions, the notion that this merger was good for them in any way is absurd.

The failures of SVB and Signature Bank, he argued, had little to do with banks circumventing regulations and that SVB’s high interest rate exposure and large amount of uninsured deposits were already known to both regulators and the market in general.

Current regulations, Dimon argued, may actually lull banks into complacency without actually addressing real banking issues throughout the system. Enforcing these regulations, he wrote, has just “become a huge, complex task of crossing the t’s and dotting the i’s.”

And while regulatory change will be a possible outcome of the recent banking crisis, Dimon argued that, “it is extremely important that we avoid knee-jerk, knee-jerk or politically motivated responses that often result in achieving the opposite of what people intended.” Regulations, he said, are often put in place in one part of the framework but have negative effects in other areas and simply make things more complicated.

The Federal Deposit Insurance Corporation has said it will propose new rule changes in May, while the Federal Reserve is currently conducting an internal review to assess what changes should be made. Lawmakers in Congress, such as Democratic Senator Sherrod Brown, have suggested that new legislation aimed at regulating the banks is in the works.

But, Dimon wrote, “the debate should not always be about more or less regulation, but about what mix of regulations will keep America’s banking system the best in the world.”

Eminent domain to combat climate change?

Dimon’s letter to shareholders touched on a number of pressing issues, including climate change. “The window for action to avoid the costliest impacts of global climate change is closing,” he wrote, expressing his frustration with the slow growth in investment in clean energy technology.

“Permissive reforms are desperately needed to allow investments to be made in any manner in a timely manner,” he wrote.

A way to do this? “We might even need to invoke eminent domain,” he suggested. “We’re just not getting the right investments fast enough for grid, solar, wind and pipeline initiatives.”

Eminent domain is the government’s power to take private property for public use, as long as the property owner is provided with fair compensation.