Today's business and finance round up 17th March 2022
🔥Gulf states rebuffs British request to increase oil production
17th March 2022
Bite-sized business news from the UK and beyond
Good morning Next week clocks will go forward in the UK as we move into British Summer Time but such changes could soon be a thing of the past across the pond. A new legislation has passed the first stage of approval to make daylight saving time permanent in the US starting in 2023. Supporters cite potential reductions in seasonal depression and benefits for businesses that use light, like golf courses.
- Oil offensive – Gulf states rebuffs British request to increase oil production
- Nickelback – Nickel trading resumes after week suspension
Gulf states rebuffs British request to increase oil production
What’s going on?
The British Prime Minister Boris Johnson visited the Gulf region in a bid to persuade Saudi Arabia and the UAE to increase oil production, as the West looks to secure alternatives to Russia’s fossil fuel supply.
Why is this important?
Last week the UK, US and EU have announced plans to reduce the level of Russian oil and gas they import in response to the invasion of Ukraine.
Russia is the world’s largest producer of gas and one of the biggest oil producers. Sanctions imposed against the country has sent already high oil and gas prices, even higher.
Given the knock-on effects of high energy prices on the cost of living, the race is on to secure other energy partners to ease supply concerns.
The prime minister met leaders in Saudi Arabia and the UAE – two of the largest oil exporters with the capacity to ramp up production and potentially offset supply losses from Russia.
Along with the UK, the US has also asked Saudi Arabia and the UAE to boost their oil supplies but have had little luck in convincing them.
The Gulf region have tried not to pick a side between the West and Russia during the Ukraine conflict. Russia is a key partner to Saudi Arabia and the UAE in an oil producers' pact called OPEC+.
Boris Johnson’s trip to Saudi Arabia has faced heavy criticism due to the country’s human rights record – just a few days ago it executed 81 men.
Replacing Russia in the global energy market will be challenging. Very few oil exporters have the spare capacity to ramp up production and even if they do, existing political ties means they may be reluctant to do so.
Other stories to keep you in the loop
- Going up: US Federal Reserve raises interest rates for first time since 2018
- Free at last: How the UK's debt to Iran is connected to Nazanin Zaghari-Ratcliffe release
- Payment day: Fears Russia will not be able to pay its debts mount
- Slower fashion: Omicron cuts into sales momentum at Zara owner Inditex
- Lad culture: Lloyd’s of London issues £1m fine over firm’s bullying and ‘boys’ night out’
- Weightier prices: Budget fitness company Gym Group hiking prices as energy costs soar
- Oodles of noodles: Wagamama sales surge ahead of pre-Covid levels
- Bad tonic: Fevertree makes profit warning after Ukraine war pushes up prices
Nickel trading resumes after week suspension
Yesterday nickel trading resumed on the London Metal Exchange one week after it was halted following a historic price spike.
The metal is mainly used to create stainless steel, which is used in everything from utensils to machinery to electric vehicle batteries.
Background: Nickel prices went through the roof last week, more than doubling in price to $100,000 per ton before the LME - the world’s largest exchange - stepped in and suspended trading.
The price rise was partly due to a ‘short squeeze,’ which happens when a lot of traders bet against (or ‘short’) an asset and the price starts to rise instead, as it did with nickel… spooking traders into bailing on their short bets, which drives the price up even further.
If left alone, markets can get very volatile as traders attempt to minimise losses, like China's Tsingshan Holding Group, which is facing a $8bn loss.
The war in Ukraine also impacted prices. Russia produces 10% of the world’s nickel and the country’s invasion of Ukraine has led to general fears of commodity shortages.
What now? Unfortunately the restart of nickel trading didn’t go according to plan yesterday. An IT glitch meant that shortly after resuming, trading had to be briefly suspended again.
The LME will be keen to make sure that nothing interrupts trading again as the whole debacle has threatened to derail its position as the global centre for metals trading and main benchmark for pricing.
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