Daily Update: March 11, 2022

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Start each business day with our analyzes of the most pressing developments affecting the markets today, along with a curated selection of our latest and most important news on the global economy.

OPEC+ is unlikely to save a volatile oil market

As world leaders search for solutions to meet their energy security needs and control soaring prices, as economic sanctions and exposure concerns have led companies to pull out of Russia, it seems unlikely that they find a solution from the OPEC alliance.

Multinational energy companies, including BP and Shell, doubled their outflows from Russia following its invasion of Ukraine. The Biden administration on March 8 imposed a ban on U.S. imports of oil and other Russian energy products and barred new investment in future Russian energy projects, and appears to be exploring oil business opportunities with Venezuela to replace supply of Russia. The UK imposed a similar ban and sanctioned executives of Russian energy giants, including Igor Sechin, the CEO of Russian oil company Rosneft, on March 10. While the EU has been largely reluctant to adopt similar sanctions anytime soon for fear of “unmanageable” risks, European Commission President Ursula von der Leyen announced yesterday that the EU plans to propose the elimination phasing out Russian fossil fuels by 2027 to improve the bloc’s energy security.

But with rising supply concerns and oil prices hitting 14-year highs of $130 a barrel (and Russia warning they could rise to $300 a barrel if conditions hold), major World economies are looking beyond their strategic oil reserves and looking to OPEC+, which controls 50% of global oil production, for helping stabilize the market after the fallout from the Russia-Ukraine crisis. However, OPEC seems uninterested in increasing its crude production and sees soaring oil prices as a geopolitical problem on the part of the West, according to S&P Global Commodity Insights. OPEC has largely maintained its alliance with Russia, and the broad coalition has no plans to bring forward its next formal March 31 meeting, where May production quotas will be decided. Middle Eastern oil superpowers like the United Arab Emirates have already expressed their commitment to the current quotas.

“We call on oil and gas producing countries to act responsibly and review their ability to increase deliveries to international markets, especially where production is not reaching full capacity, noting that OPEC has a key role to play,” said the G7 energy ministers. said in a joint statement March 10, calling on OPEC to help boost oil supplies to international markets where production is not reaching full capacity, according to S&P Global Commodity Insights. “This will help ease tensions and note with appreciation the announcements already made to this end.”

OPEC Secretary General Mohammed Barkindo said March 7 at the CERAWeek conference hosted by S&P Global in Houston that the coalition plans to maintain its oil production schedule and not increase volumes in response to the ” world game changer” of the Russian invasion of Ukraine because “we have no control”. on current events because geopolitics has overtaken the market” and that “all we can do is stay focused on our decisions.

“The high prices are not the result of actions by any OPEC country,” an OPEC source told S&P Global Commodity Insights on March 7. “It’s a political situation.”

OPEC’s spare production capacity is likely limited. According to a forecast from S&P Global Commodity Insights, by May all OPEC members should have effectively exhausted their additional production, with the exception of Saudi Arabia, which is expected to hold just under a million. barrels per day of additional production, and from the United Arab Emirates, which could contain around 755,000 barrels per day. February saw the 19 members of the OPEC+ group produce their biggest monthly increase in crude oil production since July 2021, but quotas still fell 764,000 barrels per day below their collective targets, according to the latest S&P Global Commodity Insights survey.

Today is Friday, March 11, 2022and here is today’s essential intelligence.

Written by Molly Mintz.

Economy


Credit FAQ: Conflict in Ukraine and Asian companies: Commodity prices and sentiment exceed direct effects

The conflict in Ukraine is driving up commodity and energy prices and increasing market volatility in Asia-Pacific. S&P Global Ratings expects these factors to have the most relevant and immediate credit implications for the region’s corporate sector. A protracted conflict affecting investor sentiment through 2022 will complicate access to financing for weaker credits that depend on capital markets for refinancing. Asia-Pacific entities generally have little or no direct exposure to Russia or Ukraine in terms of revenue, assets or supply chains. Russian airlines and cargo contribute insignificantly to traffic at Asian ports and airports, for example.

—Read the full report of S&P Global Ratings

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Capital markets


Asset quality improves at most major European banks in Q4’21

A majority of European banks with more than 100 billion euros in assets saw their problem loan ratios fall on an annual and quarterly basis in the fourth quarter of 2021, while two of the five largest lenders in the region saw increases levels of bad debt loans, data from S&P Global Market Intelligence shows. The problem loan ratios of Italian lenders BPER Banca SpA and Banco BPM SpA decreased by 222 basis points to 4.16% and 149 basis points to 4.83%, respectively, on an annual basis, marking the highest decline among the 26 banks in the sample. Still, BPER Banca and Banco BPM ranked first and third in the ranking of banks by problem loan ratio.

—Read the full article from S&P Global Market Intelligence

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International trade


Listen: Russian-Ukrainian conflict pushes European commodities to new heights

Oil markets – and others – are seeing record prices and intense volatility as Russia’s invasion of its neighbor continues. S&P Global Commodity Insights reporters Rosemary Griffin, Elza Turner and Rowan Staden-Coats chat with Joel Hanley about what the war in Ukraine means for Europe’s prices, trade flows and refineries.

—Listen and subscribe to Oil Markets, a podcast by S&P Global Commodities Outlook

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ESG


An ESG solution for every goal: ESG-based S&P 500 indices

When it comes to ESG indices, different objectives require different solutions. Indices can range from simple to sophisticated, from concentrate to benchmark, from broad environmental, social and governance to climate, and more. Our growing suite of ESG indices aims to address a wide range of ESG needs and support the alignment of investments with ESG principles.

—Read the full article from S&P Dow Jones Indices

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Energy and raw materials


CERAWeek: the US electricity grid must be modernized to meet decarbonization objectives

The U.S. electric grid needs to be modernized like other aspects of the economy have been in order to transition to the wave of clean energy that is waiting to come online to help meet net zero goals, said industry experts on March 10. the 1940s and hasn’t changed much since its inception, leaving network operators’ interconnection queues filled with revolving projects waiting to materialize, panelists said in a session focused on connecting renewables to the power grid at the CERAWeek by S&P Global energy conference in Houston.

—Read the full article from S&P Global Commodities Outlook

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Technology and media


Impact on industry inventory – March 2022

After the disruption of the COVID-19 pandemic in 2020, the current impact of microchip shortages on vehicle production and inventory shortages have hampered sales of almost all brands. As consumers returned to the market with limited choices, fewer remained loyal to their brand. There is a strong positive correlation between day supply and loyalty to make.

—Read the full report from S&P Global

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