January 26, 2022

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High Noon Talks to End Global Oil-Price War

(Bloomberg) —

As the coronavirus pandemic devastates the global economy, U.S. President Donald Trump, Russian leader Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman are engaged in a high-stakes poker game over ending the oil-price war in a world awash with crude.

The risks are steep for all the players as the world’s largest producers hold talks today on an unprecedented accord to rein in production by 10 million barrels a day. The Group of 20 energy ministers weigh in tomorrow.

Trump — long a vocal critic of the Saudi-led cartel — now wants the OPEC+ coalition to agree on cuts that push up prices and save the U.S. shale-oil industry from collapse.

Putin, who sought to bankrupt U.S. shale producers when he walked away from the previous OPEC+ deal, is now ready to cut production, with the reductions reaching about 15% according to a source. This underlines the risk to Russia’s economic dependence on oil with prices near 18-year lows.

Saudi production remains profitable, though the U.S. ally is under huge diplomatic pressure from Trump to strike a deal. The kingdom needs much higher prices to balance the budget.

While Trump can’t order American producers to cut production, Russia wants the U.S. to contribute more than just letting market forces squeeze its output.

The diplomatic wrangling means a deal is far from certain. Even if one is agreed, it may not be enough in a world where oil demand has slumped by as much as 35 million barrels a day.

Global Headlines

Stimulus showdown | Senate Majority Leader Mitch McConnell plans to seek swift passage today of a $250 billion boost in small-business relief. But he risks failure without a last-minute breakthrough with Democrats who want twice as much for the slumping economy, including aid for hospitals and state and local governments. That sets up a game of chicken that’s poised to play out while seesawing financial markets will be open for trading.

Read here about how the unprecedented wave of U.S. job losses is pushing the social infrastructure in the world’s biggest economy to the breaking point. Click here for an exclusive look at how Trump’s new chief of staff has rattled a White House in crisis mode.

Old fractures | European finance chiefs meet again today after marathon talks failed to spur an agreement on collective assistance to cope with the impact of the coronavirus. A deal is still possible, and some officials say it’s closer than others portray it to be. But it will require a compromise that’s been elusive as the Dutch lead the resistance against Italy burdening northern Europe’s taxpayers with helping out the poorer south.

U.K. Prime Minister Boris Johnson spent a third night in the critical care unit where his condition was improving, as officials draw up plans to extend Britain’s lockdown. Click here for the political risks rising for Spanish Prime Minister Pedro Sanchez. And here for the juggling act facing policy makers as they map out economic reboots.

Biden’s burden | Now that rival Bernie Sanders has dropped out of the race for the Democratic presidential nomination, Joe Biden’s most urgent task will be to unify a divided party for a bruising general election fight against Trump — while the coronavirus consumes voters’ attention and halts traditional campaigning. Biden has to persuade Sanders’s impassioned supporters to work actively to help beat Trump’s well-financed operation.

Turkish dilemma | Ideas that President Recep Tayyip Erdogan would have spurned just months ago are gaining traction as Turkey’s economy tumbles into a virus-triggered recession. Economists have floated printing money despite a history of runaway inflation, while a pro-government newspaper has broached the possibility of borrowing from the International Monetary Fund, an emergency lender Erdogan once branded “the world’s biggest loan shark.”

Singapore’s challenge | One of the biggest obstacles facing Singapore in its fight to contain the spread of the coronavirus is the tightly packed dormitories housing thousands of low-wage foreign workers. Clusters at the facilities now account for more than 15% of the country’s 1,623 cases, according to Ministry of Health data.

What to Watch

New Covid-19 cases in Italy, Spain and elsewhere in Europe are raising questions about the speed with which the region can begin to relax its stringent restrictions on public life. The coronavirus may be “reactivating” in people who have been cured of the illness after about 51 patients classed as having recovered in South Korea tested positive again. The pandemic will cost the global economy more than $5 trillion of growth over the next two years, greater than the annual output of Japan, according to Wall Street banks.

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And finally … Several G-20 leaders — including some who’ve been sharply criticized over their response to the virus — are enjoying a bump in approval ratings. Political scientists say this “rally-around-the-leader” effect is common in emergencies. Trump has seen a boost, though it’s small compared with those of Germany’s Angela Merkel and Emmanuel Macron in France. But it isn’t universal: Japan’s Shinzo Abe, Mexico’s Andrés Manuel López Obrador, and Jair Bolsonaro of Brazil have all lost popularity.


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