Daily Brief: Oil’s Price Just Shot Up, And Your Stocks Could Be Hit By The Aftershock

Daily Brief: Oil’s Price Just Shot Up, And Your Stocks Could Be Hit By The Aftershock

almost 3 years ago3 mins

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The price of a barrel of Brent crude oil hit its highest in a year on Monday, after a drone attack on Saudi Arabia over the weekend put the slippery elixir’s supply in its crosshairs.

What does this mean?

The drone strike – which a Yemeni group has since taken credit for – was aimed at oil giant Saudi Aramco’s facilities, including one terminal capable of meeting 7% of the world’s oil demand. Saudi Arabia said the attacks were intercepted, so there was no actual disruption to the supply of oil. But the risk alone – not to mention the threat of retaliation or another attack – was enough to send oil’s price above $70 a barrel for the first time in over a year. And yes, that is déjà vu you’re feeling: a similar price spike happened after an American airstrike in January last year.

Saudi oil under fire

Why should I care?

For markets: The damage might already be done.

It didn’t take long for the oil price to drop again, but just the prospect that limited supply would push prices higher could cause problems for stock markets. Oil’s essential to everything from toys to jet fuel, which means the more expensive it gets, the more expensive they get. That increase in inflation raises the likelihood that near-term interest rates will climb too, making high-growth and high-multiple stocks – like tech companies’ – look less attractive.

Oil price

The bigger picture: Speaking of jet fuel...

The toing and froing of oil’s price has major implications for the earnings of hard-hit airlines, which generally hedge their fuel costs to lock in prices. If the economy recovers faster than anticipated, those airlines could find themselves forced to buy jet fuel at prevailing – read: higher – prices. Still, a quicker-than-expected recovery is a nice problem for airlines to have these days, which might be why 77% of authors on data platform Nobias Financial are positive on the US’s biggest: Delta Air Lines.

Keep reading for our next story...

Two Hotly Anticipated UK IPOs Coming Soon

IPOs image

There are two highly anticipated initial public offerings (IPO) expected to hit the UK’s stock market as soon as this month, and investors are hoping they get exactly what they ordered.

What does this mean?

First up, Trustpilot: the Danish customer review platform is set to sell at least a quarter of its shares, aiming to value the entire business at $1.4 billion. And it looks like some of the world’s biggest investors rate the opportunity very highly indeed, with Fidelity and BlackRock already having promised to buy in.

Then there’s Amazon-backed Deliveroo, which is expected to be worth around $10 billion after its IPO. Investors keen on profitable companies might be put off by last year’s $309 million loss, sure, but others might give the food delivery company credit for having brought that figure down from a $440 million loss in 2019.

Why should I care?

For markets: Investors aren’t as powerful as they used to be.

Now the UK’s greenlit a more flexible IPO structure, investors in some British companies are going to have to get used to “dual share classes”, which give founders and managers more control than the average investor. They’re already common among US firms like Alphabet, Snap, and Berkshire Hathaway, and now it’s Deliveroo’s turn to try them on for size: the company’s founder will have 20 times the power per share than its new shareholders for the first year.

Record first quarter

The bigger picture: China’s getting stricter.

While UK regulators giveth, Chinese regulators taketh away: ecommerce giant JD.com is all set to cancel the mooted $3 billion IPO of its financial services business, according to reports on Monday. China’s crackdown on internet-based finance firms also hit Alibaba’s Ant Financial last year, and it’s starting to make other companies reconsider if they really want to open themselves to scrutiny by going public too.

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