Daily Brief: OPEC+ Thinks More Oil Is The Answer To All Your Inflation-Related Worries

Daily Brief: OPEC+ Thinks More Oil Is The Answer To All Your Inflation-Related Worries

about 2 years ago3 mins

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OPEC+ are sticking together through slick and thin: a group of the world’s biggest oil-producing countries and their allies announced on Tuesday that they’ll up oil production next month.

What does this mean?

Demand for oil crept up in 2021 as the global economy got back to its feet, and OPEC+’s members have been boosting their output to meet that need. In fact, they’ve finally restarted about two-thirds of the production they halted when Covid first darkened their doorsteps.

Now, though, OPEC+ has announced it’ll be increasing production by 400,000 barrels a day next month. This, at a time when Omicron could knock economic recoveries – and, by extension, oil demand – off balance. As for why, OPEC+ is feeling cocksure: it says the world’s more able to deal with the pandemic these days, and that countries will still need to replenish their depleted stockpiles even if the new variant does get in the way.

Oil price

Why should I care?

The bigger picture: Brits need a break.

More oil in the market should (all else equal) drive down the price of the slippery elixir and, by extension, the price of energy. And since energy costs bear a lot of the blame for high inflation, that might be no bad thing. The UK certainly wouldn’t mind: data out on Tuesday showed its manufacturers hiked prices at the fastest pace on record last month, which could force businesses to raise their prices and drive the country’s inflation rate even higher.

UK PMI

Zooming out: Airlines breathe a sigh of relief.

Airlines will like the sound of cheaper oil too, since it’ll bring their fuel bills down. And the good news has just kept coming for our airborne pals: the Omicron-plagued UK doesn’t look like it’ll impose stricter travel restrictions, and Germany’s relaxing its own rules. That could mean there’ll be less disruption than investors expected, which might be why British Airways-parent IAG and Lufthansa saw their stocks rise 12% and 5% respectively on Tuesday.

Keep reading for our next story...

Tesla Delivered More Cars Than Expected Last Quarter

Tesla image

The results are in: Tesla announced over the weekend that it delivered more cars than expected last quarter, as more and more buyers feel positive about the EV giant.

What does this mean?

Investors like to know how many cars Tesla delivers each quarter, both because it has a major influence on the company’s bottom line and because it gives an insight into broader demand for electric vehicles (EVs). And last quarter was a doozy: Tesla delivered a better-than-expected 309,000 cars – 28% more than the previous quarterly record and the company’s seventh consecutive quarterly gain.

Tesla deliveries

That’s partly down to China’s growing EV appetite, but it’s also got a lot to do with how well Tesla’s handled the chip shortage. The EV-maker, after all, has close relationships with its suppliers, as well as the flexibility to use different kinds of semiconductors in its vehicles. But Tesla’s not resting on its laurels: its two newest factories are set to boost production this year, as part of the company’s goal to deliver 50% more EVs every year.

Why should I care?

For markets: Tesla puts its rivals to shame.

Tesla’s stock soared almost 50% in 2021, making it one of the few US companies now worth $1 trillion. Then, after this update, investors sent its stock up by another 14%, adding $144 billion to its market value. And here’s the kicker: that gain alone is more than the individual values of nearly 90% of the companies in the key US stock market index.

Tesla stock
Source: The Wall Street Journal, FactSet

Zooming out: LG wants to cash in.

Tesla’s suppliers are riding the wave too: LG Energy Solution – one of the world’s biggest EV battery makers – is set to list on the stock market later this month, in a move that could value the company at $59 billion. The listing’s on track to be the biggest-ever in South Korea, with the company looking to raise up to $11 billion to meet growing demand.

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