Daily Brief: There’s More Oil On The Way, Just Not As Much You Might Have Liked

Daily Brief: There’s More Oil On The Way, Just Not As Much You Might Have Liked

over 2 years ago3 mins

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A bunch of the world’s biggest oil-producing nations met on Thursday as demand for the black stuff surges – but as Finimize goes to press, reports suggest they’re keeping a stopper on supply.

What does this mean?

2021 is turning into a vintage year for crude oil producers. As lockdowns ease and economies expand, they’ve been able to steadily increase output without undermining prices. But while pressure’s been growing on producers to turn on the taps, OPEC+ (the group of major oil-exporting nations and their allies that includes Saudi Arabia and Russia) reportedly plans to pump fewer than 500,000 extra barrels per day between now and Christmas. Investors in companies that buy a lot of oil were understandably disappointed, but investors in oil itself will be raising a glass: prices rose above $75 a barrel on Thursday for the first time since 2018.

Oil’s rebound

Why should I care?

For you personally: Give me liberty – or give me gas.

You may get a shock when you fill up the car this Fourth of July weekend: a gallon of fuel in the US is now 20% more expensive than before the pandemic. With investment bank Citigroup forecasting global oil demand will exceed supply by three million barrels per day this quarter – and hit a record high in August – don’t expect gas to get much cheaper anytime soon. Just as well the future of transportation is electric…

OECD stock levels

The bigger picture: Happy Interdependence Day.

High oil prices should lead to recent tensions between OPEC+ member states simmering down. When oil’s closer to $50 a barrel, nations like Russia that don’t need high prices to fund government spending remain keen to increase production – leading to run-ins with the Saudis. But if prices stick above $75, even the most heavily oil-dependent economy can balance its budgets. It may soon be in everyone’s interests to up pumping a little bit more.

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Private Equity Firms Have Had A Busy Year So Far

PE image

Private equity firms have had their busiest-ever start to a year, inking more than $500 billion in deals around the world across the first half of 2021. And you’re invited to join the fun…

What does this mean?

Investors park their cash with private equity firms in the expectation that they’ll go out and either buy large stakes in private companies or take over public ones and delist them from the stock market. The hope is that after a few years of tinkering with a company’s operations and financials, they’ll be able to sell the business on for a profit.

Ultra-low interest rates have made private equity’s promise of solid returns more popular than ever – helping firms amass a mountain of investor cash. And since private equity deals almost always involve huge chunks of debt, low rates have also created the perfect environment for them to get busy buying.

Private equity deal volumes

Why should I care?

For markets: Public service announcement.

Private equity firms are rushing to buy up companies – but several are simultaneously looking to list themselves on stock markets. California’s TPG Capital and Britain’s Bridgepoint Advisers are both considering selling stakes in initial public offerings (IPOs), apparently drawn by the historically high valuations investors are currently willing to pay for stocks. But that could be a warning sign. Private equity giant Blackstone listed in June 2007 – right before the crash that eventually saw the US stock market fall 60%.

For you personally: Pick up a private number?

While investing directly in private equity funds remains restricted to the very wealthy, shares of dozens of firms are now publicly available. Some have proved hot tickets: Sweden’s EQT has risen 270% since listing in 2019. But an exchange-traded fund (ETF) tracking the performance of 50-odd firms worldwide hasn’t proved so dazzling. It’s fallen 39% since its inception in October 2006 – while global stock markets have more than doubled.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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