Business

LONDON — World oil prices surged on Tuesday to new multi-year peaks, extending a bullish run one day after OPEC+ refrained from boosting output any further.

The news handed a boost to share prices of energy firms while European and US stock markets rebounded from losses a day earlier.

But Asia equities fell on concerns that soaring energy prices would further fuel inflation.

European benchmark London Brent North Sea oil jumped to a new three-year peak at $82.72 per barrel.

New York crude zoomed to a fresh seven-year pinnacle at $78.88.

The Organisation of the Petroleum Exporting Countries (OPEC) cartel and other major producers opted on Monday against increasing output by more than previously agreed — despite tightening supplies and rising demand.

The OPEC+ grouping decided to stick with their planned increase next month in oil production of 400,000 barrels.

 ‘Red rag’ 

“OPEC+ gave oil bulls a red rag to bid up futures contracts as it stuck to the planned increase,” said Markets.com analyst Neil Wilson.

“It’s not that demand is suddenly forecast to improve — it’s more that OPEC+ is keeping such a tight grip on supply.”

Runaway oil prices fuel higher inflation but boost the profits and revenues of energy giants.

In London, BP shares rose 0.6 per cent to 346.45 pence and Royal Dutch Shell’s "B" shares jumped 1.3 per cent to £16.93.

In Paris, France’s Total rallied 1.8 per cent to 42.83 euros and in New York shares in ExxonMobil climbed 1.1 per cent to $62.40.

“OPEC’s decision not to lift production volumes gave oil prices a lift into Tuesday, helping the FTSE 100 to solid gains as index heavyweights BP and Shell gushed higher,” said AJ Bell Investment Director Russ Mould.

Wall Street rebounded at the start of trading, shaking off losses on Monday over concerns about the impact of higher energy prices on economic growth and the ongoing standoff in Washington over raising the country’s borrowing limit, which has fuelled fears of a catastrophic US debt default.

“It remains to be seen whether the bulls will be able to hold their ground in the face of rising concerns over stagflation,” said ThinkMarkets analyst Fawad Razaqzada.

Elsewhere on Tuesday, most Asian markets fell following a Wall Street’s Monday slump as surging oil prices also put further upward pressure on inflation.

Investors were nervously monitoring developments in the crisis surrounding troubled property giant China Evergrande, which has raised warnings about contagion in the world’s number two economy and possibly beyond.

LONDON — The British military started delivering fuel to petrol stations on Monday, after a tanker driver shortage sparked two weeks of panic buying by motorists.

Troops in fatigues drove tankers from Buncefield Oil Depot in Hemel Hempstead 32 kilometres north of London after the military was put on stand-by last week.

Some 200 military personnel, half of them drivers, are taking part in Operation Escalin to alleviate fuel shortages in London and southeast England worst affected by the run on the pumps.

The military deployment has been requested for 31 days but will be subject to "discussions with industry", Prime Minister Boris Johnson's spokesman told reporters.

"What we've seen again over the weekend is a continual improving picture with fuel stocks increasing and more fuel being delivered," he added, cautioning that it was hard to say when the situation would return to normal.

The Petrol Retailers Association (PRA), which represents 65 per cent of Britain's 8,380 independent forecourts, welcomed the military's intervention.

But it warned that soldiers were still likely to have only a limited effect.

Refuelling 

At Thurrock in Essex, southeast England, members of the 3rd Logistic Support Regiment have been training with the haulage industry.

Uniformed soldiers stood with crossed arms as a civilian instructor in a high-visibility jacket and hard hat showed them how to refill giant tankers.

In Hamble, near the port city of Southampton on England's south coast, tankers were filled with petrol from a BP oil refinery and rolled out to deliver to forecourts.

One in five filling stations in London and southeast England remained out of fuel, PRA chairman Brian Madderson said.

But the crisis in the rest of the country is "virtually over", he added. 

Britain's roads have been clogged by long queues of motorists at petrol stations for more than two weeks.

Frustrations have boiled over into anger, and violence has even broken out between motorists desperate to fill up, including with jerrycans and even old water bottles.

Critics have blamed the chaos on Britain's exit from the European Union, coronavirus and a lack of government planning to replace thousands of foreign drivers who have left the country. 

Johnson said Britain's supply chain problems were a "function of the world economy, particularly the UK economy, coming back to life after COVID".

Poland, the United States and China are also experiencing driver shortages, he said.

No 'magic wand' 

The government has made a U-turn on its tougher post-Brexit immigration policy, relaxing curbs to give short-term visas to 5,000 foreign lorry drivers and 5,000 poultry workers to help plug staffing gaps.

But Johnson is resisting any further easing, saying he wants to see a "high-wage, high-skill economy" rather than mass immigration which would drive down salaries.

He called for the road haulage industry to invest in drivers' wages to make jobs in the sector more attractive.

Finance minister Rishi Sunak told the BBC the government is doing everything it can to address the fuel crisis and food shortages also attributed to driver shortfalls and vacancies in the meat processing sector.

"There are things that we can do and should do," he said but warned: "We can't wave a magic wand and make global supply chain challenges disappear overnight." 

Shortfalls in foreign workers have raised fears of a shortage of turkeys for Christmas.

Pig farmers protested outside the annual conference of Johnson's ruling Conservative Party in Manchester, northwest England, on Monday to highlight a lack of skilled butchers.

They said the lack of butchers and abattoir workers — many from overseas — could see up to 120,000 animals slaughtered and incinerated rather than going into the food chain.

"Do you really want to see this again?" one poster read, showing a photograph of burning pyres of cows slaughtered during the "mad cow" crisis of 2001.

LONDON — The sharp rise in wholesale gas prices is spilling over into the oil market, with looming demand for electricity generation and heating likely to further spur the sector this winter.

The spike in demand and consumption could lead the OPEC+ alliance of oil exporters, which meets in Vienna on Monday, to scale up their production plans.

"We could see an additional oil demand boost of nearly 1 million barrels per day [bpd] for December 2021, half of which we deem quite likely to materialise from incremental oil-for-power generation in Asia," said Bjornar Tonhaugen, an analyst Rystad Energy.

"The remaining half is more uncertain and hinges on a colder-than-normal start of winter in the Northern Hemisphere, which would drive oil for heating."

Switch to oil 

If gas prices remain prohibitively high, some countries in the Middle East and Asia may explore temporarily increasing use of their oil-fired power plants, according to Fitch analyst Dmitry Marinchenko.

Overall, oil-fired generation represents only a small portion of global electricity production, around three percent in 2019, according to the International Energy Agency (IEA).

That lags far behind 37 per cent for coal and 24 per cent for natural gas.

However, Tony Syme, macroeconomic expert at the University of Salford Business School, said that only "a small minority of power plants" in Britain and the US can switch between coal and gas for power generation.

"This number has been declining over the last three decades as the environmental impact of burning fossil fuels has become more important," he said.

The price of crude oil, which is subject to many other factors, has risen following the surge in gas prices, but not as sharply.

OPEC intervention? 

The additional demand for oil amid the gas price spike is difficult to quantify, but could be "up to 320,000 bpd... over the next six months in Asia and Europe", according to S&P Global Platts Analytics.

US bank Goldman Sachs estimated "the potential capacity for gas-to-oil substitution could be larger should gas rally further, of up to 1.35 million bpd in power and 0.6 million bpd in industry" in Asia and Europe.

However, this volume represents only two percent of global oil demand, which is expected to pass the 100 million barrels per day mark next year, according to the Organisation of Petroleum Exporting Countries, or OPEC.

"While manageable from an oil market perspective, such a one-standard deviation weather shock would nonetheless represent $5 per barrel upside to our $80 per barrel Brent forecast," Goldman Sachs said.

Members of the oil exporters' cartel and its allies, together known as OPEC+, must decide whether to ramp up oil production or risk further price inflation.

Olivier Daguin, an investor at OFI AM, told AFP the extent of the switch from gas to oil "will depend mainly on the difference in price between the two".

The gap has widened considerably in recent days.

'Irresistible' 

In Europe, gas prices continue to soar.

The Title Transfer Facility (TTF), a Europe-wide virtual trading point for natural gas in The Netherlands, reached the 100 euros ($116, £86) per megawatt-hour (MWh) mark for the first time in its history on Friday.

This is five times more than at the start of the year, while oil prices have doubled over the same period.

European gas is now roughly twice as expensive as Brent North Sea crude oil — which cost $80.75 per barrel on Tuesday, its highest price in three years — using notoriously difficult conversion methods

"Asia spot natural gas prices are now trading at near the equivalent of $180 per barrel of Brent crude, meaning that oil's appeal as a gas substitute for power generation is almost irresistible," said Jeffrey Halley, senior market analyst at OANDA.

By Esteban Rojas
Agence France-Presse

CARACAS — The official exchange rate of Venezuela's bolivar went from 4.18 million to the US dollar overnight to just 4.18 as the country slashed six zeroes off its inflation-battered currency on Friday to simplify transactions.

It is the third banknote reform in 13 years, with a staggering 14 zeroes shed since 2008 — giving Venezuela the "dubious" distinction of becoming the South American country to have lopped the most zeroes off its currency.

"Everything expressed in national currency shall be divided by a million," the central bank announced.

Housekeeper Josefina Galindo said that she "went shopping without problems this morning. The new prices were displayed above the old ones. And there was always the price in dollars". 

"The price [in dollars] has not changed," added the 52-year-old, who was shopping in the upscale Caracas district of Chacao but said she had still paid in old prices using the old bolivars when she took the bus from her working-class neighborhood of Coche.

The electronic platform of the public Banco de Venezuela, which has 14 million clients, was also down by mid-afternoon, with those trying to make internet transactions encountering a message apologising for the inconvenience.

Venezuela, the once-rich oil producer, is battling its eighth year of recession and hyperinflation that reached nearly 3,000 per cent in 2020 and more than 9,500 per cent the year before, according to central bank figures.

Economic consultancy Ecoanalitica expects the 2021 figure to come in at around 1,600.

In May, the government tripled the minimum monthly wage but the new amount was not enough even to buy a kilogramme of meat.

Three in four Venezuelans today live in extreme poverty, according to a recent study, with the economic crisis made worse by US sanctions and the coronavirus pandemic.

Millions have left the country in recent years to try their luck elsewhere.

'Lack of capacity' 

With the bolivar losing nearly all its value, seven 1 million bolivar notes — very hard to come by — were needed to pay for one loaf of bread before Friday's currency update.

The government issued new banknotes in denominations of five, 10, 20, 50 and 100 bolivars, as well as a one-bolivar coin, but has said that it wants the economy to become entirely digital.

Analysts read this as a way to avoid printing money that will just continue devaluing, eventually requiring another readjustment.

The biggest note in the retiring bolivar family, with a face value of a million, is worth barely $0.25 — not enough to buy a piece of candy. It will remain in circulation in parallel with the new notes for a few months.

"It [the bolivar] is not going to be worth more, it's not going to be worth less, it's just a monetary scale that we're applying by removing six zeros to facilitate transactions," Vice President Delcy Rodriguez said this week.

Salaries of worthless millions 

According to Luis Arturo Barcenas of Ecoanalitica, the readjustment reflected a "lack of capacity by the economic actors in Venezuela to control hyperinflation", a phenomenon that "has greatly impoverished the population".

Workers found themselves receiving salaries paid in millions of bolivars that are effectively worth nothing.

In Venezuela, the minimum public service wage is the equivalent of $2.5 per month and the average salary is about $50, while a basket of basic groceries for a family of five costs about $220.

With so many bolivars required for a simple purchase, and with notes in short supply, 70 per cent of transactions in the country are conducted in US dollars, according to private sector estimates.

Prices on many shop shelves are displayed in the US currency, to keep things simpler.

In Venezuela's border regions, it is common to also pay for goods in Colombian pesos or Brazilian reais, and even grams of gold.

In the 24 hours leading up to Friday's recalibration, the dollar soared on the black market though the central bank kept the official exchange rate stable.

By morning, some shops had already adopted the new bolivar and repriced their goods.

Others, fearful of operational problems, limited bolivar-based transactions. 

"I made purchases this morning without problems," Josefina Galindo, a domestic worker, told AFP. She used her debit card — the preferred method of payment when dealing in bolivars.

Jose Grasso Vecchio, president of Venezuela's largest private bank, Banesco, said the new, lower denominations would make the work of banks "easier, faster".

By Olivier Devos 
Agence France-Presse

LONDON - Britain's furlough scheme that has kept millions of private-sector workers in jobs during the coronavirus pandemic ends on Thursday, with predictions of a spike in unemployment and a slump in living standards. 

Prime Minister Boris Johnson's Conservative government has spent almost £70 billion ($96 billion, 82 billion euros) on paying the bulk of wages for staff stuck at home, helping to keep the official unemployment rate relatively low.

"Despite this success, significant challenges remain in the labour market," the Institute for Fiscal Studies (IFS) said in a report on Thursday. 

"These include additional job losses when the furlough scheme ends, low re-employment rates for those made redundant, and high levels of vacancies in some sectors."

Some 12 million people have been on furlough, with some one million workers still supported up until its end.

Of those remaining, more than 25 per cent work in construction and manufacturing. 

 'Low-living standards' 

"These people are susceptible to persistently low living standards should they be made unemployed," the IFS said, citing the fact that many were the only adult wage-earner in their household.

Also among those hit hardest by the end of the scheme will be Londoners and older workers, the IFS added.

While workers in the British capital make up 14 per cent of all UK employees, they accounted for almost 20 per cent of those still accessing the scheme in July, it noted.

The emergency jobs package "initially helped younger workers weather the pandemic... (but) it is older workers who are now more likely to be furloughed", according to Daniel Tomlinson, senior economist at the Resolution Foundation think-tank that lobbies for better living standards.

Compounding the situation will be the government's plan to cut unemployment benefit by £20 per week from next month, Tomlinson added in a separate assessment of the 18-month furlough scheme.

Amid high UK inflation caused in part by surging energy prices, the "cut to Universal Credit... will return the real value of unemployment benefit to its lowest level since the early 1990s", he argued.

Britain's main opposition Labour party has led the charge against the cut to universal credit, calling it "morally and economically wrong" at a time of hardship for many. 

Staff shortages 

Rishi Sunak, who unveiled the furlough scheme just weeks after being appointed finance minister, said he was "immensely proud" of the initiative, workers and businesses.

"With the (economic) recovery well under way, and more than one million job vacancies, now is the right time for the scheme to draw to a close," he said.

Capital Economics analyst Paul Dales said the end of furlough could help to fill some of the many job vacancies in Britain.

"The end of the furlough scheme may help ease some of the UK's current labour shortages," he said.

"This probably won't happen immediately, but some of those people who have been kept on the furlough and who will lose their jobs will be free to look for and start work elsewhere."

Britain has seen more than 136,000 people die from Covid-19 during the pandemic but some 82 per cent of people aged 16 and over have now been jabbed with two doses of vaccine.

That has allowed shuttered businesses to reopen after months of lockdown and social distancing restrictions, even if case numbers remain stubbornly high.

Staff shortages, though, have hit several sectors due to a combined effect of the global health crisis and Brexit, which saw many foreign workers leave.

Britain has record job vacancies at more than one million, while the unemployment rate stands at 4.6 per cent, down from a pandemic-peak of 5.2 per cent at the end of last year.

A significant shortage of lorry drivers has left empty supermarket shelves and fuel supply issues, which has seen long queues of motorists at filling stations for a week.

British troops have been drafted in to help delivery fuel to forecourts because of a lack of tanker drivers, and to ease panic-buying.

The government maintains the pandemic is to blame but critics accuse ministers of a lack of foresight in replacing thousands of foreign drivers who left the country.

Last weekend the government reversed post-Brexit entry rules to offer foreign truckers a three-month visa waiver to help improve supply chain issues.

But industry leaders have argued that this alone will not solve the problem.

LONDON — US and European stock markets rebounded on Wednesday, a day after a selloff over a slew of concerns including high energy prices, rising bond yields and the threat of a US debt crisis.

Investors were back in a buying mood as oil prices dipped back under $80 while pressure on US and European borrowing costs eased on Wednesday.

Markets have also fretted over a US Congress deadlock over raising the debt ceiling, which could cause the world's top economy to go into default for the first time.

Wall Street opened higher on Wednesday following a rout a day earlier.

London's FTSE 100, the DAX in Frankfurt and the Paris CAC 40 were all up in afternoon trading, though they eased off earlier gains.

Tech stocks, which tend to suffer when bond yields rise, "are finding some reprieve from the stabilisation in rates," said Charles Schwab analysts in a note.

"Volatility is likely to persist due to growing expectations of tightening global monetary policy and the continued debt ceiling stalemate in Washington, which has accompanied the rise in Treasury yields," they said.

London shares were buoyed partly by a weak British pound, which hit a January-low at $1.35 on fears of stagflation, or a vicious mix of high inflation and low economic growth.

The dollar also strengthened against the euro and the yen.

Oil prices dipped one day after Brent had surged close to a three-year peak above $80 on tight global supplies.

"European stock prices have become cheaper, given the sell off we have seen during the past few days, and this has brought some bargain hunters into the markets," AvaTrade analyst Naeem Aslam said.

Europe's bourses had stumbled earlier this week on high oil prices, political impasse in Germany and US debt concerns.

Wednesday's rebound was also driven by hopes of a deal to avert a potentially catastrophic US debt default, according to Swissquote analyst Ipek Ozkardeskaya.

"The rebound we see is a correction of the latest selloff, and is certainly fuelled by the expectation (of) an eventual deal on the US debt ceiling," she said.

Tokyo ends 'strong run' 

However, Asian markets mostly fell Wednesday following the rout on Wall Street as investors fret over surging inflation, the end of the Federal Reserve's financial support and the US debt standoff.

Ongoing worries about the potential collapse of Chinese property giant Evergrande, an energy crunch in China and the ever-present spectre of the Delta coronavirus variant also soured the mood.

Tokyo's main stocks index tanked more than two percent, having enjoyed a strong run in recent weeks on hopes for more stimulus from a new Japanese prime minister.

The ruling party elected former foreign minister Fumio Kishida its new leader Wednesday, putting him on course to take the mantle of Yoshihide Suga.

However, Hong Kong, Singapore, Manila and Jakarta rose.

Oil prices sagged after data pointed to a drop in US stockpiles, though analysts expect the commodity to maintain its strength for the foreseeable future.

LONDON — Stock markets tumbled on Tuesday as traders tracked a strengthening dollar, high oil prices, political impasse in Germany and US debt concerns.

Brent crude oil briefly jumped above $80 per barrel for the first time in almost three years on expectations for surging demand and concerns about tight supplies as the world slowly emerges from the pandemic crisis.

Wall Street drifted lower, with tech shares hit hard as Treasury Secretary Janet Yellen urged Congress to quickly raise the debt ceiling to keep the US government operating.

"A combination of fears that China is cooling, and rising government yields have prompted traders to sell stocks," said David Madden, market analyst at Equiti Capital, as the Dow Jones index lost two per cent mid-session and the tech-heavy Nasdaq shed 2.5 per cent.

"The prospect of higher energy prices, fuelling inflation, and rises in bond yields that appear to be pre-empting tighter monetary policy by central banks, have prompted widespread selling across global stock markets," said Chris Beauchamp, analyst at IG. 

There were "few safe havens", he said.

Analysts attributed disproportionate declines in tech stocks to rising treasury yields, as higher interest rates generally hit tech companies because of their greater reliance on debt to fund growth.

"Technology stocks came under heavy selling pressure early Tuesday as investors looked at a combination of uncertainty on Capitol Hill, coupled with all but certainty that borrowing costs will increase," said JJ Kinahan, chief market strategist at TD Ameritrade.

Republicans in Washington have blocked a Democrat move to raise the US borrowing limit, meaning the government will likely run out of cash at the end of the week.

The crisis comes as Democrats fight to pass US President Joe Biden's multitrillion-dollar infrastructure and social spending bills, with party infighting fuelling concerns that the president's agenda could end up stillborn.

Germany, Europe's biggest economy, was in focus as it headed for weeks, if not months, of protracted coalition haggling following weekend elections. 

Both the German DAX and French CAC indexes were down by about two per cent, while London was off 0.5 per cent.

Chancellor Angela Merkel's conservatives have insisted on trying to form a government even after losing to the Social Democrats in a tight race.

In Britain, army tanker drivers were put on standby to deliver petrol as the country battles a fuel crisis.

The British pound dipped more than one per cent against the dollar to $1.3531, the lowest level since January.