Wall Street Breakfast June 1: OPEC+ Policy
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The latest opec plus gathering takes place via video conference today as pandemic travel continues to prevent the usual meeting spot in vienna. The group is now holding monthly meetings. Giving it more immediate power to make decisions on current oil market conditions as well as room to maneuver. It's also a signal that opec plus producers are wary about how things might play out in the months as they try to balance expectations of a recovery in demand against a possible supply increased from iran. The world's fourth largest crude producer backdrop opec plus decided in april to return two point one million barrels per day to the market from may july anticipating rising global demand despite surging kobe cases in india. Since the announcement crude prices have risen from sixty dollars toward the seventy dollars level and are up more than thirty percent in twenty twenty one alone. Oil has still been trading in the tight sixty to seventy dollar range for the past three months as talks. Continue on the future of the. Jcp away a deal. Revival that would lead to higher iranian output wti crude futures climbed another three point one percent overnight to sixty eight dollars and thirty four cents per barrel ahead of the opec. Meeting russia is expected to seek to accelerate the pace of the ramp up in output but the saudis may call for keeping the more conservative increase given the high. Kobe case counts in india and japan as well as the looming return of iranian exports in the back half of the year said rbc capital markets outlining that opec plus is set to stick with its cost. Production returned schedule. The group is also unlikely to decide on output policy beyond july since the outlook for iran is not yet clear and opec has another reading plan for june twenty-fourth yesterday opec's joint technical committee revised global supply down by two hundred thousand barrels per day and now expects a deficit of one point four million bpd in twenty twenty one from one point. Two million bpd previously meaning inventories faster than expected thought. Bubble western oil majors are under pressure to cut carbon emissions faster especially after the courtroom and boardroom defeats he last week at exxon chevron and shell new energy policies proposed by the biden administration are also discouraging the production of fossil fuels meaning more business for opec plus and the lights of saudi aramco. Add knock and rosina. It looks like the west will have to rely more on what it calls. Hostile regimes for its supply joked a high level executive from russia's gazprom. Well it will take time to boost america's renewable power grid which could lead to higher oil prices in the interim some say the. Us may have the last laugh. If fossil fuel dependent economies fail to shift away from oil and gas in the future that could be susceptible to economic instability and stagnation and in the decades to come however many wealthy countries still have outsourced a large chunk of their carbon pollution overseas for quite some time and that could continue in a future world price. Differentials play out in the energy mix in other news. Traders are returning for memorial day with renewed optimism as stock index futures point higher following the holiday weekend dow futures are up point five percent while contracts linked to the s. and p. Five hundred and nasdaq ahead by point. Four percent more records while the benchmark and p five hundred is starting june. After notching fourth consecutive monthly gain the inflation debate continues to remain in the headlines quote overall given the market's reaction to friday's release investor concerns about inflation may have been exaggerated or perhaps already priced in said chris hussy a managing director at goldman. Sachs consensus may be building that the inflation we are seeing today is good inflation the kind of rise in prices that accompanies accelerating growth not a monetary policy mistake. Many are still concerned about the risks of a market crash sort interest in spy recently. Hit its highest. Since december and the skew index rose to the highest level since august eighteen hedge funds have also slashed their holdings and twenty of the twenty three commodities backed in the bloomberg commodity index by the most since november while the extreme volatility and crypto and tech stocks has sparked worries over broader selloff up next may nonfarm payrolls report set to be released. Friday is likely to be the catalyst for the markets. Depending on the figure it could support stocks or changed perceptions of the economy's strength or coming stimulus measures following the employment number. We'll be watching the fed's latest comments about inflation at nfl. Whimsy meeting scheduled for mid june president biden unveiled his first budget before the weekend that detailed six trillion in spending for a fly twenty twenty two including two infrastructure proposals an increase in military resources as well as domestic programs like scientific research or new energy in total the plan would raise federal spending to eight point two trillion per year by twenty thirty one meaning annual deficits of over one point three trillion and one point eight trillion in twenty twenty two while the plan is only a blueprint for the administration's fiscal priorities and is subject to congressional debate. Other policy promises that were included in the budget may add to the weighty costs student loan forgiveness lowering the medicare eight to sixty creating a public health care option and reducing prescription drug prices. Bigger picture long gone are the days of austerity conversations. The tea party movement or the balanced budget talk. That made some political brownie points in fact the us has already returned to the record. Debt to gdp ratio last seat in the aftermath of world. War two one of the biggest fears among stock market investors if the spending will lead to a sustained rise in inflation which is hard to get rid of and would require the attention and possible. Intervention of the federal reserve in the economic textbooks of yesteryear big deficits were said to lead to price pressures at a possible overheating of the economy. However growing number of economists and the white house feel that the current circumstances call for different economic plan citing historically low borrowing costs and the need to get millions of americans back to work and guaranteeing that the nation remains competitive with china. The fed has also signalled it. Wouldn worries rates before twenty twenty four while investors are still eager to scoop up. Us government debt and treasury secretary. Janet yellen has argued that any risk of inflation and overheating could be controlled quote. The president's budget improves the long term fiscal outlook because his policies are more than paid for over the long run acting budget director. Chalan too young told reporters on friday failing to make these investments at a time of such low interest cost would be a historic opportunity. That would leave. Future generations worse off. How much is too much. There's no magic number or level for winnowed government's debt begins to hurt its economy as long as interest rates. Stay low in the. Us can borrow cheaply. the country can handle a much heavier debt load than was once thought possible however the federal debt cannot grow faster than the economy indefinitely once confidence a roads and treasuries the dollar reserve currency status is threatened borrowing could get more expensive and servicing. That debt would cancel any budgetary forecast that were made in the previous lending environment. The same scenario could happen if the us would also be forced to raise rates as inflation heats up or by borrowing beyond getting crowded out though we could still be a long way from that point despite all the doom and gloom the same scenario could happen if the us would be also forced to raise rates as inflation heats up or by private borrowing getting crowded out the we could still be a long way from that point despite all the doom and gloom employers can require their workers to get vaccinated against covid nineteen according to the latest update to the guidance issued by the us equal employment opportunity commission the mandatory vaccination requirement applies to all employees physically entering the workplace with only a few exceptions permitted under law. Such as a medical reasons. The workforce is unionized or taking it against sincerely held. Religious belief employers must also comply with the reasonable accommodation provision of the ada and title eight of the civil rights act of nineteen sixty four and other considerations. Better be used. Carrots companies can also offer incentives to workers vaccinated as long as the incentives are not coercive a move likely to open a floodgate of lawsuits. According to some experts. What is coercive is unclear because just as with everything else. One person's view of what is a coercive. Incentive is not the same as another person's said helen rela unemployment attorney at a new york-based law form the revised. Eeoc guidance was issued as the us cobra. Nineteen immunization drive reached a major milestone with more than fifty percent of the population. Getting at least one dose. Meanwhile the world health organization is renaming corona virus variants after the letters of the greek alphabet. Instead of the place of their first discovery the four types of providers known by the public as the uk south africa brazil and india variants have now been assigned the greek letters alpha beta gamma and delta other variants of interest will continue down the alphabet quote. No country should be stigmatized for detecting and reporting variants. Who appeared meteorologist. Maria van kerckhove declared to avoid this to simplify public communications who encourages national authorities media outlets and others to adopt these new labels married couples. China are now allowed to have up to three children. According to the communist party's politburo as the nation looks to mitigate risks to its long term economic prospects. The policy change will come with supportive measures. Which will be conducive to improving our country's population structure fulfilling the country strategy of actively coping with an ageing population and maintaining the advantage endowment of human resources for the state. Run news agency. The government is also set to gradually raise the national retirement age but did not provide further details bigger picture. They published several weeks. Ago showed china's population growth in spending at its slowest pace since the nineteen fifties with the numbers on mainland china increasing. Five point thirty eight percent to one point forty one billion. The working age population people aged fifteen to fifty nine was on the decline as well after hitting a twenty eleven peak of nine hundred twenty five million. While the fertility rate is only one point three children per woman during two thousand twenty missing target of one point eight that beijing had set in two thousand sixteen after replacing. Its one child policy. China's statistics agency took an unusual step by announcing that the population did grow in two thousand twenty but gave no total prompting some speculate. It was only an effort to pacify investors and corporations had issues. What are the world's second largest economy may already be an irreversible. Population declined before accumulating the household wealth of g seven nations while china has eased birth limits. Couples have been put off by the high cost of living especially in cities cramped housing many share apartments with their parents and career choices. Job discrimination faced by mothers childcare is also expensive. Maternity leave is short and most single mothers are excluded for medical insurance or social welfare. Payments investment angle consumer companies seem particularly gaining from less restrictive family planning policies. include hasbro. mattel. Danone nestle procter and gamble. Kimberly clark and reckitt benckiser asian communities such as kid focused good baby international japanese baby bottle producer pigeon core and diaper maker unit charm may also benefit disney is getting some further attention while carmakers that sell to the chinese market may get a boost. Saic volkswagen lyod meal x. Paying going jew automobile. Byu company great wall motor and brilliance china automotive as of six twenty pm today. Us futures golden crew all set to open in the green with bitcoin slightly down on today's economic calendar. The manufacturing index is out at ten. Am eastern time. If you enjoyed today's podcast. Please be sure to rate interview. It below your feedback is deeply appreciated. That concludes today's wall street breakfast. Thank you for listening for the best. Investment analysis and news on the web dot com. Subscribe to this. Podcast on apple podcasts. Google podcasts spotify. Stitcher you can sign up for our other podcasts. 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