Saudi Arabia Cuts Oil Production to Boost Prices

Riyadh goes it alone on oil cuts

Crude oil and natural gas rebounded this morning after Saudi Arabia, the world’s biggest exporter, announced a million-barrel-per-day production cut at this weekend’s OPEC Plus summit in an effort to boost sagging energy prices.

But the negotiations that led to the move — and a more complicated adjustment of the cartel’s production quotas — hint at the tensions between many of the world’s top crude-producing countries, with global oil prices in the balance.

Saudi Arabia is largely going it alone. The United Arab Emirates saw its production quota grow, after years of lobbying for such a move, while other countries had their targets reduced. The complex arrangement followed a flurry of negotiations throughout one of the tensest OPEC meetings in recent memory, with African producers unhappy with the U.A.E.’s efforts to increase its production quotas.

The arrangement that emerged on Sunday was a Riyadh-led compromise, which Prince Abdulaziz bin Salman, the Saudi oil minister, called “a Saudi lollipop” that is meant to sweeten prices for oil traders. Though the cut is meant only for July, it could be extended.

Hovering over the talks was the steep drop in oil prices: Brent crude, the global benchmark, is around $77 a barrel, after trading around $120 a year ago.

Saudi Arabia is in “whatever it takes mode,” Helima Croft, head of global commodity strategy at RBC Global Markets, wrote in an investor note this morning. That the country is “willing to shoulder it alone adds to the credibility of the cut and signals real barrels coming off the market.”

Analysts calculate that Brent needs to stay above $80 in order for Saudi Arabia to keep its budget balanced and to finance the ambitious infrastructure program backed by the country’s crown prince, Mohammed bin Salman.

Meanwhile, Saudi officials have been fixated on squeezing short sellers betting against oil prices, with Abdulaziz warning such investors last month to “watch out.”

The long-term impact of the move isn’t clear. Goldman Sachs analysts say it could boost the price of Brent by $1 to $6 per barrel. But such a rise is unlikely to hurt consumers or turn gasoline costs into a potent political threat in the U.S., where prices at the pump are down 25 percent over the past year.

At the same time, Russia — despite having its quotas cut — is widely thought to be pumping huge amounts of cheap crude to bolster its war-battered economy. And the prospect of slowing global economic growth, particularly in China, is keeping a lid on oil prices.

HERE’S WHAT’S HAPPENING

The market braces for a glut of Treasuries. Now that President Biden has signed the debt ceiling deal into law, the Treasury is expected to begin selling more than $1 trillion in new securities. Some warn the auctions could jack up short-term borrowing costs and drain liquidity from parts of the market, with Bank of America predicting that the effect would be equivalent to a 0.25-percent interest rate increase by the Fed.

Apple is poised to join the metaverse. The iPhone maker is expected to unveil its virtual reality headset, a set of high-tech goggles that blend the virtual and physical worlds, at its developers’ conference on Monday. The company could also reportedly reveal an app designed to help users better monitor their mental and physical health as part of a push into the sector.

Hollywood directors and studios agree to a tentative labor deal. The Directors Guild of America said it had made gains in negotiating an agreement on wages, streaming residuals and protecting workers against the rise of artificial intelligence. The pact averts the possibility of three major unions striking simultaneously.

Big banks will reportedly be required to boost capital. Regulators are close to adopting new rules that could raise the limit by about 20 percent in a bid to bolster the banking system after a number of midsize lenders failed this year, The Wall Street Journal reported. The biggest increases are expected to focus on large lenders with substantial trading businesses.

Allstate quits California because of worsening climate and building costs. The nation’s fourth biggest insurer has stopped offering new home, condominium and commercial policies in the state because of the risk of wildfires and the high cost of repairing homes. The decision follows a similar move by State Farm last week.

Washington and business send mixed messages on China

Heated rhetoric from U.S. and Chinese officials over the weekend was a marked contrast from the cordiality that greeted JPMorgan Chase’s Jamie Dimon — and effusiveness, in the case of Elon Musk — at business events the two held in China during the week.

The dissonance illustrates the challenge of companies trying to work with, and in, the world’s second-largest economy as tensions rise between Washington and Beijing.

U.S. and Chinese military leaders talked tough:

• Defense Secretary Lloyd Austin vowed that American warships would continue patrols near China, even as he called for more dialogue.

• China’s defense minister, Li Shangfu, declined to meet with Austin at a security conference in Singapore they both attended. And senior officials in the People’s Liberation Army criticized public U.S. support for Taiwan and what they called American surveillance of the Chinese coast.

There’s an apparent divide between Washington and corporate America’s approaches. Both Mr. Dimon and Mr. Musk, who met with senior government officials during their trips, played down the idea of decoupling the U.S. and Chinese economies. And their companies continue to do big business there: Tesla counts China as one of its biggest markets, while JPMorgan is deepening its ties to the country.

The era of corporate America influencing U.S. policy on China may be over. In decades past, Wall Street leaders like John Thornton and Hank Paulson of Goldman Sachs and Steve Schwarzman of Blackstone were reportedly able to temper efforts by Washington to take a tough line on China.

The Trump and Biden administrations have appeared to favor harder-hitting approaches, including sanctions. China has responded in kind, imposing its own trade restrictions and carrying out raids on consulting firms’ offices that have startled international business.

Washington has sought to lower the temperature in recent weeks. President Biden sent the C.I.A. director, Bill Burns, on a secret trip to China for talks. And, Commerce Secretary Gina Raimondo held meetings with her Chinese counterparts in Washington. But corporate chiefs seem wary of prospects for any easing of tension in the near term: Mr. Dimon conceded that the situation is “far more complex now” and foresaw less trade between the two countries.

Jeff Zucker’s next act

As CNN continues to be roiled by internal tension — including some stoked by a lengthy new profile of its chief, Chris Licht — the network’s former leader, Jeff Zucker, is plotting his next moves, The Times’s Ben Mullin reports. (While he keeps an eye on his former stomping grounds, of course.)

Mr. Zucker is now a media investor with $1 billion to spend. He leads RedBird IMI, which is backed by the private equity firm RedBird Capital Partners and International Media Investments, a fund with ties to Abu Dhabi’s government.

Mr. Zucker is now one of at least three prospective suitors for a majority stake in Air Mail, the media company founded by the former Vanity Fair editor Graydon Carter, and has had discussions to invest in the online publishers Puck and Semafor. He has also held talks in recent months with Jeff Bezos, who owns The Washington Post.

He has told confidants that he’s interested in building what is essentially a digital equivalent to Condé Nast, with a stable of publications catering to different audiences.

What about CNN? In Mr. Zucker’s nine years as the network’s president, he reshaped the outlet and claimed credit for its successes. Since his ouster last year, he has regularly and harshly criticized Mr. Licht, and he has told associates that he would be interested in buying CNN should it come up for sale. (Mullins also reports that while CNN’s president, Mr. Zucker held preliminary talks with Laurene Powell Jobs’s Emerson Collective about a potential spinout of the network from its then-parent, AT&T.)

But Mr. Zucker says he’s not interested in acquiring CNN now, given what he says is damage from cost-cutting imposed by Warner Bros. Discovery, the network’s current owner. It’s also unclear whether Warner Bros. Discovery would even want to sell: While divesting CNN could help clear the path for the conglomerate to sell itself to a buyer like Comcast, the regulatory outlook for big-ticket M.&A. is murky at best. And selling CNN in the near term — DealBook hears the price tag could be $8 billion — might risk a rock-bottom price.

$88 million

— The amount Twitter generated in advertising revenue over a five-week stretch beginning April 1, a decline of 59 percent over the same period last year, according to an internal presentation viewed by The Times. Reviving the company’s ad business will be one of the big challenges for Linda Yaccarino, who starts on Monday as Twitter’s C.E.O.

The week ahead

It will be a relatively sedate week for data and earnings. Plus, Fed officials are in their quiet period ahead of next week’s rate decision. Here’s what to watch:

Monday: America’s manufacturing sector will be in focus with the release of factory and durable goods orders, scheduled for 10 a.m. Eastern.

Wednesday: Mike Pence, the former vice president, is expected to formally join the race to become the Republican nominee for president. The O.E.C.D. releases its latest economic outlook for member countries.

Thursday: Campbell Soup and GameStop report results.

Friday: China is scheduled to deliver key inflation data with the release of the consumer and producer price index reports for May.

THE SPEED READ

Deals

Policy

• Gov. Ron DeSantis of Florida relied on big donors in the first fund-raising effort of his presidential campaign. (NYT)

• Military jets were scrambled above Washington after a private plane entered restricted airspace. (NYT)

• Jack Dorsey, the co-founder of Twitter, endorsed Robert Kennedy Jr., a fellow Bitcoin advocate also known for anti-vaccine views, for the Democratic presidential nomination. (New York Post)

Best of the rest

• Hundreds of customers of Grail, a maker of cancer-detection tests, were mistakenly told that they might have the disease. (NYT)

• Chuck Todd is stepping down as moderator of NBC’s “Meet the Press,” and will be succeeded by Kristen Welker. (NYT)

• Edward Enninful, the high-profile editor of British Vogue, will step down from the Condé Nast title amid speculation about clashes with Anna Wintour. (Sunday Times)

• Not even the Hamptons, the traditional summer getaway for New York’s wealthy, are immune from a more challenging economic environment. (FT)

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