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New geopolitical shocks upset the international order

A series of geopolitical shocks to the global economy – including the unexpected death of OPEC Secretary General Mohammed Barkindo, the resignation of Boris Johnson as British Prime Minister and the assassination of former Japanese Prime Minister Shinzo Abe , all this week – took place against the backdrop of the COVID pandemic and the war in Ukraine to disrupt international markets.

Growing political uncertainty and geopolitical risks are radically transforming the world, with the first half of this year marked by disruption and the rest of 2022 likely to be shaped by increased fragmentation and ongoing reorientation, according to S&P Global Ratings. And as geopolitical shifts unfold, S&P Global Market Intelligence expects the resulting global system to emerge as more fluid and flexible, but ultimately more divided and unstable.

Mr Barkindo’s sudden death on July 5, less than a month before the end of his term, came as many countries sought to curb oil revenues from Russia, with which the OPEC chief for six years had helped forge an alliance. After taking office in 2016, Barkindo oversaw the creation of the OPEC+ bloc which has faced unprecedented production pressures and market volatility due to the coronavirus crisis and Russia’s invasion of Ukraine. . Although the majority of its members continued to struggle to meet their production targets, the coalition increased crude oil production by 390,000 barrels per day in June, according to the latest Platts survey from S&P Global Commodity Insights. Today, as the Group of Seven countries reduce their dependence on Russian commodities, economies are now looking to limit cash flows from Russian oil, but market participants doubt the effectiveness of the potential price caps on purchases of Russian maritime crude.

“The West’s boycott of Russian barrels will be the ultimate test of the oil market,” said Paul Hickin, associate editorial director of European and African oil news and analysis at S&P Global Commodity Insights, in a recent analysis. “The more supply is cut off from the market, the more nervous consumers become and prices at the pump become politicized, so if Russian supply ends up collapsing, buyers could start to rush… The oil market is paying may already have the additional costs of epochal changes in oil flows, but the eventual price could be much higher.

Meanwhile, Mr Johnson resigned as leader of Britain’s Conservative Party and UK Prime Minister on July 7 as the country suffers from high inflation which could reach 10% by the end of the year , the growing risk of a recession that could materialize in the third or fourth quarter, and a looming energy security crisis with spiraling household energy bills.

“Johnson plans to remain caretaker prime minister until the fall, leading what will effectively be a ‘zombie’ government unable to pass vital legislation before winter. By the time a successor is selected, he will likely be too late to prevent the UK from heading into a winter energy crisis with household energy bills spiraling out of control,” said Andrew Critchlow, EMEA insights manager for S&P Global Commodity Insights, in an analysis yesterday.” Many members of the ruling Conservative Party [are] likely to vote against any of Johnson’s policies until a new leader is chosen and the opposition [is] wanting to force a vote of no confidence in the government and the general election that followed. Another scenario, of course, is that Johnson even manages to survive as prime minister if the political landscape changes. All of this leaves the UK’s energy security in limbo until winter, when the problem may be too late to solve.

The stunning assassination of former Japanese Prime Minister Shinzo Abe today shocked the country and the world. Mr Abe was shot while delivering a campaign speech at a midday rally in western Japan. As the country’s longest-serving Prime Minister, from 2012 to 2020, Mr Abe championed economic revitalization and worked to position Japan as a military power and was seen as an influence for some of the current policies of the Prime Minister Fumio Kishida. Since Mr. Abe left office, Japan has seen a recovery in domestic demand, and S&P Global Ratings now expects the Asia-Pacific country to enjoy favorable growth prospects despite geopolitical uncertainty. and rising prices, inflation and interest rates.

Today is Friday, July 8, 2022and here is today’s essential intelligence.

Written by Molly Mintz.

Economy

Global real estate stifled by rising interest rates, leads to economic slowdown

Detailed sectoral PMI data compiled by S&P Global, derived from information provided by panels of more than 30,000 companies in 45 countries, reveals falling demand in nine of the 26 detailed sectors covered by the surveys, with by far the sharpest contraction recorded for real estate in a context of tightening financial conditions and the rise in the cost of living.

—Read the article by S&P Global Market Intelligence

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Capital markets

US Stock Market Attributes June 2022

Enter the bear, exit the bull. We’ve definitely entered a bear market this month as higher inflation, higher interest rates and a slowing economy pushed the S&P 500 into official bear territory (down 20% from at its last closing high, in this case January 3, 2022 at 4,796.56). It reached a closing low of -23.55% (3,666.77, June 16) and then sawtooth as buyers hunted for bargains, albeit with slower trading than when sellers dominated the market.

—Read the article by S&P Dow Jones Indices

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International trade

‘Unraveling’ the global nuclear fuel supply chain after Russia’s invasion of Ukraine

In the world of nuclear energy, things rarely move quickly. Nuclear reactors often take 10 years or more to license and build, and then can operate for six decades or more. Nuclear fuel is only replaced in a reactor once a year at most, ie every 18 or 24 months. Uranium can take over a year to be mined, crushed, converted to a gaseous form, enriched into fissile uranium-235, and turned into fuel bundles that are lowered into reactors during refueling.

—Read the article by S&P Global Commodities Outlook

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ESG

United Kingdom: maintaining the upstream decarbonization momentum

The Conservative government in the UK is putting in place policy and regulatory frameworks to facilitate decarbonisation and meet emission reduction targets on the UK continental shelf. Despite recent upstream political volatility and uncertainty – reflected in the recently proposed 25% energy profit tax for oil and gas companies – the government has so far avoided major changes in its low-carbon policies. carbon, demonstrating a firm commitment to advancing the energy transition in the hydrocarbon sector.

—Read the article by S&P Global Commodities Outlook

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Energy and raw materials

Trade review: Asian iron ore prices at the crossroads of post-pandemic recovery in China in the third quarter

Asian iron ore prices have landed at a crossroads after one of their worst performances in the second quarter, but expectations of further stimulus in China and the reality of steel production cuts make the outlook of the third trimester blurred. The 62% Fe Iron Ore Index, or IODEX, fell 24.87% in the second quarter to 120.1/dmt CFR China on June 30 as the Chinese pandemic slows, followed by flooding in southern China and high temperatures in northern and eastern China, continuing to dampen steel demand.

—Read the article by S&P Global Commodities Outlook

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Technology and media

California fuel cell electric vehicle market needs to secure supply: CPR

California’s fuel cell electric vehicle economy is now poised to shift its focus from refueling infrastructure to clean hydrogen generation capacity to move the industry toward commercialization, the California Fuel Cell said. Partnership during a webinar on July 6. “When we started to focus on commercialization, it was really to synchronize the deployment of vehicles with the refueling infrastructure,” said Keith Malone of CPR. “Over the past two years, it has become absolutely clear that we now need to synchronize all of this with hydrogen production.”

—Read the article by S&P Global Commodities Outlook

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