- Put the ‘China Model’ to the Test
- Threaten to Chip Away at Dollar Dominance
- Cucumber Crisis
- Soaring Cost of Diesel
- Biden Team Weighs a Massive Release of Oil to Combat Inflation
- Rising Wages Could Complicate America’s Inflation Cool-Down
- Can Home Prices and Interest Rates Soar at the Same Time?
- Profits Soar
- SEC Proposes New Disclosure Requirements for SPACs
- It Isn’t Just Tom Brady
- Ben McKenzie Would Like a Word With the Crypto Bros
- CDC Drops Its Covid-19 Risk Advisory for Cruise Ship Travel
- Apple and Meta Gave User Data to Hackers
The Biden administration is weighing a plan to release around 180M barrels of oil from the Strategic Petroleum Reserve, in what be the largest release from stockpile since it was created in 1975. WTI crude futures (CL1:COM) tumbled 6.7% to $100.53 on the news, while Brent futures (CO1:COM) fell 7.3% to $110.23. The coming SPR decision would likely see 1M barrels released daily over the course of six months, but analysts are still debating the benefits and whether it would put a dent in the inflationary forces seen in the current environment.
Commentary: "Stocks of strategic oil have a limit and flows of commercial oil do not. Flows that stop are a bigger problem than strategic stocks can solve over time," said Kevin Book, energy policy analyst at ClearView Energy Partners. "Historically, SPR releases have temporarily sent oil prices lower and are then followed by higher prices as the market prices in insufficient supply," added Josh Young, chief investment officer at Bison Interests. "It is likely that oil prices rise after an initial temporary pullback, and that the SPR may have to be refilled at even higher prices."
The White House could make the announcement at 1:30 p.m. ET, when President Biden gives a speech aimed at "lowering gas prices at the pump for American families." According to data from AAA, the national average for a gallon of gas currently stands at $4.23 per gallon, down a penny from a week earlier, but up from $2.87 one year ago. OPEC+ is also scheduled to meet today, but is expected to stick to plans of boosting production by another 400K barrels a day in May despite U.S. pressure to pump more, while the IEA has called an emergency ministerial meeting for Friday to discuss oil supply and coordinate a global release by other countries.
Some history: Washington has released oil from the SPR roughly two dozen times, but most of them have been on a small scale (around 1M barrels) and in the wake of local disasters or emergencies. Over the past six months, however, the Biden administration has coordinated two mega releases of 30M and 50M barrels, while the latest 180M would be a third. Prior to these, big drawdowns from the SPR were a rare event, only coming after supply disruptions during the Libyan civil war in 2011 and Hurricane Katrina in 2005. The SPR currently holds 568.3M barrels of oil, its lowest level since May 2002. (24 comments)
Sanctions on Russia have been a headache for many companies doing business in the region, with the fallout spreading across many industries. A great example of this is AerCap (NYSE:AER), the world's largest aircraft lessor, which has more than 100 jets stuck in the country following the invasion of Ukraine. Since the war started on Feb. 24, EU sanctions have forced the termination of the company's Russian leases that account for 5% of its fleet by value.
Staggering statistic: "Last week we submitted an insurance claim for approximately $3.5B with respect to our aircraft and engines remaining in Russia," AerCap CFO Peter Juhas told investors on an earnings call. Not only would the claim be the biggest among airplane lessors, but it could be one of the largest single claims ever submitted. It also likely means years of litigation between the lessor and insurers before any payouts are dished out.
"We plan to pursue all other avenues for the recovery of value of our assets, including other legal claims available to us," Juhas continued. "It is uncertain whether these efforts will be successful. Ultimately, our economic exposure will also be offset by any recoveries that we obtain from insurance or other claims." Shares of AerCap responded immediately, nosediving 8.4% on Wednesday after the results.
By the numbers: AerCap has only managed to repossess 22 aircraft and three engines located in Russia, out of a total of 135 planes and 14 engines on lease in the country. As of December 31, AerCap had a total of 3,701 aircraft, engines and helicopters on its books, and the company got even bigger last year after its acquisition of rival GECAS, or GE Capital Aviation Services.
Big Tech data practices are in focus again following a story from Bloomberg that put Facebook parent Meta (FB) and Apple (AAPL) in the spotlight. The two firms are said to have provided customer information like addresses, phone numbers and IPs in mid-2021 to hackers who masqueraded as law enforcement officials. Snap (SNAP) was also the recipient of a forged request, but it is not clear if the company complied or responded.
What happened? It's pretty common for police departments and federal agencies to request information from social media companies for investigations. Those applications are typically submitted with a search warrant or subpoena signed by a judge, unlike "emergency data requests," which don't require a court order due to the imminent danger involved. In this scandal, hackers gained access to the email systems of some of the tens of thousands of law enforcement agencies, assuming the identity of officials to submit inquiries.
Complicating matters is the "emergency data request" system, which is not centralized and often spans a patchwork of different email addresses and company portals.
Go deeper: It's unclear who the hackers were, but some cybersecurity researchers have speculated that it could be a group of teenagers, like the team behind the Lapsus$ hacking of Nvidia (NVDA), Microsoft (MSFT) and Samsung (OTC:SSNLF) in recent weeks. It could also have been performed by the members of a cybercriminal group called Recursion Team, which joined Lapsus$ under different names after unit disbanded. According to Bloomberg, the information obtained by the hackers was used to carry out harassment campaigns or commit financial fraud. (47 comments)
Tamping down speculation that has surfaced in recent weeks, SEC Chair Gary Gensler has revealed that a potential deal for Chinese companies to avoid delistings in the U.S. is not imminent and only total compliance with U.S. audit inspections would allow the companies to keep trading on American markets. Earlier this month, the agency named five firms from China that could be delisted, including YumChina (YUMC), BeiGene (BGNE), Zai Lab (ZLAB), ACM Research (ACMR) and Hutchmed (HCM).
Flashback to Dec. 2020: A measure called the Holding Foreign Companies Accountable Act was signed into law that would kick foreign companies off U.S. stock exchanges if they fail to comply with auditing standards for three years in a row. The rules also required firms to prove that they are not owned or controlled by an entity of a foreign government and to name any board members who are Chinese Communist Party officials.
"There have been thoughtful, respectful, productive conversations, but I don't know where this is going to end up," Gensler said in an interview. "It's up to the Chinese authorities, and it could be frankly a hard set of choices for them."
Outlook: The remarks are similar to comments made last week by the Public Company Accounting Oversight Board. The agency said that while it's meeting with Chinese regulators, it's not clear if Chinese authorities will agree to permit U.S inspectors to fully review audit papers of companies. "If we're in the same place two years from now," Gensler continued, "many companies would be suspended." (50 comments)
In Asia, Japan -0.7%. Hong Kong -0.8%. China -0.4%. India -0.2%.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.2%.
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq +0.4%. Crude -6.1% to $101.30. Gold -0.4% to $1931.50. Bitcoin unchanged at $47,250.
Ten-year Treasury Yield -3 bps to 2.32%
Today's Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Personal Income and Outlays
9:00 Fed's Williams Speech
9:45 Chicago PMI
10:30 EIA Natural Gas Inventory
3:00 PM Farm Prices
4:30 PM Fed Balance Sheet