FirstFT: Diesel and gasoline supply crunch sets off crude oil market rally

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Oil prices are rising again in the most sustained ascent since Russia’s invasion of Ukraine as a fuel supply crunch adds pressure to a market that had already been disrupted by the coronavirus pandemic.

The disturbance to flows of oil and related products from Russia has rippled through energy markets as refineries race to pump out petroleum products to meet the needs of a global economy emerging from the shock of Covid-19.

The supply and demand imbalances pushed the price of Brent crude, the global benchmark, up more than 10 per cent in May, the biggest rise since January. Brent for July delivery hit a high of $123 yesterday, compared with less than $80 at the start of the year.

The UK and EU have also agreed a co-ordinated ban on insuring ships carrying Russian oil, which will shut Moscow out of the vital Lloyd’s of London insurance market and pile additional pressure on commodities. But the EU said it was willing to consider tariffs on Russian oil if member states refused to implement an embargo unveiled on Monday.

Refiners will face even fiercer competition to secure supplies under Brussels’ sanctions on Russian oil. Here’s how the ban will affect global markets.

Thanks for reading FirstFT Europe/Africa. Here’s the rest of today’s news — Jennifer

1. Eurozone inflation hits 8.1% Eurozone inflation soared to a record of 8.1 per cent in the year to May, adding pressure on the European Central Bank to speed up its exit from ultra-loose monetary policy when it meets next week in Amsterdam. The jump in price growth from 7.4 per cent in April exceeded forecasts of 7.7 per cent.

Line chart of Year on year change in consumer prices % showing Eurozone inflation hits new high

2. Citi may retain Russian banking licence The US lender with the largest business in Russia may retain a banking licence and some operations in the country, chief executive Jane Fraser said, even as it tries to sell its local consumer and commercial arms following the war with Ukraine.

3. Shanghai reopens from lockdown China’s financial capital is set for the most significant easing of Covid-19 restrictions since it was sealed more than two months ago after authorities said public transport would resume and shops reopen today. Our interactive feature explores the sweeping impact of Beijing’s zero-Covid strategy on China’s economy and society.

4. German police raid DWS and Deutsche Bank over greenwashing claims Approximately 50 police officers arrived at the DWS premises and Deutsche Bank’s twin towers in Frankfurt midmorning yesterday and held meetings with staff until lunchtime, according to people with knowledge of the operation. Neither company was given advance notice of the raid. Hours later, DWS announced the replacement of its chief executive Asoka Wöhrmann.

5. Elliott to sell AC Milan to RedBird for €1.2bn Elliott Management has agreed to sell the Italian football club to the US investment group, according to people close to the club, in a deal that ends the firm’s four-year foray into the business of sport and included a Serie A season title.

The day ahead

Denmark holds EU security referendum Danes will vote on whether to axe the country’s 30-year-old opt-out from the bloc’s security and defence policies, increase military spending and wean itself off Russian gas.

Economic data S&P publishes manufacturing purchasing managers’ indices for the eurozone, France, Germany, Italy, the UK and the US. The EU also has April unemployment data while Germany has retail trade figures. Philip Lane, ECB chief economist, speaks at the CEPR Paris Symposium hosted by Sciences Po.

Fed Beige Book The Federal Reserve publishes its latest report on economic conditions, a day after a meeting between the US central bank’s chair Jay Powell and President Joe Biden highlighted the peril of high prices ahead of midterm elections.

US removes UK metals tariffs Washington will scrap Trump-era tariffs of 25 per cent on steel and aluminium exports, replacing them with quotas. In return, London will suspend extra taxes on US products such as bourbon and Levi’s jeans.

Alphabet AGM The Google parent hosts its annual meeting, where shareholders will vote on 10 proposals covering pay equity, sustainability and human rights.

What else we’re reading

Twelve propositions on the state of the world How do we make sense of the world? Time spent in Davos last week crystallised Martin Wolf’s answers in the form of 12 projections covering the top economic, geopolitical, social and technological issues facing society.

Martin Wolf on the state of the world
Martin Wolf: ‘We in the west have to manage profound changes and lethal conflicts at a time of division and disillusionment’ © James Ferguson

Can Africa grow without fossil fuels? Not every country in the continent is endowed with renewable energy reserves. As the developed world demands emissions cuts, African leaders are asking whether poor countries can achieve high living standards without intensive use of fossil fuels.

Ukraine war sparks rush for potash For the best part of a decade, the potash market struggled with overcapacity and low prices. But sanctions have throttled supplies of the fertiliser from Russia and Belarus, which account for almost 40 per cent of global stocks, raising warnings of a global food crisis.

NSO’s cash dilemma Faced with a cash crunch so severe that the Israeli manufacturer of cyberweapon Pegasus could miss its payroll, Shalev Hulio had a startling suggestion. The foul-mouthed chief executive asked: why not start selling again to risky clients? To his audience, the idea was alarming, but that wasn’t all. Read the inside story here.

Sifting through the stock market wreckage How should investors navigate the equities market wreckage? The answer is as simple as it is complex, writes Maike Currie: stock by stock. Some argue that the real story playing out in markets is not about value versus growth, but rather between cyclicals and defensives.

  • Ask an expert: Should I move my money into cash to avoid market volatility, asks an FT reader. Paul Surguy, Kingswood managing director and head of investment management, responds.

Line chart of Benchmarks rebased showing 'Old economy' stocks outperform high-growth peers

Technology

With slick looks recalling an espresso machine, Petlibro’s Granary Wi-Fi feeder allows you to maintain a strict dining regimen for your furry friend while jetting off for the weekend. It is one of five new gadgets to help you take care of your pet.

Petlibro’s Granary WiFi Feeder
Petlibro’s Granary Wi-Fi Feeder, $89.99 (non-Wi-Fi version from $65.99)

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