Oil Cuts (Meh…), WhatsApp and UFOs

Good morning.

Surprisingly, markets quickly shrugged off Moscow’s Friday announcement that Russia would cut oil production by half a million barrels per day (bpd), suggesting that Russia’s influence on oil markets is much diminished.

Meanwhile, two stories on regulation are good reminders that rules should be followed but also that the communication of these rules can be complicated and subtleties can be lost. Unfortunately, ‘we were confused by your messaging’ isn’t an excuse for non-compliance, so it falls to leaders to ensure that staff understand, and meet, obligations.

Finally, former foreign minister Nikos Christodoulides won the presidential election in Cyprus.

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🛢Russian Oil Cuts Shrugged Off

Russia announced plans to cut oil production by 500,00 bpd on Friday, in retaliation to western price caps and sanctions. Crude prices jumped on the news but dropped back quickly over the weekend as concerns about reduced demand and existing surpluses offset the Russian cuts. 

“In the short term, I suspect prices are going to remain fairly range-bound due to the first-quarter surplus,” Patterson said. “As we approach mid-year, we expect the market to tighten, which should push prices toward $100.

On Friday, we noted that the Western sanctions hadn’t hurt the Russian economy as Europe and the US had hoped, alleviating some of the pressure on Moscow to end the conflict in Ukraine. However, the collective shrug over Russia’s production cut also indicates that Moscow hasn’t much leverage in the other direction with respect to influencing oil prices.

💬 Regulators Crack Down 1: SEC & WhatsApp

The SEC is pursuing the personal phone records of employees at several Wall Street firms, believing that staff used ‘unapproved channels’ for business communications. The SEC is asking banks and money managers for details of records retention, believing that unofficial, and unmonitored platforms such as Whatsapp are being used for business purposes. The scope of this investigation seems to be growing, causing significant pushback from the financial services industry in the US.

“It shows that the SEC’s probe goes beyond the largest broker-dealers and that it will likely extend to all corners of the financial services sector. With more and more financial sector workers still not in the office five days a week, and with the increased use of non-official means of communication, the potential scope for liability can be tremendous.”

This could be simply a matter of convenience, or an attempt to avoid using communication channels that are saved for regulatory purposes. However, no matter the outcome in this case,  this is an important reminder to anyone working in a regulated industry, or on matters that may come under legal scrutiny, that record retention is serious business and no matter how onerous the rules appear, there can be consequences if these aren’t followed. Moreover, trying to circumvent the rules and using private text or Whatsapp means that your personal communications could come under scrutiny, no matter how much you might think these are ‘privileged’ communications.

💪 Regulators Crack Down 2: Mixed Messages in the UK

The FT warns that the UK’s Financial Conduct Authority “has vowed to take a more aggressive approach on enforcement under new chief executive Nikhil Rathi after a string of scandals, and has repeatedly warned banks operating in the UK that their oversight and reporting systems are not yet up to scratch.” Read more in the FT

However, this more aggressive approach to compliance by the FCA may lead to some mixed messages from Whitehall as the UK Treasury is keen to speed up a new, looser, set of rules for insurers, hoping to free up an additional £100 billion for additional investment. These revised Solvency II rules would allow insurers to hold lower reserves against the insured amounts, meaning that their excess cash could be put to work in the markets. 

However, firms always seem to push the boundaries of regulation at the best of times (see Regulators Crack Down 1, above) so there’s a danger that this loosening could go too far and leave the UK insurers unable to meet their obligations in the case of a significant, country-wide event. (Recall that one of the biggest casualties in the 2008 financial crisis was insurer AIG, which was dragged down by its financial products arm so this scenario is not without precedent.) Read our longer piece on Solvency II here.

There’s also the difficulty of trying to tighten enforcement and regulation with one hand, while trying to ease regulation with the other. Although the FCAs focus and Solvency II are in practice very different things, there seems to be a real potential for mixed messaging.

🇨🇾 Christodoulides wins Cypriot Presidential Race

Former foreign minister Nikos Christodoulides won the presidential election in Cyprus on Sunday after his opponent conceded. Christodoulides is the nation’s eighth and youngest president who said his top priorities included resolving the Cyprus problem and energy. Read more in The Cyprus Mail.

On to the numbers

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Relative Values (90-Days)

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Trends (21-days)

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Brent Crude

Potentially impacting: Fuel prices | Gound shipping costs. | Plastic prices | Changes to fuel subsidies (potentially leading to unrest) | Cost of living (especially transport and heating) | Changes to traffic volume/transportation choices | Demand for automotive products | Theft and smuggling.

Brent Crude is high for this 90-day interval. Prices decreased moderately over the last 21 days after moderate fluctuation.

Iron and Steel

Potentially impacting: Cost of construction projects | Construction project timelines | Cost/availability of raw materials | Infrastructure project timelines/costs | Cost and availability of finished metal goods | Value of scrap | Value of 2nd hand equipment/vehicles.

Iron and Steel is very high for this 90-day interval. Prices ended relatively flat over the last 21 days after slight fluctuation.

Market Volatility (VIX-US)

Potentially impacting: Availability of capital for investment | Interest rates| Share prices | Consumer confidence | House prices/rent | Financial certainty/uncertainty | Financial models | Stock-based compensation values.

Market Volatility (VIX) is low for this 90-day interval. The index increased moderately over the last 21 days after moderate fluctuation.


Potentially impacting: Bread, pasta, couscous & noodle prices | Changes to food subsidies (potentially leading to unrest) | Cost of living | Movement from low-income to food insecure to undernourished | Increased theft or graft in loosely governed areas | Demand on charities.

(No change) Wheat remains very high for this 90-day interval. Prices ended relatively flat over the last 21 days with little fluctuation.

Ocean Freight (FBX)

Potentially impacting: Supply chain costs (direct and indirect) | Supply chain delays | Port capacity/throughput speed | Customs clearance | Availability of goods and materials | Consumer demand/hoarding.

Shipping (FBX) is very low for this 90-day interval. Prices decreased moderately over the last 21 days after significant fluctuation.

Up-to-date shipping data supplied by our partner Freightos

Election Watch

February 25: Nigeria, President, House of Representatives and Senate

Palate Cleanser

The USA was apparently engaged in a full-scale game of Space Invaders this weekend.



Meanwhile, at a press conference, the intel community dismissed the alien theory but many remain suspicious…

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