Daily update: July 7, 2021

Start each business day with our analyzes of the most pressing developments affecting the markets today, as well as a curated selection of our most recent and important information on the global economy.

Faced with a potential existential crisis, the world’s largest oil companies have recently felt the force of climate activism in boardrooms and courtrooms. As investor pressure intensifies, oil majors may need to find solutions for their role of reaching net zero while maintaining their bottom line.

May has been an eventful month for the oil majors. Netherlands-based Royal Dutch Shell has lost a legal battle that will force the giant to step up efforts to cut carbon emissions. Exxon Mobil’s board of directors saw the appointment of three climate-focused activist investors from Engine No. 1 hedge fund. Chevron investors voted for the first time in favor of aggressive targets to cut emissions from his products. But was the upheaval a moment in time? Or does it mark the start of broad support for achievable change?

Growing attention to environmental, social and governance (ESG) risks and opportunities that have forced changes in the boards of directors of oil majors and divestments from institutional investors, according to S&P Global Ratings, could affect demand and prices new debt issues from oil and gas companies. Better credit is available for oil companies that produce less carbon, according to S&P Global Ratings, which found in recent research that oil companies pay more for capital in the bond market when they release more emissions.

Nevertheless, these companies continue to have wide access to the market. In its most likely scenario, S&P Global Platts Analytics predicts that global oil demand will rebound in 2023 from the lows caused by the pandemic and then slowly increase through 2040. At the same time, the traditional business models of the majors in the Oil and gas is expected to be growing as renewables increase and the energy transition takes shape, according to S&P Global Platts’ 2-degree alternative outlook. The International Energy Agency has warned, sparking much criticism from the oil industry, that all new upstream developments should be canceled and spending will be focused only on existing fields in order to achieve high levels. net zero emissions by 2050.

“These climate change events highlight what has become of global concern among sovereign nations and investors, and could serve as a wake-up call for an industry that is perceived by many to be slow to adapt to climate change and issuance warrants, ”S&P Global Ratings said in a report last month. “In our view, stricter regulations, substitution and secular changes in industry supply and demand fundamentals will contribute to a more difficult operating environment for fossil fuel producers and likely increase the risk of fossil fuel production. ‘blocked assets and significant asset write-downs. “

The next steps for the oil majors will likely determine how they tackle the difficult challenge of balancing sustainability in the environmental sense and sustainability with respect to the viability of the industry. As key players in the fight against global warming, whatever their size, the net zero objectives of the oil companies, the current carbon intensity, new strategies and general operating conditions are under the close surveillance of the companies. market players.

“Support for climate issues is now very broad,” Andrew Grant, head of climate, energy and industry research at think tank Carbon Tracker, told S&P Global Market Intelligence. “Everyone is following the learning curve. “

Today it’s Wednesday July 7, 2021, and here is today’s essential intelligence.

The credit cycle

The global sukuk market returns to traditional risks

In the first half of 2021, sukuk issue volumes increased by 5% (20% including primary issues only) due to high liquidity, low interest rates and the return of some issuers to the market. market.

—Read the full report of S&P Global Ratings

More and more, US chemical companies are moving closer to investment grade status

Despite a wave of negative ratings in 2020, there have been no angel investors (companies demoted from investment grade to speculative grade) in the U.S. chemicals sector.

—Read the full report of S&P Global Ratings

Market dynamics

S&P GSCI delivers strong first half performance

The S&P GSCI rose 31.4% in the first half of 2021, outperforming the S&P 500®, which rose 15.2%. The S&P GSCI has more than doubled since hitting an all-time low during the early stages of the COVID-19 pandemic in April 2020. Several commodities have hit new all-time highs this year as the economy continues to grow. global recovery, consumer confidence reached pre-pandemic peaks in many regions and supply chains remained disrupted.

—Read the full article by S&P Dow Jones Indices

NYMEX WTI Hits Over Six-Year High on OPEC + Deadlock; ICE Brent is trading near $ 78 / B

NYMEX WTI crude futures hit a six-and-a-half-year high in European morning trading on July 6, a day after OPEC + talks abruptly canceled due to differences over future plans. coalition production. The breakdown in OPEC + talks, mainly due to differences between Saudi Arabia and the United Arab Emirates over increased production, has spooked oil markets, raising concerns over tight supply in the near term .

—Read the full article by S&P Global Platts

The banking sector under pressure

Top 20 MEA banks by market capitalization, Q2’21

Saudi company Al Rajhi Banking & Investment Corp. topped the list of the 20 largest banks by market cap in the Middle East and Africa as of June 30, with a market cap of $ 73.99 billion, according to data from S&P Global Market Intelligence.

-Read the full article from S&P Global Market Intelligence

Wealth management will be the next battleground for Hong Kong virtual banks

Hong Kong virtual banks are considering an expansion in mass-market wealth management business, a move that analysts say could help generate their first profits. Like many online-only banks around the world, some of Hong Kong’s eight licensed virtual banks are moving into more lucrative businesses like wealth management after building their customer base from scratch through low-margin services like as deposit accounts, loans and money transfers.

—Read the full article by S&P Global Market Intelligence

Technology and media

F9 adds fuel at domestic box office, but recovery mileage remains uncertain

The US theatrical debut for the latest installment in the Fast & Furious franchise gives operators hope for more standardized box office returns, but the amount of pent-up demand that translates into ticket sales in a context. shifting distribution strategies make post-pandemic theatrical recovery uncertain, analysts say.

-Read the full article from S&P Global Market Intelligence

ESG in the time of COVID-19

EC targets transport emissions in 2030 decarbonization campaign

The European Commission is preparing to target CO2 emissions from the transport sector as part of its plans to reduce greenhouse gas production by 55% from 1990 levels by 2030. The executive of The EU is set to unveil a self-sustaining carbon market for the road transport sector that will target upstream fuel suppliers, according to draft documents released in late June.

—Read the full article by S&P Global Platts

Delayed power reforms hamper India’s path to 450 GW renewable energy target by 2030

India’s path to meeting its ambitious target of 450 GW of renewable energy capacity by 2030 is hampered by a lack of systemic reforms and progress in the electricity sector – factors that are critical to unlocking the continued development of its clean energy sector.

—Read the full article by S&P Global Platts

Next Generation Asia’s Wealthy Seek To Gain Sustainability Momentum, UBS Says

The next generation of Asia’s richest families are relying on sustainability to make their mark on their businesses and also to increase returns in the post-COVID-19 world. The next generation, or the coming cohort that will inherit the wealth of very wealthy families, is a major driver of environmental, social and governance issues in Asia, particularly in Greater China, said Amy Lo, co -Head of Global Wealth Management in Asia-Pacific and Managing Director of UBS Hong Kong.

-Read the full article from S&P Global Market Intelligence

The future of energy and raw materials

From Liza to Tupi, Indian refiners adopt new crudes to dilute supply risk

Indian refiners have signed first import deals for newer crudes such as Liza from Guyana and Tupi from Brazil, a sign that one of Asia’s fastest growing oil consumers is increasingly seeking to diversify its basket of raw materials and to have stable sources of supply beyond the Middle East.

-Read the full article from S&P Global Platts

OPEC + deal stalemate scares oil market as Saudi Arabia, UAE clash

OPEC + abruptly called off its July 5 meeting with no new date set after Saudi Arabia and the United Arab Emirates failed to agree on the terms of a deal that could see 400,000 bpd of additional production each month added to the market from August. The dispute is over the UAE’s demand for its baseline – the level used to calculate its quota – to more closely reflect its 4 million bbl / day of capacity. S&P Global Platts Analytics is optimistic that a solution will be found.

—Read the full article by S&P Global Platts

Written and compiled by Molly Mintz.

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