Making money: what the experts think
● Historic oil deal It was hailed as “the largest cut in oil production ever agreed”, marking the end of a damaging price war between Saudi Arabia and Russia. But will last weekend’s “global pact to stem the biggest rout in oil prices for almost two decades” really have a bearing on the price, asked Russell Lynch in The Daily Telegraph. The truce will see the Opec coalition and its allies cut production by ten million barrels of oil a day until July (“equivalent to a tenth of global output”), and then eight million barrels a day until the year-end.
● Staying power?
The oil price had already recovered slightly from the mid-March market shock that left Brent Crude “reeling at a 17-year low below $25/barrel”. But prices remain more than 50% down compared with the beginning of the year. “The pressure to do a deal was intensified by the world’s oil storage capacity filling up” – raising the prospect that prices could even turn negative. The market reacted positively to news of the deal, noted BBC Business: Brent jumped 3.9% to $32.71/barrel. Still, experts aren’t hopeful it will have a big impact. “The best we can hope for at this stage is the market stabilises,” Ole Hansen of Saxo Bank told The Daily Telegraph. “Right now, the only thing the producers and the countries have done is buy time.”
● Menacing glint
You’d think diamond prices would be holding up as a store of value in troubled times. Not a bit of it, said the FT. Global trade in the sector has “ground to a halt” because of an exodus of 200,000 migrant workers from Surat in India – “the global hub of diamond manufacturing” – to their rural hometowns following the national lockdown. “The standstill highlights the fragility of the industry’s fragmented supply chain.” Miners have cancelled sales to diamond trading hubs like Antwerp and scaled back operations. Retailers globally have been forced to shut shops. The upshot, said the New York diamond analyst Paul Zimnisky, is that prices for rough diamonds fell by 15%-20% last month. He predicts they will fall further when bigger miners such as De Beers and Alrosa “inevitably cut prices”. Stasis is one thing. But if the lockdowns continue into the summer, the lack of cash flow “threatens a wave of defaults across the diamond supply chain”.