Why oil isn't soaring in response to Iran tensions - Fox Business

FOX Business’ Jeff Flock reports on the rising price of oil amid heightening tensions between the U.S. and Iran.

America has emerged as a force in the world energy markets and that means geopolitical risks are not what they used to be for commodities despite tensions with Iran bubbling up again.

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“If this had happened five years ago, I certainly think you have a very strong argument that oil prices could hit triple digits,” Patrick DeHann, head of petroleum analysis at GasBuddy, told FOX Business’ Stuart Varney. “But we’ve added the capacity of 7.5 million barrels a day versus where we were a decade ago so we’ve come a long way, and that’s perhaps given the White House new options to deal with the Middle East.”

Instead, West Texas Intermediate crude oil, the U.S. benchmark, gained almost 6 percent, hitting a three-month high of $64.72 per barrel after a U.S. airstrike killed Iranian Gen. Qassim Soleimani on Thursday. The attack led to Iran fully withdrawing from the 2015 nuclear deal and promising to avenge Solemani’s death. President Trump said any Iranian response would not go unpunished.

GOLD BEST PROTECTION AS US-IRAN TENSIONS HEAT UP: GOLDMAN SACHS

The U.S. was, for many years, the world’s largest net energy importer, making it susceptible to economic shocks when there were sudden price increases due to rising geopolitical tensions in the Middle East. The fear was that Iran could disrupt maritime transit in the Strait of Hormuz, the world’s most important oil choke point. About 21 million barrels, or 21 percent of the global supply, pass through the strait each day.

But all of that has changed over the past few years as the U.S. has turned into a net exporter of energy. While Iran is still a threat to close the Strait of Hormuz, the impact, especially on the United States, wouldn’t be as severe.

Iran's Supreme Leader Ayatollah Ali Khamenei

US 'VERY PREPARED' FOR IRANIAN CYBERATTACKS: ENERGY SECRETARY

“The U.S. has become not only a very large producer, the largest, but it has become the swing producer and markets have priced that in,” Mohamed El-Erian, chief economic adviser at the Frankfurt-based Allianz Global Investors, with $623 billion in assets under management, told FOX Business’ Maria Bartiromo.

Last September, the markets saw evidence of just how much things have changed when Brent crude oil, the international benchmark, soared by 14 percent in a single day after half of Saudi Arabia’s oil production was temporarily taken offline by an Iranian drone strike. Prices quickly reversed to their pre-attack levels in about two weeks.

WHY MARKETS AREN'T IN CHAOS AMID ESCALATING TENSIONS WITH IRAN: EL-ERIAN  

“It is a stylized fact that oil price shocks tend to lead recessions,” wrote James Sweeney, chief economist at Credit Suisse, the Zurich-based investment bank. “Five of the past six recessions were preceded by a sharp increase in oil prices.”

However, he noted that structural changes in the U.S. economy, including the aforementioned American shale revolution, historically low levels of consumer spending on gasoline and a Federal Reserve focused on prolonging the economic expansion as opposed to fighting inflation as reasons why oil shocks aren’t the recession risk that they used to be.

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Of course, this is good news for President Trump who wants to avoid a recession ahead of the 2020 election. Since World War I, sitting presidents are a perfect 11 for 11 in their reelection bids if the economy wasn’t in a recession in the 24 months ahead of the election.

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2020-01-07 11:34:26Z
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Japan issues arrest warrant for Carlos Ghosn's wife - BBC News

Tokyo prosecutors have issued an arrest warrant for the wife of fugitive ex-Nissan boss Carlos Ghosn.

Carole Ghosn is suspected of making false statements to a Tokyo court in April, investigators said.

Mr Ghosn skipped bail in December, joining his wife in Beirut.

A spokeswoman for the Ghosn family said the arrest warrant for Mrs Ghosn was "pathetic", and was linked to a news conference due to be given by Mr Ghosn on Wednesday.

Japan is seeking Mr Ghosn's extradition from Lebanon, although the country does not have a treaty with Japan.

A spokeswoman for Mt Ghosn told Reuters: "Last time Carlos Ghosn announced a press conference and got re-arrested. This time, the day before he is announced to speak out freely for the first time, they issued an arrest warrant for his wife Carole Ghosn."

"The issuance of this warrant is pathetic," she added.

Mr Ghosn ran car giant Nissan until he was arrested in Japan on charges of financial misconduct - which he denies - in November 2018.

He was banned from seeing his wife while on bail. But, in the final days of 2019, he skipped bail to board a private jet that took him to Turkey before he travelled on to Lebanon, where he is a citizen, and where his wife was waiting.

Mr Ghosn insisted he had organised his escape "alone", and denied reports his wife had helped.

The arrest warrant accuses Carole Ghosn of falsely claiming not to know, or to have met, people connected to a company that received payments from Nissan, part of which was subsequently transferred to a firm owned by Mr Ghosn.

Mr Ghosn has denied charges of financial wrongdoing in Japan, instead claiming the country's justice system is "rigged".

The news conference scheduled for Wednesday will be Mr Ghosn's first since his arrest in November 2018.

Mr Ghosn told Fox Business that he has "actual evidence" that proves there was a coup to stop him merging Nissan with French carmaker Renault. He also said he would identify people at the news conference that he believed were behind his arrest over financial misconduct.

In earlier court filings and statements released by his lawyers in Japan, Mr Ghosn has accused Nissan executives of colluding with Japanese prosecutors and officials from the Ministry of Economy, Trade and Industry.

Mr Ghosn's legal team in Japan also said prosecutors withheld evidence, citing concerns voiced by Nissan that it included sensitive information about operations and employees.

Nissan said Mr Ghosn's flight from Japan would not affect its policy of holding him responsible for "serious misconduct".

"The company will continue to take appropriate legal action to hold [Mr] Ghosn accountable for the harm that his misconduct has caused to Nissan," the carmaker said.

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2020-01-07 10:10:57Z
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Japan prosecutors issue Carole Ghosn arrest warrant - BBC News

Tokyo prosecutors have issued an arrest warrant for the wife of fugitive ex-Nissan boss Carlos Ghosn.

Carole Ghosn is suspected of making false statements to a Tokyo court in April, investigators said.

Mr Ghosn skipped bail in December, joining his wife in Beirut.

A spokeswoman for the Ghosn family said the arrest warrant for Mrs Ghosn was "pathetic", and was linked to a news conference due to be given by Mr Ghosn on Wednesday.

Japan is seeking Mr Ghosn's extradition from Lebanon, although the country does not have a treaty with Japan.

A spokeswoman for the ex-Nissan boss told Reuters: "Last time Carlos Ghosn announced a press conference and got re-arrested. This time, the day before he is announced to speak out freely for the first time, they issued an arrest warrant for his wife Carole Ghosn."

"The issuance of this warrant is pathetic," she added.

Mr Ghosn has denied charges of financial wrongdoing in Japan, instead claiming the country's justice system is "rigged".

According to reports, Mr Ghosn escaped the country late in December by boarding a bullet train to Osaka, and was then reportedly smuggled out of the country in a flight case, usually used to transport musical equipment.

After his escape from Japan last week, Mr Ghosn insisted he had organised his escape "alone", and denied reports his wife had helped.

Mr Ghosn ran car giant Nissan-Renault until he was arrested on charges of financial misconduct in November 2018.

He was banned from seeing his wife while on bail. But, in the final days of 2019, he skipped bail to board a private jet that took him to Turkey before he travelled on to Lebanon, where he is a citizen, and where his wife was waiting.

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2020-01-07 10:05:16Z
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Musk Pulls Off Dance Moves at Tesla's Shanghai Plant - Bloomberg Markets and Finance

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2020-01-07 09:30:24Z
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Will Iran weaponize oil to retaliate against US? - DW (English)

The killing of a top Iranian general by the US followed by a threat of retaliation from Iran has rattled oil markets. What options does Tehran have up its sleeve, if it chooses to retaliate by disrupting oil supplies?

Oil prices breached $70 a barrel on Monday — the highest they have been since September when alleged Iran-backed drone attacks on Saudi Arabia oil facilities knocked out half of the kingdom's oil supply. The United States has warned that Tehran may retaliate with another attack on Saudi energy facilities to avenge the killing of an Iranian general last week.

Oil markets have been jittery since US air strikes killed Qassem Soleimani, who led the Revolutionary Guards' Quds force, on Friday. Brent crude has climbed more than 5% since the assassination. 

"Iran is likely to conduct attacks, sometimes attributed to the Houthi, against energy, desalination, maritime and aviation assets in the United Arab Emirates (UAE) and Saudi Arabia, using cruise missiles and weaponized UAVs [unmanned aerial vehicles]," said IHS Markit Middle East analyst Ege Seckin and Director Firas Modad.

The two pundits, however, warn that such attacks could lead to a full-scale confrontation in the region. 

"Unlike attacks between May and September 2019, given the willingness of the US to strike such a high-level Iranian target, the UAE and Saudi Arabia are more likely to be emboldened to respond against Iran if they are attacked," they said.

Choking the chokepoint

There are fears that Tehran may target the Strait of Hormuz — the world's most important chokepoint for global oil supplies.

Iran has threatened in the past to block the waterway — located between Oman and Iran — through which more than a fifth of the world's oil is transported.

"The most effective oil weapon — shutting the Strait of Hormuz — would damage a broad set of countries — not just the US — and may make it harder for Iran to find allies in its skirmishes with the US," CFRA Research energy analyst Stewart Glickman said. "Keep in mind though that Iran wouldn’t be selling crude oil either, and it would become a pariah in the international arena since all oil-importing nations would suffer."  

While analysts doubt Iran's ability to close the strait, they agree that Tehran could target oil tankers passing through the strait as it has done in the past.

In June, the US blamed Iran for carrying out an attack on two oil tankers near the Strait of Hormuz. Iran denied any role in the assault. A month later, Iran seized a British-flagged tanker, Stena Impero, to retaliate against the UK capturing an Iranian ship.

"The shipping industry is extremely concerned. There is unending discussion by CSOs [company security officers] expressing their fears of what is to come," said Dimitris Maniatis, chief commercial officer of Diaplous, one of the largest private maritime security firms. "Everyone is trying to find the golden solution to protect their vessels in the region but to be honest, there is very little that a merchant vessel can do to avoid state aggression."

However, Maniatis says its "highly unlikely" that the Iranians will blatantly attack a merchant vessel in the region. "The worst they can do is an act similar to the Stena Impero incident," he told DW.

Bypassing the strait?

Any attempt by Iran to block the Strait of Hormuz or disrupt oil transportation through the waterway is likely to seriously hurt the global oil supply as there are few options to bypass the critical chokepoint.

Only Saudi Arabia and the UAE have pipelines that can ship crude oil outside the Persian Gulf, according to the US Energy Information Administration (EIA), but those pipelines have a capacity of shipping only 6.8 million barrels of crude oil per day (b/d). By comparison, the daily crude oil flow in the Hormuz strait averaged 17.3 million b/d in 2018.

Nearly 80% of the crude oil and condensate that moved through the strait in 2018 went to Asian countries including China, India and Japan, leaving the US, which imported just 1.4 million b/d of crude oil through the waterway, less vulnerable to any Iranian disruption.

But Iran could target US-flagged container ships that serve the US Navy's Military Sealift Command (MSC) and regularly cross into the Persian Gulf.

"Vessels with US flag or of clear US interests are the ones we identify running the highest risk of any retaliatory action," Maniatis said. "Many have expressed concern for Marshal Islands-flagged vessels as this flag state is seen as closely affiliated to the US."

'Ephemeral' bump

Several analysts expect oil prices to fall from current levels, citing weak global demand and rising production in non-OPEC countries.

"We forecast that any bump in oil prices arising from this escalation is likely ephemeral," Glickman said. "This escalation — which, certainly, has potential to expand — does not affect supply growth in other non-OPEC areas such as Brazil, Guyana or the North Sea, nor does it improve a muted 2020 oil demand outlook in our view."

Stewart points to the September attack on Saudi facilities to stress his point.

"While the attack did register a massive one-day positive impact on WTI, the boost eroded just weeks later," he said.

Goldman Sachs suggested that the risk premium had already been factored into oil prices, saying that an actual disruption to oil supplies was needed to maintain prices at current elevated levels.

Yana Popkostova, director at the European Centre for Energy and Geopolitical Analysis, says the oil markets would remain volatile over the next few months given the unpredictability surrounding Iran's response.

"Soleimani had built a highly capable network of shadow operators across the world over the past two decades and now it seems impossible to predict their retaliation," she told DW. "The uncertainty as to the unfolding of the events — as to when, how and where Iran and these proxies will embark on their vendetta poses an entirely different paradigm nevertheless. And uncertainty does not bode well for oil markets."

Every day, DW's editors send out a selection of the day's hard news and quality feature journalism. Sign up for the newsletter here.

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2020-01-07 05:04:56Z
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Elon Musk says will design a future Tesla car in China for global market - CNBC

Elon Musk, chief executive officer of Tesla Inc., speaks during a ceremony at the company's Gigafactory in Shanghai, China, on Tuesday, Jan. 7, 2020.

Qilai Shen | Bloomberg | Getty Images

Tesla CEO Elon Musk said the company will design a future car in China for the global market.

The electric car company founder said Tesla would open a design and engineering center in the world's second-largest economy. He did not specify any timelines.

Tesla also confirmed that it would start work on a production program for its Model Y crossover vehicle in its Shanghai Gigafactory, the only production factory outside of the U.S. Production for its Model 3 — a sedan that was announced before the Model Y back in 2016 — only started in October in the Shanghai factory.

Musk made the announcements as he delivered the first Model 3 cars out of the Shanghai factory to the public.

"We intend to continue making a significant investment and increasing the investment in China, making the Model 3 and the Model Y and future models also in China," Musk told an audience in Shanghai.

"Something that would be super cool … So we're going to do it … is to try to create a China design and engineering center to actually design an original car in China for worldwide consumption. I think this will be very exciting," he added.

China is seen by analysts as a critical market for Tesla but it faces a number of challenges from cooling electric vehicle sales to increasing competition.

Still, the company has produced positive news with a profitable third quarter of 2019 and fourth-quarter vehicle delivery numbers that topped Wall Street estimates. Shares of the firm hit a record high of $454 last week.

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2020-01-07 09:13:00Z
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Bed Bath & Beyond shares jump on real estate deal that gives the retailer $250 million - CNBC

Shoppers exit a Bed Bath & Beyond store in New York.

Michael Nagle | Bloomberg | Getty Images

Bed Bath & Beyond shares jumped nearly 3% Monday morning after the retailer said it had completed a sale-leaseback transaction with an affiliate of Oak Street Real Estate Capital, netting it $250 million in proceeds.

The embattled company's new CEO Mark Tritton, who just took the reins in November, said the deal, which entailed selling real estate and leasing it back, "marks the first step toward unlocking valuable capital ... that can be put to work to amplify our plans to build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value."

Bed Bath & Beyond said in a press release that the properties it has sold represent about 2.1 million square feet of commercial real estate, which includes stores, office space and a distribution center. Bed Bath & Beyond, which also owns Buy Buy Baby and Harmon drugstores, has roughly 1,500 locations in total.

The company said it is continuing to work with outside financial advisors to review its real estate and determine the best uses "to optimize its asset base and enhance shareholder value."

Bed Bath & Beyond said it plans to use the proceeds from the deal announced Monday to reinvest in its core business and transformation efforts, to fund share repurchases and to reduce outstanding debt, or a combination of these tactics.

Tritton has only been in the CEO role, after leaving Target, for a few weeks. But he has shown he is wasting no time to embark on his own turnaround strategy.

Last month, he ousted six senior executives — in the midst of the holiday shopping season, including the retailer's chief merchandising officer, marketing officer, digital officer, its general counsel and chief administrative officer.

Bed Bath & Beyond has come under heightened pressure and sales have slumped as businesses such as Amazon, Walmart and Target have appealed more to consumers with speedier shipping and stronger websites, as they sell many of the same items that Bed Bath & Beyond has traditionally offered in its stores.

Meantime, selling real estate and leasing it back is a strategy that numerous retailers have deployed in the past, especially when they're in a pinch for liquidity. Sears did this prior to going bankrupt. So has Macy's. But this also means these companies then are stuck with paying rent.

Bed Bath & Beyond shares are up roughly 40% over the past 12 months, as of Friday's market close.

The retailer is set to report quarterly earnings after the bell on Wednesday.

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2020-01-06 14:30:00Z
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