Brent crude jumps 20% following the drone attack on Saudi Aramco’s oil facilities. Global stocks sink on back of rising crude oil prices. RBI warns government against farm loan waivers.
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Fallout: Brent crude oil price jumped over 20% to $71.95 per barrel today as it reopened for trading following Saturday’s attack on Saudi Aramco’s oil facilities.
Backstory: The attack on Aramco’s petroleum and gas processing plants in Khurais and Abqaiq is reported to have knocked down approximately 5.7 million barrels per day of total Saudi oil output – over 50% of the kingdom’s oil output and over five percent of global crude supply.
The deficit, which is expected to take weeks or even months to remedy is likely to drive up international oil prices.
U.S. West Texas Intermediate (WTI) futures climbed as much as 15.5% to $63.34.
Meanwhile…: US President Donald Trump has authorized the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied”, as Saudi Aramco aims to restore about a third of its crude output, or 2 million barrels by today.
…And We All Fall Down: Subsequently, global markets sank on back of the rising crude prices. London’s FTSE 100 lost 0.1% to 7,359.01 and Frankfurt’s DAX retreated 0.8% to 12,369.23. France’s CAC 40 lost 0.7% to 5,616.75.
No Free Lunch: The Central Bank in its latest report of an Internal Working Group to review agricultural credit has shown that farm loan waivers have severely dented state finances and counselled governments to avoid resorting to farm loan waivers.
The focus should instead be on improving the viability and sustainability of agriculture.
In addition to this, the report has also urged the governments to undertake a holistic review of the agricultural policies and their implementation.
The What: Wholesale price-based inflation remained unchanged at 1.08% in August vs the previous month as multiple manufactured items witnessed negative inflation or deflation including vegetable and animal oils, leather and apparel products, paper, rubber, chemicals, steel, basic metals, among others.
WPI inflation was at 1.08% in July this year and 4.62% in August 2018.
Retail inflation rose to 3.21% in August from 3.15% in July, on back of higher food prices.
Have The Cake and Eat It Too: As per an Accenture report, payment platforms such as Stripe, Square and PayPal are likely to eat into banks’ revenue.
According to the report, the global payments business, including card payments and wiring money overseas, which is primarily dominated by banks was worth around $1.5tr this year.
Now while this value is estimated to grow to $2tr globally by 2025, banks are likely to lose out on $280bn, or 15% of their global payments revenues as they face stiff competition from tech start-ups such as Stripe, Square, TransferWise or PayPal.
More payments are becoming instant - removing the need for credit cards – an integral source of revenue for banks. It estimated that free payments would put 8% of banks’ payment revenue at risk. A further 3.9% is at risk from “invisible payments”, while instant payments could take another 2.7% of revenues.
In Other News: Fintech platform DotPe is in talks to raise $10mn from PayU, Fosun International, Info Edge and a few angel investors.
The payments platform is the new venture of Shailaz Nag, the co-founder of Citrus Pay, which was acquired by PayU in 2016 and rebranded PayU India.
Going Offline: Online shopping sites recorded a drop in sales in the first half of the year, as per a report by market research firm Kantar.
While the average ticket size has fallen 27% in the first six months compared with the same period last year, average spending is down 21%.
As per experts, the slump in consumption can be ascribed to the cut in discounts as well as an overall economic slowdown.
Companies however expect sales to go back to normal in the second half of the year, which is marked with festivals.
There’s a Catch: The news comes shortly after the Confederation of All India Traders (CAIT) in a letter to the Federal Trade Minister requested the government to ban the upcoming festive sales on Amazon's local unit and its rival Flipkart, alleging that their deep discounts violate the country's foreign investment rules for online retail.
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