Explainer: Antitrust law won't get in the way of U.S. acting to raise oil prices

WASHINGTON (Reuters) – It is illegal for oil producers to meet to discuss pushing up oil prices under U.S. antitrust law, but perfectly legal if state regulators or the federal government set lower production levels for them, U.S. antitrust experts said on Friday.

That said, the decision by a Texas state official to talk with Saudi Arabia and Russia about supporting oil prices marks a sharp contrast with U.S. policy. A year ago President Donald Trump tweeted that OPEC needed to “increase the flow of oil. World Markets are fragile, price of Oil getting too high.”

A two-thirds drop in oil prices in the last three months has swiftly changed Washington’s thinking on whether or not it should meddle in the energy market.

Trump has called on top producers to stop a market rout caused by the coronavirus pandemic, as OPEC and its allies work on a deal for an unprecedented oil production cut equivalent to around 10% of global supply.

“Trump himself, other federal officials, and Congress cannot violate antitrust (law) by any official actions they take. It doesn’t apply to them,” said Chris Sagers, who teaches antitrust at the Cleveland-Marshall College of Law.  

When oil prices are high, anti-OPEC bills, nicknamed NOPEC, gained traction in Congress. The bills would allow OPEC to be sued in U.S. courts for violating antitrust laws.

Such bills have been introduced in the U.S. Senate and House of Representatives for more than a decade, but have never succeeded. In February 2019, the latest version was approved by the House Judiciary Committee.

“From an antitrust perspective, businesses have been complaining about OPEC and complaining about these foreign systems for years,” said Barbara Sicalides, an antitrust expert at Pepper Hamilton LLP. “I don’t think it’s an antitrust violation. It’s certainly a change in policy.”

Oil prices have fallen to around $20 per barrel from nearly $65 at the start of the year as more than 3 billion people went into a lockdown, reducing global oil demand by as much as a third.

Texas regulator Ryan Sitton, one of three members of the Texas Railroad Commission, waded into oil diplomacy on Thursday, calling Russia’s energy minister to discuss possible oil production curbs and angling for talks with Saudi Arabia as many producers in the U.S. state’s biggest industry warned it was near collapse.

The Oklahoma Energy Producers Alliance has urged its state’s regulator to curtail crude oil production.

This kind of conduct in private industry would not be permitted, but under the state action doctrine it is allowed if it is done under the commission’s authority, said Sicalides.

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In Communist-run Cuba, the private sector helps the needy as coronavirus spreads

HAVANA (Reuters) – Upmarket restaurants are delivering free meals to the elderly, while a fashion firm donates face masks. A business consultancy calls on its clients to donate hygiene products and artisanal soap shops gift their wares to low income households.

In Communist-run Cuba, the fledging private sector is rushing to set up solidarity initiatives for those most vulnerable to the coronavirus outbreak, demonstrating the state no longer has a monopoly on helping the neediest.

Sometimes the two are even joining forces to combat the common invisible enemy.

Saverio Grisell, the Italian co-owner of restaurant Bella Ciao, which usually teems with expats, tourists and affluent Cubans, says he discussed how he could help with the local Committee for the Defense of the Revolution (CDR).

“The president of my CDR gave me a list of 29 elderly people and I decided to give them a meal for free every day,” he said.

Cuba, which has so far confirmed 269 cases of the new virus, has one of the oldest populations in Latin America. The virus appears to be particularly deadly for the elderly, who throughout are the world are seeking ways to stay safely at home rather than go outside and risk contagion.

The CDR now helps Bella Ciao deliver its pizzas and pastas directly to the homes of the elderly.

“It’s a small gesture of solidarity,” Grisell said, noting that it paled in comparison with the help Cuba sent to his home country of Italy last month in the form of medical staff.

Cuba has also long provided subsidized food at eateries for the elderly nationwide, and is now dishing out free meals for those on low incomes.

“It’s admirable,” said Ines Perez, 75, digging into a plate of donated Bella Ciao spaghetti. “Let’s hope everyone comes onboard and cooperates in the same way to overcome this difficult moment.”

SOLIDARITY: A CUBAN VALUE AND GOOD POLITICS

Private restaurants, bed-and-breakfasts, beauty salons, gyms and shops have flourished in Cuba since former President Raul Castro started inching open the economy with market style reforms a decade ago.

However, fears those reforms went too far and have fostered too much inequality have prompted a crackdown in recent years on the sector, which now employs around 600,000 people.

As such, Cuban private businesses likely demonstrate more solidarity than elsewhere not just because it is a value embedded in the culture but also “because it is good politics to exhibit a ‘socialist’ or ‘cooperative’ orientation,” according to Cuba expert Ted Henken at Baruch College in New York.

Whatever their motivation, the solidarity initiatives are going down well – state-run website Cubadebate even did an article on the Bella Ciao project – and show no sign of abating as the number of coronavirus cases slowly mounts.

These days, for example, fashion brand Dador is putting its sewing machines to an altogether different task than their usual one of conjuring up limited edition garments for the runway and its Old Havana store.

Now they are making face masks out of colorful and often patterned cloth.

Co-founder Lauren Fajardo said they had already collaborated with one group that provides assistance to the elderly, donating 160 masks.

“We’d like to focus on getting people masks who need them most,” she added. “Elderly people for example, people in neighborhoods that are very crowded and those who don’t have the option to just stay home because they have to work or find food.”

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Wall Street Week Ahead: Investors look to coronavirus data to support stabilizing markets

NEW YORK (Reuters) – Investors are parsing a broad range of signals, from infection counts to more traditional indicators, for clues on the trajectory markets may take in coming weeks as the pandemic caused by the novel coronavirus continues to spread.

Some point to signs that the worst of a vicious sell-off that took the S&P 500 .SPX down as much as 34% from its record closing high may be fading, though markets remain turbulent and far off their highs.

Volatility has eased from its March peaks. Fewer U.S. stocks are hitting new 52-week lows. Liquidity in fixed-income markets has improved, and credit spreads, while still wide, have come in from their March highs.

“Most of the damaging, indiscriminate selling was reached in mid-March,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services in Atlanta.

Economic indicators like employment data are only beginning to factor in the scale of economic damage wrought by the pandemic, leaving investors looking to various corners of the markets and information on the virus’ spread to gauge the direction asset prices are likely to take.

Investor sentiment, often seen as a contrarian indicator, is one signal pointing to an eventual turnaround in U.S. stocks. Bank of America Global Research’s Sell Side Indicator in March dropped to 54.9%. At that level or lower, U.S. stock returns over the following 12 months have been positive 94% of the time, the bank’s analysts wrote.

Contrarian indicator means bearish investors may presage a bullish market – and vice-versa.

Some investors have also noticed parallels between the spread of COVID-19, the disease caused by the novel coronavirus, and movements in the Cboe Volatility Index , known as Wall Street’s fear gauge.

The VIX, which climbed to its highest levels since 2008 amid the market sell-off, has closely tracked the number of countries where the daily growth of coronavirus cases exceeds 10%, according to Jason Hunter, head of global fixed income and U.S. equity technical strategy at J.P. Morgan.

The index has fallen as the number of countries with a sharp rise in cases has abated.

“Any improvements in that trajectory have the potential to limit the severity of an equity index retest this spring,” Hunter wrote in a research note. “More importantly, how the outbreak story evolves over the summer and into the fall will likely dictate the overall duration and magnitude of the bear market.”

Tracking the number of U.S. states with 10% or higher daily growth in confirmed cases reveals a similar pattern, Hunter found. The index on Friday stood at 48.43, below its all-time closing high of 82.69 on Mar. 16.

For now, the overall numbers look grim. Confirmed U.S. cases surpassed 256,000 on Friday. More than 6,500 Americans have died, according to a Reuters tally of official data, and more than a quarter of those deaths have been in New York City.

(For an interactive graphic tracking the spread of the novel coronavirus in the United, click here: here)

Economic data have been just as dour. On Friday, the Labor Department’s monthly payrolls report showed the U.S. economy shed 701,000 jobs in March, ending a record 113 straight months of job growth. The previous day, the Labor Department reported that weekly U.S. jobless claims hit a record 6.6. million.

That scale of market disruption has made some market participants more doubtful. Investors may be overly optimistic in their expectations for a sharp market rebound even if the number of U.S. coronavirus cases flatlines earlier than expected, said Nancy Perez, senior portfolio manager at Boston Private.

“The market has discounted a V-shaped recovery,” she said. “I don’t know if it’s discounted a U-shaped recovery. When people figure out it’s going to be more U-shaped, we may start giving some of (these gains) back.”

(This story removes extraneous word from headline.)

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Delta, other airlines apply for U.S. payroll grants for crisis help

CHICAGO/WASHINGTON (Reuters) – Delta Air Lines (DAL.N) and JetBlue Airways Corp JBLU.O> said on Friday they had applied for U.S. payroll grants meant to keep workers employed while airlines ride out their toughest crisis in history due to the coronavirus, but warned the funds are “not enough.”

The U.S. Treasury had asked passenger and cargo carriers to apply by 5 p.m. EDT (2100 GMT) on Friday to expedite up to $32 billion in payroll grants for the air industry within a $2.3 trillion coronavirus relief package approved last week. Airport contractors are also eligible for grants.

In a memo to employees, Delta Chief Executive Officer Ed Bastian said the company had applied for its share of worker-protection grants, but “those funds alone are not nearly enough.”

Delta expects a 90% decline in second-quarter revenue.

JetBlue also told employees it “may not get enough to cover pay and benefits at the level you see when we are flying at full capacity.”

Companies were allowed to request the amount they paid in salaries and benefits in the second and third quarters of 2019, and must agree to keep their workforce until Sept. 30, even as they drastically reduce flight schedules to match a dramatic drop in demand.

American Airlines, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, also submitted an application on Friday, a spokeswoman said, without disclosing the details.

American has said it would seek up to $6 billion in grants and $6 billion in government loans under a separate $32 billion funding option for the sector.

American stock hit a record low on Friday.

Treasury had asked companies to propose financial instruments such as warrants or equity options as possible taxpayer compensation, a condition many Democrats and airline labor unions had argued could dissuade airlines from taking money meant to protect workers.

United Airlines Holdings Inc (UAL.O) and Southwest Airlines Co (LUV.N) were also expected to apply, though they have also warned they may still shrink before year end.

Among cargo carriers, FedEx Corp (FDX.N) said it could benefit from certain government relief options after outlining other steps it is taking to save cash and boost liquidity, including slashing its chief executive officer’s pay and drawing down $1.5 billion from a credit facility.

Cargo carriers are suffering from disruption to global supply chains and high-margin business-to-business demand, even as ground-package delivery services increase.

Airlines have also raised debt and taken a series of cost-cutting measures as they ground an unprecedented number of planes and implement new policies on ticket refunds and exchanges in an effort to encourage passengers to book flights.

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Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion, and an equal amount in loans.

Other airlines across the world are also seeking government aid as they brace for a prolonged downturn, with Air France-KLM (AIRF.PA) in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, sources told Reuters.

Planemakers are also preparing for a slump in demand, with Reuters reporting on Friday that Airbus SE (AIR.PA) is studying a sharp cut in output of its top-selling A320 jet series.

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Exxon plays on virus worries in Baytown contract talks: union official

HOUSTON (Reuters) – A union official said on Friday Exxon Mobil Corp is playing on economic uncertainty caused by the coronavirus pandemic in negotiations with workers at its Baytown, Texas, refinery.

The company has begun meeting with union-represented employees in small groups after rejecting two contract extension proposals from the union, said Ricky Brooks, president of United Steelworkers union local 13-2001, which represents hourly workers at Baytown.

“They’ve begun in-house scare and misinformation meetings, leveraging the uncertainty of COVID-19 to get all of their issues and force the union to forego all of its issues,” Brooks said. “They have held the pattern wages hostage if the union moves to go to the table.”

COVID-19 is the disease caused by the new coronavirus. Pattern wages refers to the national pattern agreement reached in January 2019 between the USW International and U.S. refiners that sets wage increases for all USW-represented workers.

Under the proposal rejected in January, pay was set to go up 3.5% in the first year and 4% in the second year. In the third year, the increase would match the pay hike in the new national agreement the USW will negotiate for oil industry workers with energy companies in January 2022.

Brooks said the company has suggested the pay proposals would be less if the two sides go back to the bargaining table.

Negotiations for a new contract to replace the current pact that expires on May 15 began in December with a company-proposed three-year extension that was rejected in January by workers in the 560,500 barrel-per-day refinery and the complex’s laboratory.

Chemical plant workers accepted the extension.

The sticking point for refinery and lab workers is Exxon’s proposal to lengthen by six months the time before a new workers’ wages reach the same level as veteran workers.

Exxon spokesman Jeremy Eikenberry declined to discuss the negotiations.

Even though the current contract expires on May 15, the refinery and lab workers could not walk off their jobs for 60 days nor could Exxon lock them out under an agreement between the company and the union.

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Trump says Bank of America, others doing 'great job' on small-business loans

WASHINGTON (Reuters) – President Donald Trump hailed one of the country’s largest banks, as well as many small lenders, for making small business emergency loans on the first day of a new U.S. coronavirus economic relief program.

“Great job being done by Bank of America and many community banks throughout the country. Small businesses appreciate your work!” Trump wrote in a tweet

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OPEC+ debates biggest-ever oil cut as pandemic crushes demand

DUBAI/LONDON/MOSCOW (Reuters) – OPEC and its allies are working on a deal for an unprecedented oil production cut equivalent to around 10% of global supply, an OPEC source said, after the U.S. president called on producers to stop the market rout caused by the coronavirus pandemic.

The meeting of OPEC and allies such as Russia has been scheduled for April 6, but details were thin on the exact distribution of production cuts. No time has yet been set for the meeting, OPEC sources said.

A global deal to reduce production by as much as 10 million to 15 million barrels per day would require participation from nations that normally have not exerted regulatory control over output, including the United States, now the world’s largest producer of crude.

Russian President Vladimir Putin said on Friday that his country was ready to cut production along with OPEC and the United States, while still blaming Saudi Arabia for the market’s collapse.

Oil prices have fallen to around $20 per barrel from $65 at the start of the year as more than 3 billion people went into a lockdown because of the virus, reducing global oil demand by as much as a third, or 30 million barrels per day. The coronavirus has infected 1 million people worldwide and killed more than 53,000.

Trump said on Thursday he had spoken with both Putin and Saudi Crown Prince Mohammed bin Salman. However, he said he did not make any concessions to Saudi Arabia and Russia, such as agreeing to a U.S. domestic production cut – a move forbidden by U.S. antitrust legislation. Some U.S. officials have suggested U.S. production was set for a steep decline anyway because of low prices.

Trump was scheduled to meet with U.S. oil producers on Friday afternoon. OPEC producers, along with Russia, are waiting to see if the United States commits to any efforts to stabilize the markets, two OPEC sources said.

“The U.S. needs to contribute from shale oil,” an OPEC source said. Russia has long expressed frustration that its joint cuts with OPEC were only lending support to higher-cost U.S. shale producers.

Russia’s energy minister, Alexander Novak, told Russian state media that he understands the United States has legal restrictions on output cuts, but it should still be flexible.

The International Energy Agency warned on Friday that a cut of 10 million barrels per day would not be enough to counter the huge fall in oil demand. Such an output cut would still result in a 15 million barrel per day increase in inventories in the second quarter, said Fatih Birol, the head of the agency.

White House economic adviser Larry Kudlow said Trump will fight any international collusion in energy markets that would hurt U.S. producers, but the administration cannot dictate to oil producers.

“I think … oil companies, seeing a decline in price are going to pull back on production. That’s just common sense,” he said, adding that he sees no reason why Trump’s talks with Saudi Arabia and Russia on oil will not “bear fruit.”

A second OPEC source said any cut must include producers from outside OPEC+, an alliance which includes OPEC members, Russia and other producers, but excludes oil nations such as the United States, Canada, Norway and Brazil.

Canadian Prime Minister Justin Trudeau said he has had direct communication with OPEC and the United States. The Norwegian oil and energy ministry declined to comment on Friday on whether Western Europe’s largest producer could cut its oil output to help support prices.

Jason Kenney, the premier of Alberta, Canada’s primary oil-producing province, said on Thursday that Alberta was open to joining a production-cut deal.

OIL PRICES RECOVER, FOR NOW

Oil prices recovered from the lows of $20 per barrel this week with Brent trading near $33 per barrel on Friday, still half its $66 closing level at the end of 2019.

Prices plunged in early March after Russia and Saudi Arabia could not come to an agreement to curb output. The Saudis shocked the oil industry with an aggressive series of steps to take back market share that included cutting export prices, pumping at maximum production and trying to sell cheaper oil to refiners that buy Russian crude.

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The oil market was dealt a heavier blow by the freefall in demand due to the coronavirus pandemic, which sent crude prices to their lowest levels since 2002, hitting budgets of oil-producing nations and slamming the U.S. shale oil industry, which cannot compete at low prices.

The oil-price crash spurred regulators in the U.S. state of Texas, the heart of the country’s oil production, to consider regulating output for the first time in nearly 50 years.

Major global producers have already scaled back production with or without OPEC, as fuel demand has dropped precipitously and storage is rapidly filling. This past week, U.S. drillers idled more rigs in one week than at any time in the last five years.

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U.S. small businesses flood Bank of America with loan applications

(Reuters) – Bank of America Corp (BAC.N) said on Friday it has already received about 35,000 applications for federally backed small-business loans within hours of starting to accept them.

The second largest U.S. bank by assets became the first major bank to accept applications for the massive small-business rescue program approved by Congress last week. But the bank was already being criticized on social media after its CEO said on CNBC that it was prioritizing existing customers.

“Speed is of the essence here for these types of small businesses,” Chief Executive Brian Moynihan said in a CNBC interview on Friday. “The money will start to go out the door once these applications are processed over the next short period of time.”

Small businesses, which employ about half of U.S. private sector employees, have been hit hard during the outbreak of the new coronavirus, which has caused cities to shut down non-essential businesses. Many people are staying home, which has sharply cut into consumer spending.

Bank of America’s consumer transaction volume fell from an average of $60 billion a week to $40 billion through March, Moynihan said.

Seeking to bail out millions of small businesses and slow unemployment, Congress included $349 billion for small firms in its $2 trillion stimulus package passed last week. Small businesses will need to rely on banks to get the funds.

Banks have been scrambling to prepare for overwhelming demand for the loans while awaiting guidance from the government. As of Friday morning, competitors JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) were not accepting applications on their website.

“Wells Fargo is working as quickly as possible to be ready to assist small-business customers as part of the Paycheck Protection Program (PPP),” a spokesman said in a statement.

Bank of America is prioritizing processing applications for small-business clients that already have a borrowing relationship with the bank, Moynihan said.

“If you borrow from another bank … Please go back to them because they’re your core bank and they know you the best and can process you the fastest,” he said.

It has also drawn criticism from Florida Senator Marco Rubio, who chairs the Senate Committee on Small Business and Entrepreneurship. After hearing from a Bank of America customer who was denied a loan he called the credit account stipulation a “a ridiculous requirement that isn’t anywhere in law,” in a tweet on Friday.

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Swiss double size of coronavirus company loan scheme to $41 billion

ZURICH (Reuters) – The Swiss government said on Friday it was doubling the size of its coronavirus emergency loan scheme to 40 billion Swiss francs ($41 billion) after being flooded with requests for help from businesses.

The government said it would expanded state guarantees after banks extended more than 76,000 loans worth 14.3 billion francs in the first few days of the programme.

The total aid package, which has now reached 62 billion francs, represents a major departure for the normally hands-off Swiss government. Equivalent to nearly 9% of economic output, it is the biggest of its kind in Swiss history.

Small businesses have been particularly hard hit by the virus outbreak and need urgent help, said Finance Minister Ueli Maurer.

“Since last Thursday, every four seconds a loan guarantee has been agreed somewhere in Switzerland,” Maurer told a news conference in Bern.

The government could suffer losses on the loans if the crisis continued for more than three months, Maurer said. If 10% of the loans defaulted that would mean writing off 800 million francs a year for five years, he added.

Health Minister Alain Berset said Switzerand was in a delicate but stable condition as the death toll from the new coronavirus rose to 484 and positive tests topped 19,000.

“Hospitalisations continue to go up but not all beds are taken,” Berset told reporters.

“We have not yet reached the peak for infections or for hospitalisations. Now more than ever we have to continue this marathon.”

Berset said it was still far too early to say if emergency measures – including shutting schools and businesses and banning gatherings of more than five people – needed to be extended beyond April 19.

Businesses have been clamouring for the loans to stay afloat as customers stay away or supply chain problems emerge.

Under the emergency liquidity scheme administered by hundreds of banks including heavyweights UBS and Credit Suisse, loans of up to 500,000 francs are fully secured by the government. Credits of up to 20 million are 85% secured.

Maurer said the focus was on helping small and mid-sized companies rather than big ones such as airline Swiss, a Lufthansa unit, whose situation he called “complicated”.

The government has also adopted powers to force companies to make vital medical supplies such as protective gear and drugs, while easing rules governing unapproved medicines under study against COVID-19 so they can be deployed quickly.

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Ukraine tightens restrictions to fight coronavirus spread

KIEV (Reuters) – Ukraine’s government on Friday imposed a series of new restrictions designed to prevent the coronavirus outbreak spreading widely but said it hoped to soften the measures again in late April.

Ukraine reported 138 new cases of the coronavirus over the past day, taking the total number of infected people to 942 with 23 deaths.

“The coronavirus infection continues to spread in Ukraine. The only way to break the chain of infection and save lives is to strengthen quarantine measures,” Prime Minister Denys Shmygal said in a televised statement.

Last month, the government imposed an emergency regime across the country with the new measures from April 6 additionally prohibiting visits to parks and sports fields, banning gatherings of more than two people, and obliging everyone to wear masks and carry ID cards when outside their homes.

Educational institutions, restaurants, cafes, entertainment and fitness centres remain closed, the government said.

Regional authorities must establish border points with mandatory inspections of passing vehicles, and all arrivals must spend a mandatory 14-days in quarantine.

But Shmygal said that the government could soften the restrictions later this month, starting with the resumption of public transport and allowing people to go to work.

“This will allow us to restart the economy from the beginning of May,” Shmygal said.

Earlier on Friday the government said it had sharply revised Ukraine’s economic outlook, expecting the economy to shrink by 4.8% in 2020 due to the restrictions imposed to prevent the spread of the virus.

It had forecast that the economy would grow by 3.7%. The government also expects inflation will speed up to 11.6% from an earlier estimate of 5.5%.

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