Oil hits six-year highs after OPEC Plus fails to reach a deal.
Traders worry that a deadlock means too little oil would reach the markets at a time of growing consumption as lockdowns ease and travel picks up.
Daily Business Briefing
July 6, 2021Updated July 6, 2021, 8:09 a.m. ETJuly 6, 2021, 8:09 a.m. ET
Traders worry that a deadlock means too little oil would reach the markets at a time of growing consumption as lockdowns ease and travel picks up.
Didi drops nearly 30 percent in premarket trading after China orders it removed from app stores.Nextdoor, the social network for neighborhoods, plans to go public.Jeff Bezos steps down as Amazon’s C.E.O., handing the reins to Andy Jassy.The pandemic has brought more automation, which could have long-term impacts for workers.Catch up: Stellantis will build electric cars in Britain.
Oil tanks at a Saudi Aramco facility in Abqaiq, Saudi Arabia. The country, a member of OPEC Plus, has resisted oil production demands from the United Arab Emirates.Credit…Maxim Shemetov/Reuters
Oil prices surged to their highest levels in years on Tuesday, a day after OPEC, Russia and their allies failed yet again reach agreement on production increases. A teleconference planned for Monday never started, following meetings on Thursday and Friday that did not reach a deal.
Brent crude, the global benchmark, rose about 0.3 percent to $77.40 a barrel, while West Texas Intermediate, the U.S. standard, rose 1.7 percent to $76.46 a barrel, its highest in more than six years.
Traders worry that the deadlock in OPEC Plus, the alliance of oil producers, means that too little oil would reach the markets at a time of growing consumption as the effects of the pandemic ease and summer travel booms, and prices will jump.
The United Arab Emirates, which has invested in its oil capacity in recent years, is insisting on higher levels of production over objections from Saudi Arabia, a longtime ally, and other producers. Mediation efforts have so far not bridged the gap, and a new meeting has not been scheduled. The disarray in OPEC Plus raises the risk of a price war among producers, like the one in spring of 2020, but some analysts think the group is more likely to figure out a way of gradually drip-feeding more oil into the market in the coming months, a move that would soften price jumps.
In a note to clients on Tuesday, analysts at Goldman Sachs wrote that many OPEC Plus countries had not made the investments to increase output to meet growing demand, presenting producers like the United Arab Emirates, Saudi Arabia and Russia with “an opportunity to bring production to or near” record levels.
The Saudis, who have the ability to increase their output by more than three million barrels a day from the 8.5 million barrels a day in May, could intervene if the market overheats. The Biden administration has been slow to react to rising prices in recent months, but it is beginning to take notice.
All OPEC Plus members seem to agree on the need to raise output, but the deadlock has so far blocked a deal.
On the table at the meetings was a proposal by Saudi Arabia and Russia to increase production by 400,000 barrels a day each month for the rest of this year, beginning in August, eventually raising total output by two million barrels a day.
The Saudis want to make that increase conditional on extending an OPEC Plus output agreement from spring 2020 beyond its expiration date of April 2022. The United Arab Emirates wants any extension coupled with an upward recalculation of its production quota, which it says does not fairly reflect its current output capacity.
A phone showing the app for Didi, the big ride-hailing company based in China. Since its shares were listed on Wall Street last week, the company has come under regulatory scrutiny by the Chinese authorities.Credit…Alex Plavevski/EPA, via Shutterstock
Didi, the giant Chinese ride-hailing platform, dropped nearly 30 percent in U.S. premarket trading on Tuesday in response to an order by China’s government that the service be removed from app stores less than a week after it went public in New York.
Late on Sunday, China’s internet regulator said there were “serious” problems related to the collection and use of customer data. Without explaining the problem, it said that Didi needed to correct them and “earnestly safeguard” users’ personal information. The drop in premarket trading reflected the first chance investors could react to China’s actions, as U.S. markets were closed on Monday for the July 4 holiday.
Didi Global listed shares on the New York Stock Exchange last week with a $14-a-share offering price. A few days after it went public, the same Chinese regulator issued another surprise announcement, saying on Friday that new user sign-ups on Didi would be suspended while the authorities conducted a “cybersecurity review.” On Friday, its shares closed at $15.53, down 5 percent.
The moves are part of a fast-moving effort by China to control the country’s internet industry. On Monday, the authorities said that user registrations on three other Chinese platforms were being suspended for cybersecurity reviews. The two companies behind those platforms have also listed shares recently in the United States: Full Truck Alliance, which connects freight customers and truck drivers, and Kanzhun, which runs a job-hunting platform.
Both of those companies also tumbled in premarket trading. Full Truck Alliance was down 16 percent, and Kanzhun fell 11 percent.
Global chip shortage
The ongoing crisis of a global shortage of semiconductors hit shares of European carmakers on Tuesday as the companies warned of the impact to deliveries and sales and said that more investment was needed to increase supply. Daimler shares fell 2 percent, leading the Euro Stoxx 50 lower, after it said the chip shortage would impact sales for the next two quarters. BMW shares were also down 5 percent.
Jaguar Land Rover said it expected chip shortages to be even greater in the current quarter than in the past three months, which could result in deliveries being half of what the company had planned. The carmaker said the problem should lessen later in the year but there would be some shortages “through to the end of the year and beyond.” Shares in its parent company, Tata Motors, fell 8 percent in India and about the same in U.S. premarket trading.
Elsewhere in markets
The S&P 500 index was set to open slightly lower when trading begins.
Most European stock indexes were losing ground. The Euro Stoxx 50 index, made up of the eurozone’s largest companies, fell 0.2 percent.
Oil prices jumped to their highest since late 2014 after OPEC and its oil producing allies failed to reach an agreement on proposed production increases, ending a third day of meetings without a deal. Futures of West Texas Intermediate, the U.S. crude benchmark, climbed 2.1 percent to $76.72 a barrel, the highest since November 2014. Brent crude, the global benchmark, rose 0.7 percent to $77.68 a barrel.
The Australian dollar rose 0.6 percent against the U.S. dollar after Australia’s central bank said it would pare back its bond-buying program in September. The Reserve Bank of Australia held interest rates at 0.1 percent and decided against extending its target for bond yields.
Raymond Zhong contributed reporting.
Sarah Friar, the chief executive of Nextdoor, which will be listed on the public markets by way of a special purpose acquisition company, or SPAC.Credit…Peter Prato for The New York Times
Nextdoor, the neighborhood-focused social network based in San Francisco, announced its plans to go public on Tuesday, raising $686 million for the 10-year-old start-up and valuing the company at roughly $4.3 billion.
But instead of completing a traditional initial public offering process, Nextdoor will be listed on the public markets by way of a special purpose acquisition company, or SPAC, a type of financial vehicle that has grown increasingly popular in recent years among tech companies.
Nextdoor’s SPAC will be backed by an affiliate of Khosla Ventures, a blue-chip Silicon Valley firm, and will include participation from firms such as T. Rowe Price Associates, Baron Capital Group and Dragoneer Investment Group, along with existing investors that include Tiger Global.
Over the past year, these buzzy, financial vehicles have come under increased regulatory scrutiny as private equity firms and investors create record amounts of so-called blank check companies in the hunt to take promising start-ups public. Executives at companies like Reddit have mulled going public via SPAC, while hundreds of new SPACs have been created in the first half of 2021 alone.
Sarah Friar, Nextdoor’s chief executive, said in an interview that going the SPAC route made the most sense for the company, allowing it to be more closely involved and counseled by a smaller, more targeted group of investors. Ms. Friar also said it gave Nextdoor a better sense of certainty about how much money it would raise, rather than the riskiness that could come with a traditional I.P.O. process.
“We’ve been prepping for this now for a couple of years,” Ms. Friar said. “We are ready, and we’ll do this right.”
Founded in 2011, Nextdoor rose to prominence early on as a kind of “Facebook for neighborhoods,” slowly meting out invitations to people who lived in specific areas and could form small, tight-knit social groups based on proximity. Using the site’s web and mobile apps, neighbors discussed everything from yard sales to finding child care to concerns about crime.
Nearly 10 years later, Nextdoor has ballooned to more than 275,000 “neighborhoods” across 11 countries. As the network grew, Nextdoor began making money by selling advertising to businesses, which pay the company to post sponsored content inside users’ feeds. Ads run the gamut from national brand marketers to small and midsize businesses to local service providers.
Nextdoor plans to use the new funding to invest in expanding its products and acquire more users, Ms. Friar said, while also using capital to further develop its self-serve advertising platform aimed at small and midsize businesses. It also plans to hire more engineers and other employees.
Critics of Nextdoor have assailed the platform for being a haven for racism and targeted online harassment. Complaints often involve users who have flocked to Nextdoor to lodge racially motivated grievances about their neighbors or to engage in toxic behavior or harassment.
Since Ms. Friar became chief executive in 2018, she has made it a priority to clean up areas of the platform that have created problems. The company has added anti-racial profiling steps and includes ways to make users slow down and become more thoughtful about certain kinds of posts, like those about suspected crimes. Ms. Friar said the new funding would also pay for products that handle such content moderation issues.
In addition, Ms. Friar, the company’s three original founders and its earliest investor plan to contribute a portion of their shares in Nextdoor to form the Nextdoor Kind Foundation, a nonprofit foundation “dedicated to helping neighbors rejuvenate their neighborhoods through targeted grants.” The foundation will solicit ideas from people who want to improve their communities, whether it is to “plant a garden, paint a community center, or repair the playground,” according to the company.
Shares of Nextdoor will be publicly traded on the Nasdaq stock exchange under the stock ticker symbol “KIND.”
On July 20 Mr. Bezos is scheduled to fly aboard the first manned spaceflight of his rocket company, Blue Origin.Credit…Nick Cote for The New York Times
Andy Jassy was elevated to chief executive of Amazon on Monday, taking the reins from its founder, Jeff Bezos, in one of the most closely watched executive handoffs in years.
In recent years, Mr. Bezos has stepped back from much of Amazon’s day-to-day business, focusing instead on strategic projects and outside ventures, like his space start-up, Blue Origin, giving his deputies even more autonomy.
Mr. Bezos, 57, re-engaged on day-to-day matters early in the pandemic. But in February, he announced that he planned to step down from running Amazon and would become executive chairman of the company’s board. On July 20, he is scheduled to fly aboard the first manned spaceflight of his rocket company.
Mr. Bezos anointed Mr. Jassy, 53, a long-serving deputy who built and ran the cloud computing division, to take over as chief executive. Mr. Jassy has worked so closely with Mr. Bezos that he has been viewed as a “brain double,” helping conceive and spread many of the company’s mechanisms and internal culture.
Shifts at the top have trickled down, Karen Weise reports for The New York Times. With Mr. Jassy’s ascent, Amazon Web Services needed a new chief executive. It hired Adam Selipsky, who ran Tableau, a data visualization company that Salesforce acquired in 2019. Mr. Selipsky had worked at AWS until 2016, when the cloud business was a less than a third the size it is now.
Amazon is facing a shift that earlier generations of tech companies experienced as they grew and their strong founders stepped aside, said David Yoffie, a professor at Harvard Business School who served on Intel’s board for 29 years. Even before a founder leaves, executives sense a business is approaching a new era, he said.
“People get the idea that Jeff is going to be transitioning, and that leads people to start thinking about other options,” he said, adding that as companies get large, executives can often find less bureaucracy and more financial upside if they leave.
Shana Gonzales, who owns four Checkers franchises in the Atlanta area, said she has had difficulty finding workers to meet demand.Credit…Lynsey Weatherspoon for The New York Times
An increase in automation, especially in service industries, may prove to be an economic legacy of the pandemic.
Businesses from factories to fast-food outlets to hotels turned to technology last year to keep operations running amid social distancing requirements and contagion fears. Now the outbreak is ebbing in the United States, but the difficulty in hiring workers — at least at the wages that employers are used to paying — is providing new momentum for automation, Ben Casselman reports for The New York Times.
After having trouble finding workers, a Checkers franchisee put in a system from Valyant AI, a Colorado-based start-up that makes voice recognition systems for restaurants, to take drive-through orders. Now customers are greeted by an automated voice designed to understand their orders — including modifications and special requests — suggest add-ons like fries or a shake, and feed the information directly to the kitchen and the cashier.
Self-checkout lanes at grocery stores have reduced the number of cashiers; many stores have simple robots to patrol aisles for spills and check inventory; and warehouses have become increasingly automated. Kroger in April opened a 375,000-square-foot warehouse with more than 1,000 robots that bag groceries for delivery customers. The company is even experimenting with delivering groceries by drone. Other companies in the industry are doing the same.
With air travel off limits, a manufacturer used augmented-reality technology in its factories to bring in experts to help troubleshoot issues at a remote plant.
Technological investments that were made in response to the crisis may contribute to a post-pandemic productivity boom, allowing for higher wages and faster growth. But some economists say the latest wave of automation could eliminate jobs and erode bargaining power, particularly for the lowest-paid workers, in a lasting way.
Automakers are struggling to keep up with demand as a global shortage of computer chips is limits how many cars and trucks they can make.
On Friday Ford Motor, which has been hurt by the chip shortage more than most of its rivals, said it had 162,100 truck and cars in dealer inventories, fewer than half the number it had just three months ago and roughly a quarter of the stocks dealers typically hold, Neal E. Boudette reports for The New York Times. Its U.S. deliveries rose just 9 percent in the second quarter, to 472,260 light trucks and cars, a modest gain from a year-earlier total that had been depressed substantially by the pandemic. That total was also below Honda’s sales of 486,419 for the quarter, a rare instance of the much smaller Japanese company’s outselling Ford.
And on Thursday, General Motors and Toyota Motor said their U.S. sales rose 40 percent for the April-to-June quarter. Honda, Hyundai and Kia all reported sales increases of more than 70 percent in the quarter.
Tesla, the electric carmaker, sold 201,250 cars globally in the second quarter, more than twice as many as in the same period a year earlier, the company said on Friday, suggesting that it was not as badly affected by the chip shortage.
The British auto industry’s prospects for surviving Brexit improved further Tuesday after Stellantis, the newly formed holding company for brands including Fiat, Peugeot, Citroen, Jeep and Opel, said it would build electric cars at an existing plant in Ellesmere Port, near Liverpool. The factory will produce battery powered Vauxhall, Opel, Peugeot and Citroen brand cars and light commercial vehicles starting in 2022, Stellantis said, noting that the British government will provide an unspecified proportion of the 100 million pounds, or $140 million, needed to refit the factory. The announcement comes after Nissan said last week it would build a new generation of electric cars at its plant in Sunderland, England.
BoltBus, the bus service known for offering its passengers Wi-Fi and $1 lottery seats, is shutting down operations indefinitely after months of low ridership during the pandemic, according to Greyhound, its parent company. The discount bus operator announced last month that it was transferring most of its routes to Greyhound so it could “undergo renovations.” BoltBus had suspended service earlier during the pandemic, but its parent company said this week that the operator had no plans to put its buses back on the road.
Tyson Foods is recalling nearly 8.5 million pounds of frozen chicken that may have been contaminated with listeria, the Agriculture Department said. The voluntary recall was issued after Agriculture Department investigators were notified last month about two people who had been sickened with listeriosis, the department said in a statement on Saturday. An investigation found evidence linking those cases to frozen chicken from Tyson Foods, the agency said. Investigators eventually identified three cases linked to the recalled products, including one death, the department said.