In the month-and-a-half since Russia invaded Ukraine and at a time when most western energy companies have self-imposed purchasing embargoes on Russian oil which has led to record discounts for Russian Urals crude oil amid increasingly more aggressive sanctions, energy traders have been closely watching flows in the oil market to see what happens next: will Russian oil output tumble as a result of sanctions (and lead to eventual capping of Russian pipelines as domestic storage overflows), or will Russia find enough demand from “friendly” countries such as India and China to offset the lack of demand from Western nations.

Today we got an important update: first, we learn that overall Russian oil output dropped the most in almost two years in early April as some buyers looked elsewhere for their energy supplies following the invasion of Ukraine. According to Bloomberg, if this is maintained for the whole of the month, it would be a decline of about 500,000 barrels a day from March, the most profound drop in Russia’s output since it made deep cuts alongside OPEC+ in the initial stages of the Covid-19 pandemic.

Data from the Energy Ministry’s CDU-TEK unit seen by Bloomberg showed that Russia pumped an average 1.436 million tons a day of oil from April 1-6, equivalent to some 10.52 million barrels per day, and a reduction of 4.5% from the March average of 11.01 million barrels per day, according to Bloomberg calculations, a number which was confirmed by Deputy Prime Minister Alexander Novak, who told Interfax that Russia’s oil production this month may decline 4%-5% from March “due to changing logistics of crude shipments and potential issues with tankers.” Russia’s domestic demand for oil products has also dropped amid uncertainties over the country’s economic growth. That double blow has forced refineries to reduce their processing volumes amid overstocking as discussed here.

Comparing this drop to the global post-covid lockdown, in May 2020, the first month of the post-pandemic agreement between the Organization of Petroleum Exporting Countries and its allies, Russia cut production by a historic 17.1%.

While only a handful of countries, including the U.S. and the U.K., have explicitly banned purchases of Russian oil and petroleum products with most European nations leaving a sanctions loophole open for critical Russian energy, some traditional buyers are shunning the fuel with self-imposed sanctions, even as others, Asian buyers, continue to aggressively purchase the country’s energy supplies.

Which brings us to the next point: while overall Russian oil exports are down, far more Russian cargoes are now heading to China, India, Korea and Japan, where customers either can’t resist the temptation of cheaper crude – recently Russian Urals brent was offered at a nearly $40 discount to spot – or are struggling to find replacement barrels. A tangent here: as the US is draining its strategic petroleum reserve to score political points for the Democrats, China is busy stocking up on its own crude in what Zoltan Pozsar hinted may be preparation for war.

And after an initial tentative period where Chinese banks were said to balk at providing letters of credit, it appears that concerns have largely been swept under the rug, and cargoes of Russian Sokol crude from the Far East have sold out for next month in a sign that Russian shipments not only continue to find buyers but have in fact risen substantially. According to Bloomberg, May-loading cargoes from the Sakhalin-I project will be delivered to buyers in Japan, South Korea, China and India on a spot or term basis. Sokol yields a lot of diesel, and it can be shipped to nations in north Asia within a week.

The number could rise even more: during a conference call on Thursday, Band of America’s energy analyst Francisco Blanch said China could “arguably” import an extra 2m b/d of crude oil from Russia (presumably once all the covid-related lockdowns are removed) which would more than make up for all losses of western demand so far. It would also accelerate the shrinkage of the petrodollar now that Russia and China have an agreement to transact in yuan and/or rubles.

And speaking of (interrupted) Chinese demand, Bloomberg also writes that tankers carrying 22 million barrels of Russian, Iranian and Venezuelan oil are piling up off China, according to Kpler, as the country battles a virus outbreak that’s sapping demand and causing logistics problems. China is the world’s largest crude importer, and has been one of the only buyers of sanctioned Iranian and Venezuelan oil over the last few years, openly flaunting US sanctions on Iran then, and Russia now.

Of course, sooner or later Chinese ports will reopen and its economy will be in overdrive (especially now that Beijing has conceded to more monetary stimulus). That will only exacerbate the latest inflationary trend – according to Bloomberg analysis, the war in Ukraine is starting to drive up the cost of transporting oil around the world. While the invasion caused an immediate surge in the price of hauling Russia’s own barrels, the rally is increasingly filtering through to other oil trade routes, in part because companies are avoiding hiring the nation’s giant tanker fleet. Surging freight would be just another example of how the war is roiling oil, energy and commodity markets, and is an example of one of the side-effects of the Bretton Woods 3 world described by Zoltan Pozsar.

Finally, speaking of Bretton Woods, Russian coal and oil paid for in yuan is about to start flowing into China – several Chinese firms used local currency to buy Russian coal in March, and the first cargoes will arrive this month, Chinese consultant Fenwei Energy Information Service said.

Perhaps realizing that the world is finally splintering in a half that is still reliant on the petrodollar and another half that isn’t, and also realizing that it has already lost China, overnight Joe Biden’s top economic adviser said the administration has warned India against aligning itself with Russia, and that U.S. officials have been “disappointed” with some of New Delhi’s reaction to the Ukraine invasion. “There are certainly areas where we have been disappointed by both China and India’s decisions, in the context of the invasion,” said the director of the White House National Economic Council, Brian Deese. In response, India pointed out that when it followed sanctions against Iran, the US looked the other way while China consistently broke them.

Because in the end, what goes around, comes around.

Authored by Patricia Tolson via The Epoch Times (emphasis ours),

As the battle between Florida and Disney escalates following Gov. Ron DeSantis signing the “Parental Rights in Education” bill into law, one Sunshine State lawmaker says Disney “stepped in quicksand and made a drastic unforced error.”

As The Epoch Times reported April 1, DeSantis floated the possibility at a March 31 press conference in Ponte Vedra Beach that lawmakers in the Sunshine State might repeal the 1967 Reedy Creek Improvement Act in response to Disney’s ongoing opposition to the recently signed “Parental Rights in Education” law, dubbed by liberal opponents as the “Don’t Say Gay” bill. State Rep. Spencer Roach, a Republican, revealed through social media that lawmakers had already met twice to discuss the idea, saying “if Disney wants to embrace woke ideology, it seems fitting that they should be regulated by Orange County.”

The announcement came as part of the ongoing feud between Disney and the state of Florida since the governor signed the bill into law. Previously silent about the bill until he faced backlash from a minority of Disney’s LGBT employees, Disney CEO Bob Chapek issued a statement on March 11, apologizing to them for not being a “stronger ally.” In a show of action, Chapek also announced Disney would put an immediate stop to all political donations in Florida. In a subsequent demonstration of solidarity, Disney Corporation issued a statement vowing that its new goal was to have “this law to be repealed by the legislature or struck down in the courts” and to support organizations working to make that happen. DeSantis quickly reminded Disney that Florida “is governed by the interests of the people of the state of Florida—it is not based on the demands of California corporate executives.”

Recent polling shows the overwhelming majority of Florida’s primary voters, including a significant majority of Democrats, strongly support this legislation. Breitbart reported that “a flood of families are canceling Disney memberships” to their amusement parks and the Disney+ streaming service. The hashtag, “BoycottDisney” trended on social media and one of the largest mothers’ advocacy organizations in the United States, Moms for Liberty, has warned Disney of the pushback it will face if it does not stop interfering with Florida’s laws.

“CEO Bob Chapek needs to be removed,” Roach asserted on social media April 3. “A man obsessed with sexualizing 4-year-olds should not run a company that built its brand on preserving the innocence & magic of childhood.”

“I think Disney leadership is well aware they have stepped in quicksand and made a drastic unforced error,” Roach told The Epoch Times. “I think they are aware of how badly they’ve messed up here and the only way they can get to détente on this is Bob Chapek is going to have to go. I think his days are numbered and he’s going to be out as CEO in very short order. Whoever comes in is going to have to publicly acknowledge to some extent that Disney is not going to be held hostage by a small number of employees who think they can dictate Disney’s political stance and if some employees don’t like that they are going to have to leave.”

Roach said he has been to a dozen campaign events over the past few weeks and it’s very clear that “people are outraged.” At this point, Roach believes the only way for Disney to save face is to acknowledge they didn’t read or understand the bill and they are going to stop meddling in Florida’s legislative affairs. He also suggests Disney make a clear statement affirming or reaffirming their support of parental rights in Floria.

While he would not provide names, Roach also said he has had numerous discussions with Disney lobbyists who have been very vocal in advising corporate leadership that they are very badly mistaken about the political climate in Florida and they strongly advised them to stay out of it. But the executives in California “did not heed that warning.”

‘It’s Also Disney Making Money’

In the “strategic gamble” against Florida’s Parental Rights legislation, James Bailey—professor of leadership at George Washington University’s School of Business—told the Washington Examiner that Disney knows what it’s doing.

“For Disney to step up and say, ‘Hey, we’re a progressive company, and you can’t tell us what to do,’ is actually helping their reputation,” Baily told The Washington Examiner. “And so, this is Disney being Disney and adhering to their values, but it’s also Disney making money.” Baily further argued that “Disney has accountants, marketing people, and focus groups that have been able to suss out that their business model will be better off by pushing back on the legislation.” While there is a risk of losing some conservative customers, Baily believes the move could gain some new liberal customers.

Conversely, Roach contends the business model of gaining some new liberal customers while sacrificing conservatives in a state where registered Republican voters recently overtook Democrats by 100,000 is not a winning strategy.

“Perhaps in California,” Roach said. “A lot of the executives of Disney live in a California bubble.” Roach also believes Chapek’s apologies and promises to have the law overturned is a political gamble based on ignorance, scripted talking points, and a lot of bad advice.

“The information that Bob Chapek has been receiving is flat out wrong,” Roach argued. “Despite the fact that we have a strong Disney presence in Florida, this is a California company with California values. Chapek is a man who was raised in Chicago and lives in California. I don’t have any idea how often he actually comes to Florida, but I have to believe he is getting his advice from corporate executives in California. I would be absolutely shocked if Chapek actually took the time to read the seven-page bill. I’m sure he didn’t. He got his talking points from someone in California.”

It’s a sentiment shared by DisneyBizJournal.com editor and Disney shareholder Ray Keating.

“Here’s a suggestion for Disney CEO Bob Chapek: Get back to business, that is, excellence in storytelling, and stop wasting shareholders’ money on political crusades that have nothing to do with Disney’s business,” Keating told Fox News Digital. “We all have the right to have our voices heard on issues, but not on the shareholders’ dime.”

Roach predicts this is the “very beginning of the shareholder revolt.”

“I think the executives at Disney are well aware that they have made a very critical error and I think their shareholders are starting to respond,” Roach asserted. “The problem with woke corporations is they fail to realize that they exist to serve their shareholders, not their employees. What happened at Disney has happened at many other corporations, a very small minority of woke radical progressive employees putting pressure on management to speak out on political issues and many times, management is hijacked by these folks thinking it represents a broad consensus of public opinion when it actually doesn’t. Ultimately, the shareholders will make a decision on whether Bob Chapek gets to keep his job, not the employees. So, I think you have a real disconcerted corporate model here where a lot of people in the public and employees seem to forget that the shareholders who drive these decisions at companies, not the employees.”

Repeal of Reedy Creek More ‘Opportunistic than Retaliatory’

While some have accused DeSantis of trying to punish Disney with a show of “post-Trump authoritarianism,” Roach insists the move to repeal Reedy Creek is more “opportunistic than retaliatory.”

“In the past, it was politically impossible to try to dismantle Reedy Creek because of the overwhelming political power Disney has had in the state of Florida,” Roach told The Epoch Times. “But now they are politically vulnerable.” According to Roach, Disney’s political clout is at a “55-year low.” Republican candidates are even returning Disney’s campaign contributions. “This egregious error Disney has made has provided a politically opportunistic time to capitalize on this moment for us to correct this free-market apparition,” Roach said.

According to Roach, Reedy Creek has been hotly debated and seriously questioned for years. DeSantis said the repeal would not be entirely retaliatory, but rather made as part of a larger effort to strip Disney of what he called “special privileges.” Repeal, Roach said, is “an opportunity to correct something that should have [been] fixed a long time ago.”

There are numerous other amusement parks in Florida. As Roach explained, the “special privileges” Disney takes for granted are numerous and unique to Disney alone. Of the near 40 square miles of land Disney controls, Reedy Creek exempts all of that land from “all county and nearly all state regulations.” This means Disney is exempt from impact fees, building codes, surface water control, drainage, and all waste treatment regulations. In fact, Roach said Disney even gets to pick the residents—of which there are only 36—who live in the “state-cities” they’ve created in Bay Lake and Lake Buena Vista.

“The problem with this now is they are straying away from what [Disney’s] original vision was,” Roach said.

As Roach explained, it’s not just the theme parks anymore. Disney has had long-laid plans to build a $300 million movie studio on the property. There’s a fourth, out-of-this-world expensive Disney-owned hotel where the most modest package starts at $4,809 on weeknights. Disney also has plans for a new apartment complex and expansive residential communities. Disney is also working on plans to develop a business park and transfer jobs to the Sunshine State from its California operation.

“When you look at the developers and businesses that want to invest there, Disney has an absolute advantage because they don’t have to comply with all of the state and county regulations,” Roach clarified. “Reedy Creek is an absolute perversion of the free market system. It is the largest privately controlled taxing district in the state of Florida, maybe in the United States. The problem with Reedy Creek is we never should have done this in the first place. It’s absolutely anti-free market. There are multiple theme parks near Orlando Osceola County/Orange County area, seven to 11 others. None of them have this special carveout. Only Disney. So it’s absolutely anti-free market and an enormous tax windfall for Disney. The largest tax evasion scam in the history of the state of Florida and possibly in the United States.

“I suspect that Bob Chapek’s days as CEO are numbered,” Roach reiterated. “He will be a casualty of this, and I hope Disney will come out with some kind of statement reconfirming their commitment to parental rights in Florida and acknowledging they are not going to be held hostage by a group of radical, progressive employees who do not speak for the majority of Florida voters or even a majority of Disney employees.”

The Epoch Times reached out to Disney CEO Bob Chapek for comment but received no response.

How’s this for interesting timing?

Just days after Elon Musk – a self-described “free speech absolutist” – unveiled a 9.2% stake in Twitter and was rewarded with a seat on the company’s board, eliciting cheers from Republicans and conservatives who have long seen their speech suppressed on the platform, the NYT’s executive editor has reportedly ordered the paper’s army of reporters (many of whom are among the platform’s most closely followed journalists) to reduce the amount of time they spend tweeting.

The order from the NYT comes as Musk has promised to make ‘significant improvements’ to the platform. He had previously opined that the Twitter algorithm should be open source. Conservatives have also used the platform to lobby Musk to reinstate Trump’s twitter account.

Citing an internal memo, Business Insider reports that NYT Executive Editor Dean Baquet on Thursday ordered his staff to consider a Twitter “reset”, and that using the platform is now “purely optional” for its journalists.

“If you do choose to stay on, we encourage you to meaningfully reduce how much time you’re spending on the platform, tweeting or scrolling, in relation to other parts of your job,” he wrote.

He also claimed the NYT would step up efforts to support reporters who find themselves on the receiving end of “harassment” on the platform (following the viral interview with former NYT staffer Taylor Lorenz, who wept during an interview with MSNBC while describing the targeted harassment she has experienced on social media).

“This is an industry-wide scourge, but we are determined to take action,” he wrote.

Baquet also demanded that reporters and all NYT employees refrain from attacking one another on the platform.

Baquet also said that “tweets or subtweets that attack, criticize or undermine the work of your colleagues are not allowed.”

We can’t help but notice how this last requirement follows an incident at rival the Washington Post, where reporter Felicia Sonmez publicly attacked her editors for barring her from covering issues related to sexual assault (a lawsuit she filed against the paper was later thrown out by a judge).

But left-wing journalists aren’t the only ones who are clearly anxious about Musk’s plans for Twitter. Several Twitter employees have anonymously complained to media outlets about their ‘concerns’ that Musk might roll back policies governing ‘harmful’ and ‘abusive’ content on the platform.

By Simon White, Bloomberg Markets Live commentator and reporter

Recent days have seen a phenomenon anathema to asset managers — stocks and bonds both falling together. Unfortunately, this is something we’ll have to get more used to.
 
The most recent bond-and-stock flop was prompted by Fed Governor Lael Brainard’s hawkish comments on Tuesday, but it is something becoming increasingly common. Over 20% of days over the last year saw lower stocks and lower bonds, with this percentage rising quickly since the pandemic.

Sure, the percentage of days where both stocks and bonds have both gone up has also increased, but not to the same extent and, anyway, asset managers don’t lose much sleep when their holdings rise. The negative correlation between stocks and bonds that is a built-in axiom to the asset-management industry and the cornerstone of 60/40 portfolio construction is a historical anomaly. Only about 30% of the last 100 years has had a negative stock-bond correlation, with the bulk of that period occurring since the millennium.
 
Rising inflation and concomitantly rising yields are pushing the stock-bond correlation higher. Currently, it sits at about zero, but looking historically we can see that higher yields are generally consistent with a continued rise in the correlation.

This makes life difficult for holders of portfolios with stocks hedged with bonds. That was certainly the case in the high-inflation 1970s. While a portfolio of 60/40 stocks and bonds apparently did well, nominal variables become misleading in high-inflation periods and everything needs to be viewed in real terms. A 60/40 portfolio made almost 50% in the 1970s in nominal terms, but in real terms it actually lost almost 30%!

With bonds increasingly becoming a Texas Hedge, what are holders of 60/40-like portfolios to do?
 
Well, there are no great alternatives to government bonds as a hedge for stocks. Corporate bonds have an even greater correlation to stocks than government debt, so they are not particularly suitable. Commodities’ correlation with equities has fallen, but as a market it has considerably less depth and size than sovereign debt. Gold has a similar problem. Buying downside protection on stocks helps, but this does not provide a smooth return profile.
 
Which leads asset managers back to TINA – There Is No Alternative – loading up on more equities and hoping for the best. It is not destined to end well.

There are widespread reports that House Speaker Nancy Pelosi is scheduled to arrive in Taiwan on Sunday, which some are still chalking up to “rumor” given that neither Taipei officials nor Pelosi’s office have confirmed the trip, which would be the first time since 1997 that a US House speaker visited the island (when Republican Newt Gingrich did). 

Beijing was quick to slam the trip, urging the US to cancel it immediately, with Chinese Foreign Ministry spokesman Zhao Lijian saying China opposes all forms of such official interaction between the US and Taiwan. He lodged official protest, saying it would violate “one-China” understanding between Beijing and Washington and further would falsely signal pro-independence forces – for which a forceful response would be warranted. 

Zhao said in a press briefing, “If she does visit, China will take strong measures and the consequences will be borne by the US,” according to Bloomberg, though without providing details as to what these threatened consequences would be.

She’s expected in Japan this weekend, and it’s being reported from there she’ll head to Taiwan, with NBC writing that “The possible visit has not been confirmed by Pelosi’s office or Taiwan’s government, but some Japanese and Taiwanese media reported it would take place after she visits Japan this weekend.”

While there have been about a half-dozen US official delegation visits to Taiwan over the last couple years, Pelosi would be by far the most high profile current US government figure, also given that as House speaker she’s second in the presidential line of succession after the vice president.

Taiwan’s Ministry of Foreign Affairs (MOFA) spokeswoman Joanne Ou has not yet confirmed the visit. She merely said all “friends” in the US have an invitation to visit the democratic-run island. “We will make details of any such trip public when we are able to do so,” Ou said.

That’s an almost unprecedented provocation by the U.S.

Since the re-establishment of diplomatic relationships between both countries, the very basis of the relationship is the One-China policy.

Such a visit is akin to saying “this is over”.https://t.co/AgvBT4IhCZ

— Arnaud Bertrand (@RnaudBertrand) April 7, 2022

Interestingly, regional media cited the following: “…her Taiwan trip was designed as a display of US support amid fears that China might try to emulate Moscow and launch an invasion of its neighbor,” according to unnamed officials. There’s been this concern out of Washington and the West from nearly the beginning of the Ukraine crisis, especially given that for the past year or more China’s PLA military has flown weekly or near-daily jet sorties near the island.

Authored by Kat Dwyer via The Epoch Times (emphasis ours),

Inflation is hitting voters where it hurts the most, forcing policymakers to pay attention—and revealing the economic illiteracy of the Left. 

Rather than acknowledging that reckless fiscal and monetary policy are to blame, Democrats have turned to their favorite boogeyman to explain the sharp increase in prices: corporate greed. From “big poultry” to “big oil,” Democrats are eager to scapegoat their harmful economic policies.

This week their political theater is on full display with Democrats dragging oil executives before the Energy and Commerce Subcommittee on Oversight and Investigations to determine what’s driving up the price at the pump and why these companies haven’t expanded production.

Subcommittee Chair Diana DeGette (D-Colo.) explained the purpose for the hearings in a statement: “We want to know what’s causing these record-high prices and what needs to be done to bring them down immediately.“

Is she kidding? By now, the reason should be obvious. 

Inflation is ultimately the result of expansionary monetary policy. In response to the Covid pandemic, the Fed dramatically increased its quantitative easing program and kept interest rates near zero, both of which flooded the economy with money, expanding the money supply by 40 percent over the course of the past two years. 

At the same time, the government’s fiscal policy was also stimulative, with a gush of transfer payments that further goosed demand. These two approaches combined over stimulated demand in the market at a time when supply had been seriously hampered because of the pandemic and the government’s draconian response to it. The result? A classic inflationary tale of too many dollars chasing too few goods.

Government-mandated lockdowns decimated demand during the pandemic bringing the price of Brent crude down to $0 a barrel. Once government restrictions began to lift and the economy began to rebound, demand for oil surged. Suppliers have been trying to play catch up ever since. 

Likewise, the Biden administration from day one has clearly communicated its goal to phase out fossil fuels — from canceling the Keystone XL pipeline and pausing federal oil and gas leasing, to setting net-zero goals and making controversial anti-fossil fuel nominations. The industry would be stupid not to internalize this message. Why would they invest in new oil and gas exploration or pipeline construction with the amount of uncertainty their industry faces? Naturally, Democrats obscure the connection. 

Expanding production requires capital investment which requires some level of confidence that policymakers won’t throw sand in the gears of your operation. Perhaps the Democrats’ climate messaging has been nothing more than political red meat for its voter base, but in the real world, words have meaning, and telling an industry that your policy goal is to make it obsolete doesn’t encourage new investment or growth.

To further illustrate this point, a recent survey by the Federal Reserve Bank of Dallas found that 59 percent of oil and gas executives said pressure from investors is the primary reason major companies are restraining production growth. In a similar vein, White House National Climate Advisor Gina McCarthy recently stated, “[U.S. climate policy] is not a fight about coal anymore. It is a challenge about natural gas and infrastructure investments because we don’t want to invest in things that are time limited. Because we are time limited.” 

Gee, I wonder what’s spooking investors?

Others are taking a different, though equally backward approach. The “Big Oil Windfall Profits Tax Act,” introduced by Sen. Sheldon Whitehouse (D-R.I.) and Rep. Ro Khanna (D-Calif.), would put a 50-percent-per-barrel tax on the difference between crude oil prices and the average between 2015 and 2019, with revenues returned to consumers as a rebate.

Not to be outdone, Socialist Bernie Sanders has proposed the “Ending Corporate Greed Act,” which would slap a 95 percent tax on excess profits of corporations with more than $500 million in yearly revenue. Sanders noted that had this act been in place last year, Chevron Corp. would have paid an additional $12.9 billion in taxes.

Now, one could rightly argue that this is a craven political move meant to appease key constituents ahead of the midterm elections, motivated solely by cratering poll numbers. But something more harmful is afoot here. Increasing the tax burden on these companies will increase costs, which they’ll pass on to consumers in the form of higher prices.  Meanwhile, flooding the economy with more government-issued checks will further stoke demand, which will, in turn, exert upward pressure on prices. 

Others on the progressive left have called for price controls or more stimulus checks or antitrust action. All of these ideas would just exacerbate the problem. A better solution would be to tighten the Fed’s loose monetary policy, reduce the tax burden, and untangle our ever-growing web of regulation, but don’t hold your breath for such logic to prevail. It’s unsettling to see serious calls for such harmful and economically illiterate policy proposals. But what do we really expect? After all, it’s what the government does best: propose backward solutions to problems it created in the first place.

Kat Dwyer is a Young Voices contributor and co-host of the Whiskey Bench podcast. Her writing has appeared in the National Review, Washington Examiner, and others. Follow her on Twitter @KatJDwyer.