Europe’s energy crisis intensifies again. Britain chooses a new prime minister

The UK lagged behind India to become the world’s sixth-largest economy, dealing another blow to the government in London, which has been struggling with a steep drop in the cost of living. Britain’s fall in the international rankings is not a pleasant backdrop for the new prime minister. British Foreign Secretary Liz Truss said Sunday that she would take immediate action in her first week in office to address rising energy bills and increased energy supplies if appointed prime minister. Truss said she would bravely fight the falling economy, repeating her promise to stimulate growth to fix a long list of problems. The Sunday Times newspaper, citing insiders at the Treasury Department, said the cost of Truss’ plan would easily exceed 100 billion pounds ($115 billion), most of which would be added to government borrowing. The winner with the most Conservative votes will be announced on Monday, and the next day the new prime minister will meet with Queen Elizabeth and ask her to form a government.

Oil prices declined over the summer amid uncertainty about demand prospects due to China’s COVID-19 restraint and as central banks around the world raised interest rates to combat rising inflation, affecting the global economic outlook. The Organization of Petroleum Exporting Countries and its allies, including Russia, are scheduled to meet Monday. Energy traders will be paying close attention to the event, especially after Saudi Arabia raised the possibility of production cuts. OPEC+ last week revised its market balances for this year and now sees demand lagging supply by 400,000 BPD versus the 900,000 BPD previously projected. The producer group expects a market deficit of 300,000 BPD in the baseline scenario for 2023.

This week, the escalating energy dispute between Russia and the West will draw investors’ attention. Moscow has closed its main gas pipeline to Germany for an indefinite period. The closure of the Nord Stream pipeline, which Russia says will last as long as it takes to make repairs, has exacerbated fears of a winter gas shortage that could lead to a recession in major economies and lead to energy rationing. Europe accused Russia of using energy as a weapon in what Moscow called an “economic war” with the West following Russia’s invasion of Ukraine. Moscow blamed Western sanctions and technical problems for supply disruptions.

Asian markets traded lower last week. Japan’s Nikkei 225 (JP225) decreased by 1.81% for the week, Hong Kong’s Hang Seng (HK50) was down by 2.55% for the week, and Australia’s S& P/ASX 200 (AU200) closed down by 3.88% for the week.

In the commodities market, orange juice futures showed the largest rise in price by the end of the week (+5.44%). Futures on gasoline (-13.73%), cotton (-12.3%), copper (-8.01%), Brent oil (-7.63%), WTI oil (-6.24%), palladium (-4.71%), lumber (-4.65%), silver (-4.46%), coffee (-4.14%), natural gas (-3.96%), and soybeans (-2.84%) showed the biggest drop.