Daily Update: December 13, 2021

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

With preliminary data showing omicron to be more contagious but cause less-serious infections, the newest coronavirus variant could have mild effects on the global economic recovery and delay a complete return to pre-pandemic activity.

The full extent of omicron’s health, market, and economic risks isn’t yet realized. After its discovery by South African scientists on Nov. 25, omicron has been identified in more than 65 nations. After countries in the E.U. alongside the U.K. and U.S. implemented restrictions on travelers from South Africa following the discovery, new travel rules and bans on foreigners visiting have materialized from Japan to Israel. Markets reacted strongly, with a broad sell-off on Nov. 26, and some equities have still been burdened with the weight of concerns about omicron in the weeks since. S&P Global Economics characterized omicron as “a wildcard at this juncture” in its 2022 growth outlook.

Overall, market participants foresee omicron simply slowing economic growth and recovering activity for a period of time.

“S&P Global Ratings believes the new omicron variant is a stark reminder that the COVID-19 pandemic is far from over,” S&P Global Ratings Chief Global Economist Paul Gruenwald said in the report. “Over coming weeks, we expect additional evidence and testing will show the extent of the danger it poses to enable us to make a more informed assessment of the risks to credit. Meanwhile, we expect the markets to take a precautionary stance in markets and governments to put into place short-term containment measures. Nevertheless, we believe this shows that, once again, more coordinated, and decisive efforts are needed to vaccinate the world's population to prevent the emergence of new, more dangerous variants.”

Global supply chain constraints have slightly eased going into the last month of this year, but a further surge of coronavirus cases spurred by omicron creates a potential risk of port closures and factory shutdowns that could lead to supply shortages, according to S&P Global Ratings Chief U.S. Economist Beth Ann Bovino.

“The recent pickup in COVID-19 infection rates, particularly abroad and with the detection of several omicron cases in the U.S., increases worries that the U.S. may be heading into another wave this winter… So far, the impact of the current pickup in viral rates on consumer behavior seems to be much lower than previous waves, which suggests people have learned to live with the virus,” Dr. Bovino said in research published today. Nevertheless, “the U.S. economy remained resilient, with consumers seemingly willing to spend despite a pickup in COVID-19 cases—particularly with the detection of several omicron cases in the U.S.—and higher inflation weighing on purchasing power.”

Additional and more encompassing global restrictions on movement have the potential to derail the mobility and oil recovery seen across Asian markets like India and South Korea. But industry sources told S&P Global Platts that in markets like Australia, reopening borders and high vaccination rates will contribute to a stronger gasoline demand recovery.

"We expect Australia's gasoline demand in Q1 2022 to rise by another 5% on quarter,” JY Lim, an oil markets at S&P Global Platts Analytics, told S&P Global Platts. “But there is now a risk of downward adjustment with the emergence of new omicron variant in the country as the government may re-impose measures to contain the virus.” 

"Improved COVID-19 management and rising vaccination rates [will enable] economic activity and mobility to return to pre-pandemic levels, supporting transportation fuels in particular," OPEC said in its monthly oil market report. "Meanwhile, as vaccination rates increase, the impact of the omicron variant is projected to be mild and short-lived."

The oil producer coalition projects that the global economy is likely to consume 99.13 million barrels per day of oil in the first quarter of 2022, marking an increase in confidence to the tune of 1.1 million barrels per day from its November forecast when concerns about the omicron variant threatened to disrupt OPEC’s planned output hikes, according to S&P Global Platts.

Today is Monday, December 13, 2021, and here is today’s essential intelligence.

The Credit Cycle

Default, Transition, And Recovery: 2020 Annual Emerging And Frontier Markets Corporate Default And Rating Transition Study

Global economic activity abruptly slowed at the end of first-quarter 2020 as governments around the world instituted stay-at-home orders, mandated business closures, and imposed travel restrictions to curb the spread of COVID-19. The sudden global recession led to a sharp tightening in financial conditions and caused credit quality to rapidly deteriorate among corporate issuers rated by S&P Global Ratings in emerging and frontier markets.

—Read the full report from S&P Global Ratings

Default, Transition, And Recovery: 2020 Annual Mexican Structured Finance Default And Rating Transition Study

S&P Global Ratings believes the new omicron variant is a stark reminder that the COVID-19 pandemic is far from over. Although already declared a variant of concern by the World Health Organization, uncertainty still surrounds its transmissibility, severity, and the effectiveness of existing vaccines against it.

—Read the full report from S&P Global Ratings

Technology & Media

Cloud Migration Accelerates As Pandemic Heightens Cybersecurity Concerns

Companies worldwide are accelerating a move to cloud computing as they seek to reduce cybersecurity risks and support a pandemic-fueled rise in remote work. Spending on enterprise cloud services likely will surpass that on non-cloud enterprise information technology within the next few years, according to a November report from Gartner.

—Read the full article from S&P Global Market Intelligence

Power Sector Races Against Multiplying Cyberthreats

The electricity sector is grappling with an unintended consequence of the global energy transition: A greener, smarter, and more interconnected power grid is also more vulnerable to cyberattacks. The influx of millions of smaller energy assets, from wind turbines and solar panels to electric vehicles and smart home devices, vastly increases potential entry points for hackers.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Infographic: Bridging Asia's Climate Gap-Top 10 Emitters

The top 10 CO2-emitting countries in the Asia-Pacific face an uphill challenge to meet their COP26 commitments. Platts Analytics' Future Energy Outlook shows an extraordinary effort will be needed to meet a 2-degree global warming target by 2050, which implies a 1.5-degree target will be out of reach without greater ambition.

—Read the full article from S&P Global Platts

Supreme Court's Review Of EPA Authority Carries Far-Reaching Implication

The U.S. Supreme Court's review of the U.S. Environmental Protection Agency's authority to regulate power plant emissions could have implications that go far beyond the agency's ability to curb pollution from the electricity sector. Specifically, the court's 6-3 conservative majority may be poised to use the case to effectively overturn or limit what is known as Chevron deference.

—Read the full article from S&P Global Market Intelligence

'Responsibly Sourced' Tag Could Shift From Bonus To Necessity For Gas Drillers

Shale gas drillers face increasing market pressure to have their product certified as "responsibly sourced," even though gas awarded the designation might not fetch a premium price. Industry players have begun responding to concerns over greenhouse gas emissions in the natural gas supply chain by competing to offer the cleanest supplies, and certification offers a way to assure buyers that drillers are limiting methane emissions at their production and gathering operations.

—Read the full article from S&P Global Market Intelligence

Supply-Demand Gap A Key Challenge For Recycled Plastics Sector

All plastic bottles made from polyethylene terephthalate moving through the California recycling system must contain at least 15% post-consumer resin, or PCR, by 2022. California is the first state to impose a PCR mandate, under Assembly Bill 793 signed by Governor Gavin Newsom in September 2020. That percentage will increase to 25% by 2025 and 50% by 2030.

—Read the full article from S&P Global Platts

ExxonMobil Urges Financiers To Push For Carbon Pricing, Low-Carbon Incentive Policies

ExxonMobil's Low Carbon Solutions business was created in March to commercialize technologies like carbon capture and storage, biofuels, and hydrogen. In November, the company announced a $15 billion investment over the next 6 years to reduce greenhouse gas emissions from its operations, with a significant portion of that amount going towards Low Carbon Solutions.

—Read the full article from S&P Global Platts

South Korea's Rental Car Companies Seen Leading Auto Transport Sector's Green Fuel Switch

Rental car companies are expected to play a big part in the South Korean automobile transport sector's fuel switch from gasoline and diesel to greener energy, with SK rent-a-car and Lotte Rental absorbing a significant portion of the country's annual electric vehicle sales, industry and market participants said Dec 10.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

Watch: Market Movers Americas, Dec 13-17: U.S. Watches For Sanction Evasion, Holidays Support Shipping Rates

In this week's Market Movers Americas with Jennifer Pedrick: U.S. watches for sanction evasion as US-Iran nuclear talks reach a pivotal point (00:20); container shipping rates from Asia to North America could rise starting this week (01:05); U.S. coal prices remain bearish into Q1 (01:38); California grid operator looks to expand past the real-time market (02:16).

—Watch and share this Market Movers video from S&P Global Platts

Egypt Emerges As Key LNG Supplier To Turkey In Q4

Egypt has emerged as a key supplier of LNG to the Turkish market, with seven cargoes already shipped so far in the fourth quarter of 2021, data from S&P Global Platts Analytics showed Dec. 9. Turkey is set for record high gas demand in 2021—of as much as 60 Bcm—on the back of strong consumption in the power sector.

—Read the full article from S&P Global Platts

Bipartisan U.S. Lawmakers Urge White House To End Talk Of Crude Export Ban

Urging the White House to end consideration of a U.S. crude export ban, a bipartisan group of lawmakers said reimposing the restrictions would increase U.S. gasoline prices, curb domestic production, restrict global supply, and pose other serious economic threats. The four Democrats and four Republicans in the House of Representatives detailed the potential unintended market impacts in a Dec. 9 letter to President Joe Biden.

—Read the full article from S&P Global Platts

U.S. Trade Agency Favors Extending Solar Tariffs, Despite Developer Opposition

The U.S. International Trade Commission recommended that President Joe Biden extend import tariffs on solar cells and modules for another four years. The commission, known as the USITC, said in a Dec. 8 report that while domestic solar manufacturers have made a "positive adjustment" to foreign competition since the tariffs were imposed in 2018 by former President Donald Trump, companies in the U.S. continue to require trade protection "to prevent or remedy serious injury."

—Read the full article from S&P Global Platts

Interview: Oil's Surge May Do Little To Derail India's Petrochemicals Growth: SABIC

India is witnessing strong petrochemicals demand recovery and the rise in crude prices is unlikely to create hurdles for the sector which is expected to grow faster than the country's GDP in the foreseeable future, Janardhanan Ramanujalu, SABIC's vice president and regional head for South Asia, Australia, and New Zealand, told S&P Global Platts.

—Read the full article from S&P Global Platts

'Lights Will Stay On' This Winter In Texas, Regulator Says, But Some Miss Deadline

Touting a series of unprecedented power grid reforms, additions of new generating facilities, and coordination with natural gas suppliers, Texas' top electric utility regulator guaranteed the state would not experience a repeat of the catastrophic blackouts from February's rare winter blast.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.