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Saudi output cuts and record demand have pushed crude prices 26% higher this quarter

An almost uninterrupted rise in oil prices has pushed benchmark Brent crude close to $100 a barrel, posing a new challenge for central banks in their battle against inflation.

The rise is a victory for Saudi Arabia, which sought to bolster prices to fund a planned transformation of its oil-dependent economy. Russia, which depends on energy income to finance its war on Ukraine and joined Riyadh in slashing supplies, is another winner. The two countries sparked the rally early this month when they said they would restrict supplies until the end of the year.

Record levels of oil demand—fueled by unexpected economic strength—have outstripped production. As a result, traders and petroleum refiners are draining oil stockpiles at a rapid clip. Many analysts expect crude prices to keep rising, which would feed into higher fuel bills, quicker inflation—and, potentially, higher interest rates.

The Federal Reserve is expected to hold rates steady on Wednesday while leaving the door open to further increases. The central bank excludes volatile energy markets when it sets borrowing costs. But surging oil prices trickle into inflation of other goods and services. That could prop up price pressures while slowing the economy—the scenario that the Fed and investors hope to avoid.

Brent crude futures, the international energy benchmark, have risen 26% this quarter. On Tuesday, they closed at $94.34 a barrel, their second-highest mark of the year, after rising in 13 of the past 17 trading days. West Texas Intermediate futures, the U.S. benchmark, have jumped 29% this quarter to $91.20 a barrel.

“This clearly risks pushing…inflation slightly higher again,” said David Fyfe, chief economist at commodities data firm Argus Media. “It is something that may encourage, through the end of the year, further interest-rate hikes.”

Gasoline prices have jumped to a national average of $3.88 a gallon in the U.S., according to AAA, from $3.68 a year ago. Gas costs rose almost 11% from July to August alone, according to the Bureau of Labor Statistics, driving more than half of overall inflation. Diesel prices have hurtled up, particularly in Europe. Refiners there are starved of diesel-rich Saudi and Russian crudes.

Oil prices sagged for much of the year until Saudi Arabia cut daily output by a million barrels in July. The world consumes just over 100 million barrels a day. The reduction came on top of broader output cuts by the Organization of the Petroleum Exporting Countries and its Russia-led allies.

Russia rowed in behind Saudi Arabia, saying it would lower exports by half a million barrels each day in August. Moscow and Riyadh jolted the market again on Sept. 5, extending the curtailments until the end of 2023.

Saudi Energy Minister Abdulaziz bin Salman on Monday said the OPEC+ cartel sought to reduce volatility and make energy markets more predictable.

“OPEC conduct is nothing different from what a central bank, or a group of central bankers, is doing,” Abdulaziz said, describing the cuts as soft-touch market regulation.

A knock-on effect of the cuts: Russian oil and fuel prices have risen far above caps imposed by the U.S. and its allies as part of energy sanctions. The country’s main flavor of crude, Urals, trades at $82 a barrel, according to Argus. The cap set by the U.S. is $60.

One of Wall Street’s most bearish oil analysts, Edward Morse of Citigroup, said in a note that Brent could surpass $100 a barrel for a short while. But he said higher prices now make lower prices likely next year by encouraging higher output and denting demand. Saudi Arabia could boost supplies if prices get too high, he added.

Analysts say China, where refiners have stocked up on cheap Russian and Iranian oil for much of the year, could switch tack to a policy of lower imports and higher exports now prices are on the rise. In the U.S. shale patch, oil and gas producers are standing up new drilling rigs at the fastest rate since last November, according to Baker Hughes.

Crude producers, oil-field service firms and fuelmakers stood out in a stock market that has wavered over the past three months. The S&P 500 energy sector has risen nearly 15% over that period, more than double the next best-performing sector.

One sign refiners are fighting for tight supplies: The spot market for oil fetches a big premium to forward prices. Investors who have snapped up oil can earn easy money from adjusting positions when longer-dated futures trade at a discount.

Some firms’ trading algorithms have amplified the move by following the trend toward higher prices and adding to their positions. “As prices rise, it kind of becomes a self-fulfilling prophecy,” said Charlie Macnamara, head of commodities at U.S. Bank.

For oil consumers outside the U.S., crude’s advance is particularly problematic. Crude prices are typically denominated in dollars, and the greenback has strengthened since mid-July. The Reserve Bank of India said on Monday that the oil-price rise poses a risk to global financial stability and threatens to juice inflation unless an economic downturn knocks energy demand.

Giovanni Serio, head of research at giant oil trader Vitol, said stockpiles are currently shrinking at a pace of nearly 2 million barrels each day. One of the reasons is that demand in China has been stronger than its weak economy would suggest. But there may be relief ahead. Serio expects higher output in North and Latin America to bring global production and demand more into balance in the fourth quarter.

For now, oil-intensive companies such as airlines say rising prices will eat into profits. “Fuel is up 30% since early July. It has been volatile all year,” Delta Air Lines Chief Financial Officer Daniel Janki said last week after the company cut its quarterly earnings forecast.

Convoluted amendments threaten to reduce the appeal of a package of measures

In recent years, Italy has suffered from a succession of reputational blows from some big corporate names shifting their listing or legal headquarters outside the country.

Last year Exor, the holding company controlled by the Agnelli family, moved its listing to Amsterdam. That came a few years after the holding company for the merged Mediaset businesses in Italy and Spain — MediaforEurope — chose the Netherlands to base its holdings company. Likewise Campari has moved its registered office there.

Now Italy is attempting to stem the trend. It is close to approving a long awaited set of measures aimed at improving the appeal of its capital market to local businesses. The measures include simpler listing requirements and the option to issue shares with much greater multiple voting rights.

The new proposed rules follow the OECD’s 2020 warnings about improving the country’s capital markets to boost economic growth and the findings of a report compiled by the Italian treasury under former prime minister Mario Draghi. They are seen in Milan as a step in the right direction although business figures argue taxation reform is needed to make Italy’s markets more attractive.

But there’s a catch. Politicians from the governing coalition have proposed a series of convoluted amendments to the regulations to change the way directors at listed companies are appointed in order to give minority investors more influence over board decisions.

In Italy, a board of directors including the chief executive typically has a three year mandate. At the end of that term, the board has the option to nominate candidates for the next term, often many of the same directors. If the proposed amendments were to be approved, the possibility of the board renominating directors would be significantly curbed, say corporate governance experts.

Under one proposed amendment, the board cannot present a slate of candidates if there is a single investor who owns more than 9 per cent of the company and nominates directors. According to another one, if the board’s slate wins a majority but there’s a second slate that obtains at least 20 per cent of the votes, the latter is in effect boosted to 49 per cent and given half of the board seats minus one.

Companies such as UniCredit, Telecom Italia, Mediobanca and Generali could all be affected by such potential new rules. Some lawyers and academics believe the proposed changes in companies’ governance would cause a new unnecessary shock to foreign investors, just weeks after the controversial banks windfall tax which sent Italian banking shares plunging last month.

Funds and other institutional investors usually own small stakes in Italian companies and typically back a board’s slate of candidates. “The mechanism makes the decision simple for international investors,” says Stefano Caselli, dean of the SDA Bocconi School of Management. “The outgoing board has skin in the game, if they propose unlikely candidates they will damage their reputation, if not investors will back them . . . it’s pretty straightforward.”

But critics claim the mechanism hands excessive power to the boards of directors. Francesco Gaetano Caltagirone, the 80-year-old founder of an eponymous building group, says the power of the board to nominate a slate of directors is based on the Anglo-American model where shareholder ownership is less concentrated. “It is hard to find an investor [in that model] that has the interest or sufficient shares to present a list of board candidates,” Caltagirone told policymakers. He also argued that investors should be allowed to vote on the single board candidates as opposed to a list of them as a whole.

Last year, his group put forward a slate of board candidates for Generali, where he now owns a 6.2 per cent stake. It was also backed by Delfin, the holding company of the late Leonardo Del Vecchio which owns roughly 10 per cent in the insurer. The move lost out against the outgoing’s board list. A similar battle is brewing over Mediobanca’s board renewal next month. Mediobanca is the largest investor in Generali while Delfin and Caltagirone are the two largest shareholders in Mediobanca. They own a 19.8 per cent and 5.6 per cent stake, respectively.

That makes the amendments timely for those shareholders but Caselli argues the changes won’t make Italy look like a friendly place for other investors. “The subject is totally unrelated to the important capital markets reform at hand, and complicates matters without need,” he says.

A machine-learning model evaluated 71 million variations in human proteins for their likelihood to cause disease

One of the greatest challenges biologists face is figuring out which of the myriad variations in a person’s genetic code might make them sick. Artificial intelligence is helping them solve the problem.

A machine-learning model developed by DeepMind Technologies, a subsidiary of Google parent Alphabet, has cataloged 71 million genetic mutations in the structure of proteins that could cause disease in the human body.

Proteins make a critical contribution to the function of human tissues and organs. Each has a unique structure based on a sequence of amino acids that determines what it does and how it works. Often no harm comes from variations in a protein’s structure, but some mutations lead to diseases.

An abnormal form of hemoglobin, a protein that carries oxygen in the blood, causes sickle-cell anemia. Cystic fibrosis is caused by mutations in the protein that is responsible for regulating the flow of salt and fluids in and out of the cells.

AlphaMissense, DeepMind’s AI model, evaluates structural variations in proteins and predicts the likelihood that a mutation will cause harm. The model looks for “missense” mutations in which a protein’s composition varies by a single amino acid.

“This is the most frequent type of variance you see,” said Jun Cheng, research scientist and project lead at Google DeepMind, and co-author of the study published Tuesday in the journal Science.

The model evaluated 216 million possible single amino-acid changes across more than 19,000 human proteins and predicted 71 million missense variations. Relying on patterns in biological data, the model predicted the probability of a variant being able to cause disease. The researchers found 32% of the variants were likely to cause disease and 57% were likely to be benign.

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In comparison, of the four million missense variants that had been directly observed in humans, 2% had been classified as either benign or capable of causing disease. The remainder were unclassified.

AlphaMissense builds upon previous research in which DeepMind scientists used artificial intelligence to predict the structure of proteins. That project, AlphaFold, catalogs the three-dimensional structures of more than 200 million proteins based on the sequence of their amino acids.

With AlphaMissense, the researchers set out to assess the potential effect of changes in these structures. Pushmeet Kohli, vice president of research for Google DeepMind and one of the study’s co-authors, compared the process to choosing the right words for a sentence.

“If you substitute a word from an English sentence, you can immediately see if the word substitute changes the meaning of the sentence,” he said.

The researchers tested their model against four benchmarks including a database curated by experts and experimental tests that measure the effects of genetic mutations—approaches that are expensive and labor intensive. Their model, they said, showed strong agreement and performed better than other similar AI tools.

DeepMind is making its catalog of missense mutations publicly available to help molecular biologists, geneticists and doctors improve rare-disease diagnosis and develop treatments that target the genetic causes of these diseases.

In a related article in Science, Joseph A. Marsh, chair of computational protein biology at the University of Edinburgh, and Sarah A. Teichmann, head of cellular genetics at the Wellcome Sanger Institute, who weren’t involved with the project, applauded the work but said its current utility is minimal.

“Current computational predictors are not considered reliable enough to be used by themselves for genetic diagnosis,” Marsh said.

Federal prosecutors also have sought information about transactions between Tesla and other entities related to the billionaire

Federal prosecutors are scrutinizing personal benefits Tesla TSLA 0.76%increase; green up pointing triangle may have provided Elon Musk since 2017—longer than previously known—as part of a criminal investigation examining issues including a proposed house for the chief executive.

The U.S. Attorney’s Office for the Southern District of New York also has sought information about transactions between Tesla and other entities connected to the billionaire, people familiar with the investigation said. Prosecutors have referenced the involvement of a grand jury.

The new information indicates that federal prosecutors have a broader interest in the actions of Musk and Tesla than was previously known and that they are pursuing potential criminal charges. The Wall Street Journal reported last month that the Justice Department is investigating Tesla’s use of company resources on a secret project that was described internally as a house for Musk.

The house effort was known within the carmaker as “Project 42,” and plans called for an expansive glass building to be constructed near Tesla’s Austin-area factory and headquarters.

The Securities and Exchange Commission has opened a separate civil investigation into the project, the Journal has reported.

On X, the social-media platform formerly known as Twitter, Musk has said there isn’t a glass house “built, under construction or planned.” He didn’t address past work or plans; neither he nor his representatives have responded to requests for comment.

Last year, Musk explored building a home for himself on a horse farm across the Colorado River from the factory known as Giga Texas—and met with an architect to brainstorm designs—but “put off building it,” Walter Isaacson wrote in an authorized biography of the billionaire published this month. At one point, according to the book, Musk suggested the design could incorporate a shard of glass emerging from a lake.

The Journal spoke with an array of people about Tesla and the government investigations for this article.

Among the questions prosecutors are examining is whether Tesla properly disclosed perks Musk might have received. Internal or external lawyers typically handle such disclosures. At Tesla, Musk has at times personally guided what information to disclose to shareholders. It couldn’t be learned whether that was the case with any perks that prosecutors are scrutinizing. Tesla has said it generally doesn’t provide perks or other personal benefits to its top executives.

The Manhattan-based federal prosecutors also have sought information about a separate issue, the driving range of Tesla’s electric vehicles, the Journal reported in its article last month.

The Journal reported last October that the SEC and federal prosecutors in Washington and San Francisco were investigating whether Tesla misled consumers and investors about the performance of its advanced driver-assistance system known as Autopilot. The agencies haven’t announced any enforcement action against Tesla in connection with those investigations. Tesla has disclosed in securities filings that it received Justice Department inquiries about Autopilot.

Within Tesla, Project 42 and its purpose were closely guarded secrets.

Tesla lawyers and board members scrutinized the project after employees became concerned about how millions of dollars of large-format glass panels the company had ordered would be used.

Zach Kirkhorn, who was Tesla’s chief financial officer before stepping down last month, was among those who raised concerns internally about the project.

Some employees were told a limited liability company called Peninsula LLC would reimburse Tesla for certain costs. An LLC by that name, formed in April 2022, is managed by Musk adviser Jared Birchall, Texas records show.

Whether Tesla was reimbursed and whether the glass was ever delivered to the company couldn’t be learned.

Tesla is one of several companies that has received questions about executive perks recently from the Justice Department or the SEC.

Corporate policies on what constitutes personal or professional spending by C-suite executives vary, and there can be broad leeway, corporate governance experts say.

SEC regulations require public companies to disclose perks and other personal benefits provided to top executives if the total value of those benefits is $10,000 or more. Personal benefits can include reimbursement for private security, housing allowances or airplane use.

Stephen L. Cohen, a lawyer at Sidley Austin who leads its regulatory and enforcement group, said for the past few years the SEC’s Enforcement Division has been aggressive around its interpretation of legal standards involving disclosure and looking for anomalies.

“Companies have been paying attention to the SEC’s enforcement efforts and tightening their controls in this area, which is likely resulting in changes to perks or increased disclosures,” he said. “But I believe there is also a view at the SEC that the public cares about executive perks.”

The regulations also require companies to disclose transactions above $120,000 in which an executive officer or other related party has a material interest.

Musk runs several companies in addition to Tesla—including rocket company SpaceX and the social-media platform X.

Last October, around the time Musk was acquiring the company then-known as Twitter, he borrowed $1 billion from SpaceX. He paid the loan back with interest the next month.

Around the time the $44 billion deal closed, Musk called in Tesla engineers to review Twitter’s engineering talent.

Musk testified in a Delaware trial last year related to his compensation that Tesla employees were doing so on “a voluntary basis after-hours.”

Tesla said in an April proxy filing that Twitter had incurred roughly $1.4 million in expenses through February under agreements with the electric-vehicle maker. It also said it had agreements with SpaceX.

Musk has become the world’s wealthiest person thanks in large part to the soaring value of his stake in Tesla, where he is compensated in stock options. Tesla’s recent proxy statement showed that Musk didn’t receive any new compensation from the carmaker in 2020, 2021 or 2022.

Debtors of collapsed cryptocurrency exchange claim money was funnelled to pet charitable courses

FTX has sued the parents of Sam Bankman-Fried, claiming they enriched themselves by siphoning off millions of dollars from the cryptocurrency exchange their son founded.

In a court filing late on Monday evening, the FTX debtors said Joseph Bankman and Barbara Fried, both of whom are tenured professors at Stanford Law School, used their influence to funnel money from the business to their pet charitable causes.

Bankman, a tax lawyer, also lavished gifts upon his friends and family using FTX funds, they alleged, including, in one instance, flights and tickets to the F1 Grand Prix in France.

Fried used her influence to obtain millions of dollars in donations from Bankman-Fried and an associate for Mind the Gap, a so-called super Pac she co-founded to help Democrats win office in the 2020 US election cycle. She further pressured “certain FTX Insiders to unlawfully avoid (if not violate) federal campaign finance law”, the debtors alleged, by circumventing disclosure requirements.

Bankman-Fried, who was arrested last December after FTX collapsed with a multibillion-dollar hole in its balance sheet, has previously asserted that his parents “weren’t involved in any of the relevant parts” of the business. They have not been charged with a crime.

But lawyers for the FTX debtors said the truth was that “Bankman and Fried were very much involved — from the founding of the FTX Group until its collapse”. 

“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group,” they added. Alameda Research was FTX’s affiliated hedge fund.

Even as FTX was rapidly descending into insolvency last year, Bankman and Fried “discussed with Bankman-Fried the transfer to them of a $10mn cash gift and a $16.4mn luxury property in The Bahamas”, the debtors alleged.

Bankman-Fried is currently incarcerated awaiting an October trial over several criminal charges. Earlier this month, former FTX executive Ryan Salame, who had become a Republican megadonor in the 2022 midterms, pleaded guilty to conspiring to make unlawful political contributions and conspiring to operate an unlicensed money transmitting business. 

He became the fourth member of Bankman-Fried’s inner circle to reach a deal with prosecutors, after Gary Wang, Caroline Ellison and Nishad Singh entered guilty pleas. 

While prosecutors have not to date charged Bankman-Fried’s parents, the FTX debtors claimed they “either knew — or ignored bright red flags revealing — that their son . . . and other FTX Insiders were orchestrating a vast fraudulent scheme”.

First example of artificial intelligence helping to accelerate diagnosis of diseases caused by genetic variants

Researchers at Google DeepMind have used artificial intelligence to predict whether mutations in human genes are likely to be harmful, one of the first examples of the technology helping to accelerate the diagnosis of diseases caused by genetic variants.

​The AI tool, called AlphaMissense, assessed all 71mn ‘‘missense” mutations, in which a single letter of the human genetic code changes. Of these, 32 per cent were classified as likely to be pathogenic, 57 per cent benign and the rest uncertain.

The findings were published on Tuesday in the journal Science.

Human experts have so far discovered the clinical effect of just 0.1 per cent of these variants, which change the structure of proteins, the body’s main working molecules. “Experiments to uncover disease-causing mutations are expensive and laborious,” said Žiga Avsec, a researcher on the project that was based at DeepMind’s London headquarters.

“Every protein is unique and each experiment has to be designed separately which can take months,” Avsec said. “By using AI predictions, researchers can get a preview of results for thousands of proteins at a time, which can help to prioritise resources and accelerate more complex studies.”

“We should emphasise that the predictions were never really intended to be used for clinical diagnosis alone,” said Jun Cheng, also a researcher on the project. “They should always be used along with other evidence. However, we do think that our predictions will help to increase the diagnosis rate of rare disease and also potentially to help us find new disease-causing genes.”

The UK government’s Genomics England tested the tool’s predictions against its own extensive records of genetic variants causing rare diseases, and was impressed by the results, said Ellen Thomas, deputy chief medical officer.

“We were not involved in generating the tool or in providing data to train it, so we could give an independent assessment,” Thomas said. “It is completely different from the tools we already use. I think it’s a great advance and we’ve been pleased to be involved in just the final stages of thinking about using the tool.”

Thomas said she expected AlphaMissense to be used in healthcare as “a co-pilot for clinical scientists, flagging which variants they should be focusing on so that they can do their jobs more efficiently”.

DeepMind built on its AlphaFold tool, which predicts protein structure, to develop AlphaMissense. The AI tool also learnt from a vast amount of biological evidence about the characteristics of mutations in humans and other primates that make a genetic variant pathogenic or benign.

The company — founded as a specialist AI developer in 2010 and bought by Google in 2014 — has made the tool “freely available to the scientific community”. Its predictions will be incorporated into the widely used Ensembl Variant Effect Predictor run by the European Bioinformatics Institute in Cambridge.

AlphaMissense has limitations, Avsec said. The most important is that its predictions of pathogenicity “are made in a general sense and do not tell us the biophysical nature of what a variant does”. Those insights might emerge more clearly as the tool is developed further, he added.

Sarah Teichmann, head of cellular genetics at the Wellcome Sanger Institute in Cambridge, who was not involved in the research, said that while individual missense mutations were an important cause of disease, other clinically significant changes in DNA lay beyond the scope of the tool.

“We shouldn’t exaggerate and say this is going to solve everything,” she said. “But it is a real advance to have such a powerful interpretive AI integrating so much genomic data.”

Current aircraft tracking relies on two systems. GNSS provides geolocation data directly to aircraft. That location data is sent on in the form of ADS-B signals out to satellites or ground stations. The second system is an on-the-ground air traffic control radar. While these are effective, ground radar only operates within a limited radius and provides no coverage in remote areas. While ADS-B solves inefficiencies in aircraft surveillance, the future of the aviation industry requires a more advanced system than is provided by GNSS.More planes in the sky, slower uptake of ADS-B in developing countries, GNSS accuracy, and short-staffed air traffic controllers across the U.S. as recently reported in the New York Times, are driving forces behind the need for a modernized aircraft surveillance system.

In 2025, Spire Global and ESA aim to deploy the demonstrator mission for this revolutionary tracking system that works globally with existing onboard technology- no installation required.