OPEC pushed on Thursday for a bigger-than-expected oil output cut to support prices that have been hit by the coronavirus outbreak, effectively presenting its non-OPEC partners with an ultimatum to back the move or face a price collapse.oilOPEC’s proposal to curb supplies by an extra 1.5 million barrels per day (bpd) until the end of 2020 was a surprise, given the group was expected to propose cuts of 1 million bpd and, hours earlier on Thursday, had said curbs should be limited to the second quarter. But an unusual informal meeting of OPEC ministers in a Vienna hotel on Thursday evening announced that the group now wanted the cut – already the biggest since the 2008 financial crisis – to run until the end of year. Russian Finance Minister Anton Siluanov said on Thursday he was ready for a drop in oil prices if there was no deal. Kazakh Energy Minister Nurlan Nogayev, another non-OPEC producer, said talks were only focusing on extending existing curbs to June. “Moscow perhaps is underestimating that Saudi Arabia may be ready to walk away if it doesn’t get a positive answer,” said Amrita Sen, co-founder of Energy Aspects think-tank.A pumpjack is seen at the Sinopec-operated Shengli oil field in Dongying, Shandong province, China, in this file photo. (Reuters/Chen Aizhu)In this togetherRussia has been hesitant in previous negotiations and has then signed up to deals at the last minute. But OPEC sources have said negotiations with Moscow this time have been tougher. Two OPEC sources said on Thursday that, if Russia failed to sign up, there was a risk Saudi Arabia would insist on scrapping OPEC production limits altogether. After its formal ministerial meeting, OPEC ministers had said non-OPEC states were expected to contribute 500,000 bpd to the overall extra cut. Suhail al-Mazroui, energy minister of the United Arab Emirates, said OPEC did not want to carry the burden of cuts alone and non-OPEC had to help. “We are all in this together. So it’s not going to be us making a decision alone,” he said.Saudi Arabia, the world’s top oil exporter, is already cutting well beyond its quota under the existing pact, reducing its output by about 10%. Russia, with bigger total production, has reduced its output by a fraction of Riyadh’s cut. Gary Ross, founder of Black Gold Investors, said a worst case scenario in which Saudi Arabia returned to full production would send oil prices down to $25 to $30 a barrel. That would take prices to a level that would be painful for OPEC states, already struggling with prices at around $50, but also for Russia, which has said it can balance its books at $40. “OPEC+ have little choice but to cut output substantially given the virus related demand losses,” Ross said, adding that he expected Russia “will join because it is overwhelmingly in their economic interests.” Brent oil prices LCOc1 initially rose 0.6% on news of OPEC’s plan to cut by 1.5 million bpd, but then gave up most of those gains when Russia and others suggested a deal was not in the bag. The proposed OPEC cut of 1.5 million bpd, if approved, would bring the group’s overall output reduction to 3.6 million bpd or about 3.6% of global supplies. The last time OPEC reduced supplies on such a scale was in 2008 when it cut production by a total of 4.2 million bpd to address slower demand because of the global financial crisis. OPEC hold its next ministerial meeting on June 9.Topics : Russia and Kazakhstan, both members of the broader grouping known as OPEC+ which meets in Vienna on Friday, said they had not yet agreed to a deeper cut, raising the risk of a collapse in cooperation that has propped up crude prices since 2016. OPEC+ already has a deal in place for 2.1 million bpd of cuts. OPEC said after Thursday’s formal ministerial meeting that the market faced an “unprecedented situation” as efforts to stop the coronavirus spreading has driven down demand for oil by dampening economic activity around the world.Riyadh, OPEC’s biggest producer, has been pushing for a significant cut to lift oil prices that have tumbled 20 percent since the start of year. But it has struggled to win over Moscow.
The UK’s pension regulator (TPR) has released a revised code of practice, and supporting guides, for trustees of defined contribution (DC) pension schemes, with its guidance on the consideration of environmental, social and governance (ESG) factors one of the aspects welcomed.The new code is effective as of today and is aimed at trustees of occupational trust-based schemes that offer some form of money purchase benefits. There were around 36,000 in the UK as at March 2016, including hybrid schemes, TPR noted.Andrew Warwick-Thompson, executive director for regulatory policy at the regulator, said: “Millions of people are being auto-enrolled into DC pensions, so it’s essential that schemes are being managed to a high standard. “In revising the code, we have responded to calls from the pensions industry to shorten and simplify it, with an increased focus on legislative requirements.” The release of the code comes after the regulator launched a wide-ranging consultation on trustee standards and governance, and suggested “sub-standard” pension funds should be forced to merge with others.The code sets out the standards TPR expects trustees to meet when complying with the law, with accompanying guides providing information on how these can be met in practice.The new code was put before Parliament in May after a consultation.It updates the code from 2013 to reflect recent legislation, including 2015 regulations on charges and governance for occupational pension schemes, TPR’s experience in regulating DC schemes, and evolved market practice.The code is set out in six sections, addressing areas such as scheme management skills, investment governance and “value for members”.Responsible investment organisations welcomed TPR’s comments on how ESG factors should be taken into account as part of investment governance.ESG campaign organisation ShareAction said the code and supporting guides improved guidance for trustees on ESG, while the UK Sustainable Investment and Finance Association (UKSIF) said TPR’s important clarification was a “huge boost for responsible investment in the UK”. In the code itself, TPR states that, “when setting investment strategies, we expect trustee boards to take account of risks affecting the long-term financial sustainability of the investments”.The accompanying guide elaborates on this and other aspects of investment governance, such as fiduciary management.It summarises the Law Commission’s guidance on how trustees should consider financial and non-financial factors, and gives examples of risks that could affect DC schemes’ investments over the long term, such as those relating to climate change or “unsustainable” business practices.In this guide, TPR states: “You should bear in mind that most investments in DC schemes are long term and are therefore exposed to the longer-term financial risks.”UKSIF said the regulator’s guidance “represents the first time the Law Commission’s review has been reflected in regulation or legislation since it was published in 2014”.In November last year, the UK government decided against changing the law on trustees’ fiduciary duties following the Law Commission’s suggestions the year before.Rachel Howarth, policy officer at ShareAction, said TPR’s decision to include the guidance was “extremely encouraging”.“The guidance for pension trustees is clear,” she added. “They have a mandate to consider all risks that could affect the financial performance of their funds, and this includes ESG risks.”Care urged on fiduciary managementOther industry experts highlighted the importance the updated code places on investment governance and administration, or seeking legal advice, particularly in investment matters.Rona Train, partner at Hyman Robertson, drew attention to the regulator’s guidance on fiduciary management, saying it suggested it was “keen to head off similar issues in the DC world to those we have seen in DB”, where many trustees have appointed their existing investment consultant as the fiduciary manager without considering other providers.In its guide supporting the section in the code on investment governance, the regulator said: “Note that the skills a successful investment consultant needs are not exactly the same as those a successful fiduciary manager needs.”It also flagged the potential for conflicts of interest of the various parties involved in choosing a fiduciary manager, including the existing investment consultant and third-party advisers.Hymans Robertson commented on the regulator’s guidance on trustees’ legal requirement to assess “value for members”, arguing that wider industry comparisons were needed to help them do this effectively.Train noted that TPR had called on large schemes to “use information-sharing through their consultants and professional trustees as one way of assessing value”.,WebsitesWe are not responsible for the content of external sitesLink to TPR 2015 code of practice for occupational trust-based DC schemes