Fireworks

The Didi drama and another OPEC+ impasse provided for some post-US holiday fireworks on Tuesday.

Shares of the Chinese ride-hailing company plunged as much as 30% on the heels of Beijing’s regulatory crackdown. More than $20 billion in market value evaporated as the stock traded through its $14 IPO price.

According to The Wall Street Journal, Beijing asked Didi to delay the US IPO. Didi went ahead with it anyway. “Weeks before Didi went public in the US, China’s cybersecurity watchdog suggested the Chinese ride-hailing giant delay its initial public offering and urged it to conduct a thorough self-examination of its network security,” the Journal said, citing people familiar. “For Didi, waiting would be problematic. In the absence of an outright order to halt the IPO, it went ahead.”

That’s pretty obtuse on the company’s part. Beijing doesn’t make “suggestions” on matters like these. A suggestion is tantamount to an order. Now, Didi, its shareholders and a handful of other recent US IPOs, are learning the hard way.

Read more: From Xi, With Love

Cathie Wood’s ARK owns shares in Kanzhun (which, as noted in the linked article, is also in Xi’s crosshairs) through the ARK Next Generation Internet ETF and ARK Autonomous Technology & Robotics ETF. Both Kanzhun and Full Truck Alliance looked poised for sizable losses. Bloomberg suggested watching other Chinese tech ADRs which went public stateside in 2021, including Tuya, Cloopen Group, Zhihu and Waterdrop.

Meanwhile, crude rose to a six-year high as a rift between OPEC+ and the UAE torpedoed plans for a supply increase and (again) raised the specter of a UAE defection. For the market, the near-term implications were bullish, although the threat of another price war became a semblance of “real.” I guess. But with the memory of 2020’s disastrously ill-timed standoff between Riyadh and Moscow still fresh, some manner of reasonably cordial resolution seems the more likely scenario.

“The (non-)outcome of the meeting rewrites the supply-demand landscape for the near and potentially for the distant future,” PVM’s Tamas Varga wrote Tuesday, calling the short-term impact “unambiguously bullish” before adding that,

It’s hard to believe the public disagreement between Saudi Arabia and the UAE will not end in a mutually amicable way. [They’ve] been allies for a long time and have common political and economic interests. Under this scenario… prices would stabilize at a slightly lower level before starting their march higher again.

RBC’s Helima Croft delivered an incisive take. “Back-channel talks reportedly are continuing, but questions about the UAE’s commitment to remaining in OPEC will likely grow in the coming days,” Croft wrote, noting that “since the launch of its Murban benchmark in March, there has been a distinct question mark over the durability of UAE’s OPEC membership and its willingness to continue idling its expensive spare capacity.”

For Croft, this is about more than oil. The UAE, RBC said, is “seemingly intent on stepping outside Saudi Arabia’s shadow and charting its own course in global affairs.” The table (below, from RBC) is useful.

Iraqi Oil Minister Ihsan Abdul Jabbar neatly encapsulated the dilemma. “We do not want a price war. And we do not want oil prices to rise to more than the current levels.” (Best of luck with that.)

This comes at an inopportune time for the US, where policymakers are struggling to pacify those who insist the uptick in inflation isn’t “transitory.”

The White House is “closely monitoring the negotiations and their impact on the global economic recovery from the pandemic,” a Biden administration spokesperson said. “Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward.”

The drama is set against a backdrop defined by a tenuous normalization in relations between Israel and several Arab nations, complicated by the dramatic escalation of conflict between the Israelis and Hamas in May.

The Biden administration is walking a tightrope. The White House wants a good rapport with the new Israeli government but also needs to placate key Progressive Democrats, many of whom are outspoken in their opposition to Israeli military operations. Biden needs those lawmakers to support him, if for no other reason than incurring their ire risks undermining Progressive “bonafides” he’s keen to preserve as he seeks to cement a legacy as a “transformational” president. Israel, meanwhile, is the furthest thing from excited about the prospect of restoring the Iran nuclear deal. The lifting of sanctions tied to its restoration factors into the OPEC+ calculus. At the same time, US lawmakers on both sides of the aisle have pushed for the US to distance itself from Mohammed Bin Salman, whose reputation suffered irreparable damage from the Jamal Khashoggi tragedy. The Crown Prince is also blamed for the Kingdom’s ongoing role in perpetuating one of the worst humanitarian crises in the world (in Yemen) with the help of US weapons.

Suffice to say wading into Middle East affairs is perilous, which is why the White House would probably rather not inject itself too forcefully into the OPEC spat. As RBC put it, the Biden White House “will have to decide how much more diplomatic capital it wants to deploy in order to stave off a politically perilous rise in gasoline prices.”