Opec struggles to speak with a single voice these days, so it was always a wobbly assumption that the cartel of oil producers would be able to agree a deal with non-members, such as Russia, to curb output.
So it has proved. The weekend talks in Doha fell apart over a single issue. Saudi Arabia wanted Iran, its big regional rival, to be included in a deal to freeze production at January levels. Iran, freshly returned to international markets after the lifting of sanctions, wasn’t interested. Its priority is revenues, at almost any oil price, and recovery of lost market share.
The first puzzle is why anybody thought that this tension could be resolved. The short answer must be that the Saudi camp gave encouragement for a deal, but then changed its mind. That version tallies with the grumble from the Russian delegation that “some Opec members” put up new demands at the 11th hour. Such an explanation sounds more solid than the idea that the whole two-month adventure was an elaborate ruse to con the market into thinking that the first global oil deal for 15 years was on the way.
The bigger unanswered question is what happens next. Monday’s counterintuitive result was: not much. The oil price fell by 4% at the outset, but ended the day virtually flat at $43 a barrel for Brent. Maybe the market thinks that Doha was irrelevant and that demand for oil is slowly catching up with supply, as the producers always said it would. Or maybe a bigger factor was a labour dispute in Kuwait that is affecting output there. As ever with oil prices, it is incredibly hard to decipher short-term price movements.
But we can conclude this from the Doha diplomatic debacle: the Saudis are happy to run the risk of the oil price falling back to the $30-a-barrel level seen a couple of months ago. That doesn’t mean such a tumble will materialise – but it must be more likely than it was.
Sorrell should justify his rewards
The full tally of his rewards for 2015, likely to be around the £70m mark, won’t be formally unveiled until later this month. But the advertising titan is probably correct to detect a row in the offing. If £14m for Bob Dudley was enough to enrage 59% of BP shareholders, a sum five times as large for Sorrell won’t pass under the radar, even if WPP’s share price has performed better.
Sorrell’s weekend outburst is unlikely to pacify the sceptics. He’s missed the point of the rebellion at BP, which was about the sheer size of rewards now being paid in big company boardrooms. By contrast, Sorrell’s defence was all about the alignment of his interests with those of WPP. It is true that Sorrell is aligned – he owns 1.62% of WPP – but that’s not the subject of the hour. Is £70m a fair take, or does it represent rent extraction?
On that point, WPP’s investors made their feelings clear back in 2012, when the company lost the pay vote. As a consequence, it was obliged to drop its controversial incentive plan, known as Leap, or leadership equity acquisition plan. But the concession was hardly dramatic. Leap was allowed to complete its five-year cycle, which is why, coupled with WPP’s strong share price, it is still producing ever larger payouts for Sorrell.
If he wants to defend the sum properly, let’s hear less about “alignment,” which can used to justify any figure, and more on how any FTSE 100 chief executive could possibly be worth £70m in a single year.
When the Powa gets switched off
Poor old Dan Wagner. He – or rather the Powa Technologies business that he founded – has been hit by a car. Complete accident. Couldn’t see it coming. Nobody to blame, especially not the unfortunate victim.
That, at least, was the version of Powa’s collapse into administration that Wagner promoted on BBC Radio 4 at the weekend. It is not persuasive.
We can all understand that companies in the business of developing new technology, in this case a system to allow consumers to buy a product by scanning an advert with their smartphones, can rack up overheads before revenues arrive. But the mismatch at Powa, founded in 2007, was extraordinary, as detailed in administrator Deloitte’s report. The company lost £31.8m on revenues of £4.8m in 2015, for example, but was operating from the top floor of a City skyscraper.
In those circumstances, it pays to stay close to your financial backers, here meaning Boston investment group Wellington Management, which triggered the administration by calling in loans. If it really came as surprise to Wagner, he should have followed the old road safety advice: stop, look, listen.
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