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On August 16th, ahead of Nvidias (NVDA.O) highly anticipated $500 billion financing deal this week, investors were already concerned about approximately $70 billion in "shadow liabilities" that werent on the balance sheets of major AI companies but could surface in the worst-case scenario. With Nvidias latest move, the company may be providing tens of billions of dollars in so-called "residual value support" for debt transactions related to AI infrastructure development—essentially using its high credit rating to help control customers financing costs. With computing power demand surging, such guarantees are practically a "free lunch" for giants like Nvidia and Broadcom: they can expand sales to customers and AI companies without having to include the related debt on their balance sheets. These arrangements typically involve multiple stages: a special purpose entity borrows to purchase chips, the loan supported by cash flow generated from contracts with companies that will use the technology in the future. If the company stops making payments, the assets are re-leased or sold to repay the remaining debt. If a funding gap still exists, the guarantor makes up the difference. Theoretically, this process carries extremely low risk. However, some havent fully grasped this logic. DoubleLine portfolio manager Mariya Entina stated, "Its like playing the rules; youre trying to get special treatment from rating agencies to get the highest possible rating. Were entering an era of financial engineering. Thats one of my concerns: when financial engineering prevails, the true financial situation gets obscured."According to The Information, Nvidia (NVDA.O) is in talks to invest $3 billion in SB Energy as part of the OpenAI data center deal.According to Al Arabiya TV, local authorities in Marib stated that Houthi rebels fired four ballistic missiles and four drones at residential areas.The Qatari Ministry of Foreign Affairs stated that Qatar invited an Iranian delegation to visit Qatar in April to receive a detailed briefing on the search and rescue operation, but Iran has not yet responded to the invitation.Qatars Ministry of Foreign Affairs: Search and rescue teams have found the remains of an Iranian pilot and have contacted Iran to discuss the handover.

Oil Quiet As Price Cap Suggestion Assists in Relieving Supply Concerns

Skylar Williams

Nov 25, 2022 14:48

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Benchmark Brent oil declined on Thursday, while West Texas Intermediate (WTI) crude remained unchanged, hovering at two-month lows due to uncertainty about the degree to which a proposed G7 restriction on the price of Russian oil would limit supply.


A larger-than-anticipated rise in gasoline inventories in the United States and an expansion of COVID-19 limitations in China also knocked on oil prices.


At 15.15 p.m. ET (2015 GMT), Brent oil prices decreased 29 cents, or 0.3%, to $85.12 per barrel, while U.S. WTI crude futures decreased 2 cents, to $77.96 per barrel.


Due to the Thanksgiving break in the United States, trade volumes were quite low.


The announcement on Wednesday that the expected price ceiling for Russian oil may surpass the current market level triggered a decrease of about 3 percent for both benchmarks.


European Union nations remained divided over what level to cap Russian oil prices to limit Moscow's ability to pay for its battle in Ukraine without causing a global oil supply shock; if positions converge on Friday, more conversations are possible.


A European official claimed that the G7 is discussing a cap of $65-$70 per barrel for Russian oil transported by sea, but European Union member states have not yet reached an agreement on a price.


A higher price ceiling might encourage Russia to continue selling its oil, decreasing the possibility of a global oil supply shortage.


According to two sources, several Indian refiners are discounting Russian Urals crude by between $25 and $35 per barrel compared to the worldwide benchmark Brent oil. Urals is Russia's principal crude export.


Despite the obstacles, Bart Melek, global head of commodities market strategy at TD Securities, is rather optimistic about oil. "The Russian price ceiling is another aspect that contributed to the current price fall," he stated.


The Energy Information Administration (EIA) said on Wednesday that gasoline and distillate inventories in the United States climbed substantially during the previous week. [EIA/S]


In contrast, oil stockpiles decreased by 3.7 million barrels to 431.7 million barrels in the week ending November 18, despite a Reuters survey predicting a reduction of 1.1 million barrels.


China reported the highest daily number of COVID-19 cases since the outbreak began over three years ago on Wednesday. Local officials intensified measures to remove the breakouts, raising investor anxiety over the economy and demand for fuel.

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