Opec pops US shale’s balloon

0:02Good morning from the Financial Times. Today is Thursday, August 14th, and this is your FT News Briefing. Turns out rich people aren't fleeing the UK after all, and British companies are rushing to do more business in China. Plus, US shale has been booming for the past 10 years, but that run may be coming to an end. I'm Mark Filippino, and here's the news you need to start your day.

0:36It looks like the UK doesn't need to worry about losing all its wealthy residents whose fortunes are headquartered outside the country. Earlier this year, Chancellor Rachel Reeves intensified Britain's crackdown on so-called non-doms, that's non-domiciled residents, folks who may be avoiding taxes while living in the UK. And some predicted this crackdown would lead to a mass exodus. But new data finds no evidence suggesting more non-DOMs left Britain than official predictions, which takes a huge amount of pressure off Reeves. She's hoping to raise£4 billion from the non-DOMs between 2026 and 2027.

1:24the u.s has been in a shale boom for a while now if you don't include the pandemic when oil prices were you know negative the u.s has been the world's largest oil producer for the past decade but now it's facing a threat from the oil cartel opec and u.s shale worries that the good times might be coming to an end. The FT's U.S. Energy Editor, Jamie Smith, joins me now to talk about all this. Hey, Jamie. Hi, Mark.

1:51Jamie Smyth: So what has U.S. oil producers so spooked? It comes down to a big drop in the price of oil. What we've seen over the last six months is oil prices going down as global production goes up. And U.S. oil producers generally need a price of about$65 a barrel just to break even. So what we're seeing is prices currently are hovering around$65 a barrel and they're predicted to go lower. And this has to do with OPEC, right? Yeah. So the big shift over the last year is that OPEC and OPEC Plus have decided that they're going to bring back about 2.2 million barrels per day of oil production. So they'd taken that off the market a couple of years ago because they felt that demand was weak and they wanted to keep the price of oil up.

2:44Jamie Smyth: But come April, they've started to bring that back online and they've shifted their strategy from propping up prices to really trying to pursue more market share. And that is what is a real threat to the U.S. shale industry. Right. Okay. So they need that price to stay up to be profitable. Just out of curiosity, Jamie, why did OPEC suddenly do a 180 on all this? Well, Saudi Arabia is really driving this policy. So Saudi Arabia has borne most of the output cuts over the last couple of years, and it really wants to reclaim market share from the US and other non-OPEC producers, but also from OPEC producers within the cartel itself.

3:28Jamie Smyth: And there's a second reason, and that's geopolitics. You know, Trump was pushing very hard in and around the April timeframe for lower energy prices. And some analysts think that Saudi Arabia responded to that by pushing ahead with these production increases. So by putting this extra supply in the market, that kept prices at a reasonable level. What are US shale producers doing in response to all this? It seems like it would be pretty disruptive for them. So what they're doing is they're reducing the amount of drilling rigs that they've got out in the field. So the amount of drilling rigs has fallen sharply.

4:09Jamie Smyth: It's now at four-year lows. And they're also reducing the amount of workers, the amount of crews that are out fracking these oil and gas wells. They are trying to conserve their cash, conserve their profits. And to do that, they've got a slow production. This seems a little counter to what Trump wants, U.S. President Donald Trump. He's been saying since the campaign trail that he wants U.S. oil to drill, baby drill. What does this mean for U.S. oil long term? Yes, one of the real ironies and contradictions at the heart of the Trump policy is that in one sense, he's been saying that U.S. producers have to boost production and he's going to unleash American energy dominance around the world by increasing exports.

4:59Jamie Smyth: But of course, he also wants low energy prices. And he forecast on the campaign trail that he would cut energy prices in half during his presidency. And of course, these are impossible things to do together. And so forecasters are predicting that US oil production will drop for the first time since the pandemic next year because of the lower oil prices that they're predicting and the need for U.S. shield producers to preserve their cash margins. Jamie Smith is the FT's U.S. energy editor. Thanks so much, Jamie. Thanks very much, Mark.

5:45Britain's labor government is prioritizing trade and investment with China. And because of that, British businesses are enjoying something of a reset in the world's second largest economy. Tom Hale is the FT Shanghai correspondent, and he joins me now. Hi, Tom. Hi, thank you for having me. So where do UK-China relations stand now in comparison to, say, China's relations with the US and the EU? So the US and the EU have gone down quite a confrontational route with Beijing on trade, And the UK has really taken a very different approach. As you mentioned, it's pursued this reset with Beijing after several years of very difficult relations, especially following national security law Beijing imposed in Hong Kong in 2020 that the UK objected to quite strongly.

6:36And of course, Hong Kong is a former British territory. There have been many visits from foreign leaders in the Chinese mainland in recent years, but Rachel Reeves' visit in January was widely seen as quite a productive one and really quite an important moment in the general tone of this wider reset. How has China responded to Britain's overtures? So shortly after that Rachel Reeves' visit in January, the UK government released a statement outlining what they saw as some of the wins from that visit. They included recent grantings of new licenses and quotas for UK financial institutions. There were a couple of pork processing plants.

7:17Their exports to China were blocked during the COVID-19 pandemic. And in December, shortly before this visit, those restrictions were lifted and those plants were able to export their pork to China again. I should also mention that there is a trade fair coming up in September in the Chinese coastal city of Sharman, and the UK will be the country of honor at that trade fair, which is quite a significant thing in and of itself and has kind of raised hopes of further visits and further trade talks between the two countries. Sounds like things are really improving, but how has that translated so far to activity on the ground?

7:54So I think, first of all, it's important to recognize that a lot of British companies already have a very significant presence in China and have done for a long time, HSBC, several other big financial players, the likes of Rolls Royce. But we also see a lot of small British companies looking to expand their presence in the mainland, particularly kind of prestige or heritage brands, you know, the likes of Barber or Brompton Bicycles, which may be opening new stores in China or may be looking to sell on the world's biggest e-commerce platforms on the Chinese internet. These companies will have many reasons for expanding into China.

8:32But obviously, this backdrop of this diplomatic thaw between London and Beijing is not going to hurt their prospects and is going to be something that they're very optimistic about. Now, Tom, are there any particular hurdles that need to be overcome for this trade to really sort of flourish? Yes, there are. Like the EU and like the US, British companies also consistently cite issues with market access in China, the difficulty of competing in the incredibly intense domestic competition that we now see in mainland China across pretty much every sector. There are real concerns over the future direction of the Chinese economy.

9:08And I think based on past experience, there are legitimate questions raised over the extent to which improved diplomatic relationships will actually feed through into revenues or profits. We're certainly still in the early stages of all this. But I think on the ground here, there is a noticeable change in mood for companies visiting China or companies already with a presence here. Tom Hale is the FT's Shanghai correspondent. Thanks so much, Tom. Thank you.

9:42Before we go, I want to give you a heads up that in a few weeks, I'm going to be hosting a session at FT Weekend Fest in London. Join me and a few other folks from the FT podcast team on Saturday, September 6th. We're going to be talking about politics, podcasts, and a whole bunch of other stuff. So make sure to swing by and say hi. We're offering 10 % off your ticket using a promo code that you can find in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

10:29Capital raising is being redefined in real time from macro disruptions and shifting investor expectations to AI-driven demand and the rise of private credit. When headlines can tilt markets overnight, how can companies stay on course? Strategic Alternatives, the RBC Capital Markets podcast, explores how corporates and investors are navigating new pathways to raise capital, create value, and drive growth. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts.

11:27for the job. Thumbtack. We know homes. Hire the right pro today.