America’s got the muscle, but does it have the patience to be a true oil master? 

According to a Reuters report published Wednesday, members of OPEC+ are getting fidgety about what will happen to the oil market once President-elect Donald Trump retakes the White House next month. On the one hand, the oil industry overall might benefit from a pro-oil president. On the other hand, if US production ramps up, it could flood the market, especially with OPEC+ countries in the throes of their intricate how-much-do-we-cut-production dance.

Two-Way Wells

For most of this year, OPEC+ has been on a production-cutting mission with a view toward keeping oil prices as high as possible while demand ebbs away. The organization had planned on abandoning this strategy as 2025 rolled around, but the US election made it change tack, keeping its production-cut plan in place while it figures out how exactly to deal with a change of leadership in the world’s top oil-producing country, which already chomped into OPEC+’s market share under Biden.

With Trump expected to chase increased oil exports and more drilling in the US, OPEC+’s fear of losing market share looms larger than ever. But the change in the White House isn’t all bad news for OPEC+:

• “I think a return of Trump is good news for the oil industry, with possibly less stringent environmental policies,” one OPEC+ delegate told Reuters.
• There’s also the possibility that, despite encouragement from Trump, US production won’t actually ramp up the way the president-elect intends. Increased supply would drive prices down, and like OPEC+, US producers may prefer to keep production low to ensure it remains profitable.

“The fiscal realities of the shale producers limit the amount of additional oil that can be economically produced,” Mark James, interim director of the Institute for Energy and the Environment at Vermont Law and Graduate School, told The Daily Upside. “A new well needs between $64 and $72 per barrel of oil to make its breakeven point. Since Trump’s re-election, the average Brent crude price has hovered between $71 and $75 per barrel.” 

Hard Rock: James added that on top of walking an economic tightrope, US oil producers have a hard geological reality to reckon with. “The best resources have already been tapped and there is little significant growth potential for the industry,” he said, adding: “No major US shale region has surpassed the productivity they enjoyed in 2021. New resources are more marginal and require greater investment to extract.” On OPEC+ versus Trump, James thinks OPEC+ is more likely to come out on top: “OPEC+ is playing a longer game and is willing to wait and see if the US industry can sustain its pattern of growth amid weakening markets. Trump made short-term promises in what has always been a long-view industry.”

Stephen King is famous for turning the most ordinary things into something terrifying. According to Washington, Beijing is pretty good at it too. 

On Wednesday, The Wall Street Journal reported that US authorities are investigating whether to place a ban on a wildly popular made-in-China home-internet router that may or may not pose a national security threat.

Import Controls

Chances are the internet router in your home or at your work office is from Chinese manufacturer TP-Link. The company has a grip on around 65% of the home-and-office market in the US, up from around just 33% in 2021, according to a WSJ analysis of industry data. Its products are even used to power the internet within the offices of various US government agencies, including the Department of Defense, per the WSJ. And that’s why concerns have been raised.

The US government has not released any evidence that TP-Link has any, er, connection to espionage, but researchers at Microsoft earlier this year warned that thousands of TP-Link routers have been compromised by a large Chinese hacking entity.

And in similar tech cases in recent years, the US has given roughly equal weight to known threats to national security and hypothetical threats to national security. Which means the TP-Link threat level falls somewhere in the middle:

• The TP-Link case most closely resembles the 2019 ban on Huawei telecom equipment, carried out by the Trump 1.0 administration, which similarly cited potential threats to national security; the looming TikTok ban is also based on potential threats not yet realized. While it’s the Biden administration currently weighing a TP-Link ban, Trump 2.0 can be counted on to maintain a hawkish stance on Chinese hardware.
• On the flip-side, export controls on high-powered US-made chips are a little more grounded in fact — though the bans haven’t been entirely effective. In August, The New York Times reported that Nvidia chips and other pieces of US-made tech have “aided Chinese research into nuclear weapons, torpedoes and other military applications.”

Clock’s TikToking: Speaking of TikTok, the Supreme Court challenge is about to go viral. The high court announced on Wednesday it’d take up the case on whether the upcoming ban — which, again, is predicated on possible threats to national security — is constitutional. On Monday, TikTok CEO Shou Zi Chew, following in the footsteps of just about every other tech titan, traveled to Mar-a-Lago for a meal with the president-elect. 

In normal slang, to get merked is a bad thing. In biotech, getting Mercked is a good thing.

New Jersey-headquartered pharma giant Merck announced Wednesday that it will license a GLP-1 pill for treating obesity from Chinese drugmaker Hansoh — whose luck is a blow to investors who placed bets on a much splashier acquisition.

Weighing Their Options

Merck rivals Eli Lilly and Novo Nordisk have so far dominated the GLP-1 weight-loss market with Zepbound and Ozempic, respectively. In the meantime, Merck has continued to reap dividends from its blockbuster cancer drug Keytruda, which brought in $7.4 billion in third-quarter revenue, a 17% year-over-year increase.

But Keytruda’s patent is up in 2028, leaving Merck in search of revenue sources amid heated speculation that it might enter the GLP-1 fray via acquisition. Zepbound brought in $1.3 billion for Eli Lilly in the third quarter and Ozempic earned $2.5 billion for Novo in its equivalent reporting period. The largesse is only expected to grow with wider adoption of GLP-1s to treat obesity in the next decade.

But by licensing a drug from Hansoh, rather than ponying up billions for a full-blown entry into the ring via M&A, Merck signaled that — at least for now — it isn’t prepared to go large and challenge its rivals’ dominance in the GLP-1 space. That left potential acquisition targets slenderized Wednesday: 

• Shares in Viking Therapeutics, an oral and injectable weight loss drug developer seen by some as a potential acquisition target for Merck, fell 18% on Wednesday — the company counts 41 hedge funds among its shareholders, according to an analysis by Insider Monkey. Structure Therapeutics, another weight loss pill developer and potential M&A target, fell 11%.
• Hansoh, meanwhile, will receive $112 million upfront as part of its licensing deal with Merck and can earn up to almost $2 billion in milestone payments to develop its experimental weight loss pill. Merck gets the exclusive rights to develop, manufacture, and commercialize the drug, which will require a catchier name than HS-10535.

All is Not Weight Lost: Other pharma giants are circling entry into the GLP-1 market, in a sign that it’s about to get much more competitive (and a rationale for Merck’s caution). Pfizer and Roche, for example, both have oral GLP-1 treatments in development that could serve as direct competitors to Merck’s global play with Hansoh. Just like any diet, it’s all about results.