Oil down $40 as the world consumes less crude and the supply of it swells - Canadanewsmedia
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Oil down $40 as the world consumes less crude and the supply of it swells

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Oil demand is shrivelling as the trade war between the U.S. and China trips up the global economy.
Estimates for March and April are pointing to year-on-year declines in regions that account for almost half of global oil demand, according to Morgan Stanley. Indicators including the profit from making plastics have been sinking while refining margins in Europe recently hit multiyear lows.

Even support from one of the tightest physical markets in years is starting to weaken — premiums refineries pay to procure immediate supplies are slumping. That’s despite output being hit by a combination of OPEC+ production cuts, U.S. sanctions on major producers Iran and Venezuela, and an unprecedented halt to Russia’s giant Druzhba crude pipeline. Analysts are now taking increasingly bearish views on consumption for this year.

The U.S. Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and U.S. crude production on Tuesday.

A surprise increase in U.S. crude stockpiles also kept oil prices under pressure.

“Investors have been concerned about the recent rise in stockpiles in the U.S.,” ANZ bank said in a note.

“Demand expectations for 2019 have so far been unrealistic,” said Mark Maclean, managing director at Commodities Trading Corp. in London, which advises on hedging strategies. “China has slowed faster than people expected and the trade war is still having a significant impact, the EU will not be a pocket for demand growth this year and the U.S. is also problematic.”

Oil isn’t alone in showing weakness. While stocks have so far shown resilience in the face of the trade war, other parts of the global financial market betray investor fears. Government bonds have been on a tear, with the yield on 10-year U.S. Treasuries falling more than a percentage point since a November peak as traders seek out safer assets.

Other established havens have enjoyed similar demand, and gold touched the highest since April 2018 last week while the Japanese yen is near the strongest this year.

Concerns about oil demand are also filtering through to policy-makers in producing nations. This week both Saudi Arabia and Russia addressed concerns that weaker consumption has the potential to send crude prices below US$40 a barrel if OPEC and its allies don’t persevere with output cuts. West Texas Intermediate traded at around US$52 on Wednesday, having slumped into a bear market last week.

Darkening Outlook

Though the International Energy Agency expects oil consumption to grow by 1.3 million barrels a day this year, Wall Street has been turning more pessimistic. Morgan Stanley said it expects growth of 1 million barrels a day, while JPMorgan Chase & Co. sees 800,000 barrels a day. That which would be the lowest growth rate since 2011. If demand grows by less than 600,000 barrels a day this year, it would be the weakest since 2009, according to IEA data.

The outlook has been darkened particularly by concerns around the trade war between the U.S. and China. Global trade growth is set to slow for a second year, to 3.4 per cent in 2019, according to the International Monetary Fund, and that easing will continue to crimp oil demand, said Caroline Bain, chief commodities economist at researcher Capital Economics in London.

“We’ve had quite a slowdown in world trade, and we’re not expecting it to pick up, which is negative for oil demand,” said Bain, who sees oil demand growing by 900,000 barrels a day this year.

Diesel Dark

Demand weakness will be reflected most starkly in diesel-like products such as gasoil, said Steve Sawyer, an analyst at consultancy Facts Global Energy in London. In recent weeks, the structure of that market has weakened significantly for the rest of 2019, suggesting growing expectations of oversupply.

There’s still cause for hope. Demand for jet fuel should remain robust as air travel continues to expand, Sawyer said. Meanwhile, new rules curbing the amount of sulfur that ships are allowed to emit are set to provide a much-needed boost to oil demand toward the end of the year.

But lighter products are still providing a cause for concern. Producing naphtha — which can be used to make gasoline or plastics — is the least profitable in Europe for the time of year since 2012. In Asia, profits from churning out the product tumbled in recent weeks. The weakness in those regions has started to chip away at the profitability of refining crude in some parts of the world.

“Demand has been particularly weak in Asia,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland. “The growth needs to come from there and right now it’s not.”

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U of T names Michael Sabia director of the Munk School of Global Affairs & Public Policy

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Michael Sabia, one of the country’s most accomplished leaders in business, investment and public policy, has been named the new director of the University of Toronto’s Munk School of Global Affairs & Public Policy.

The university’s Agenda Committee of Academic Board recently approved the appointment of Sabia, who is currently CEO of pension fund Caisse de dépôt et placement du Québec (CDPQ), which has more than $325 billion of assets invested globally, for a five-year term beginning Feb. 1, 2020.

A U of T alumnus, Sabia will draw on his considerable experience in both the public and private sectors – he once ran Canada’s biggest telecom and helped privatize its largest railway – to help realize the Munk School’s growing ambitions in Canada and on the global stage.

“CDPQ is now a global financial institution with investments around the world. Over the last decade, we have had to navigate through an increasingly complex and turbulent geopolitical scene,” Sabia said.

“With the lessons learned and the global relationships built, I am looking forward to working with the scholars, students and staff at the Munk School to continue building an institution engaged in the world and widely admired around the globe for the quality of its ideas and its practical solutions to the issues facing us all.”

The Munk School, created through a merger last year of the Munk School of Global Affairs and the School of Public Policy & Governance, is a leading hub for interdisciplinary research, teaching and public engagement that houses world-class researchers and more than 50 academic centres, labs and programs.

It’s also home to 20 teaching programs, including Munk One – a first-year foundational program that focuses on global problem-solving.

Sabia will take over the role of director of the Munk School from Professor Randall Hansen, who is currently serving as interim director.

“I’m delighted to welcome Michael Sabia back to the university as the Munk School’s new director,” said President Meric Gertler. “Throughout his career, he has made significant contributions to public policy, to business and to the world of investment. I know he will bring the same kind of engaged thought leadership to the school.

“I would also like to thank Professor Hansen for his excellent leadership and guidance at the school. His work has helped set the stage for future success.”

Sabia, who earned a bachelor’s degree in political economy from U of T before completing two graduate degrees at Yale University, took over the role of chief executive at CDPQ in 2009 and proceeded to build the organization into a global financial institution with more than $325 billion in assets under management.

He also oversaw the implementation of a new investment strategy that made CDPQ an internationally recognized leader among investors working to address climate change, develop urban infrastructure and forge global industry partnerships.

Before that, Sabia held several senior positions at Bell Canada parent BCE Inc., including the role of CEO from 2002 to 2008 when he led a strategic transformation of the telecommunications giant. He also served as chief financial officer at Canadian National Railway, where he worked with then-CEO Paul Tellier to successfully launch CN as a publicly traded corporation through what was then the largest-ever initial public offering in Canadian history.

Sabia spent several years in the public service prior to entering the corporate world. He was director general of tax policy in the federal department of finance, where he was one of the architects of a comprehensive reform of Canada’s tax system, and served as deputy secretary in the Privy Council Office.

More recently, Sabia served on Finance Minister Bill Morneau’s advisory council on economic growth. He is currently co-chair of the G7 Investor Leadership Network on Climate Change, Diversity and Infrastructure Development, as well as co-chair of long-term investment, infrastructure and development for the World Economic Forum.

In addition, Sabia is a trustee of the Foreign Policy Association of New York and a member of the Asia-Pacific Foundation of Canada’s Asia Business Leaders Advisory Council. He was named an Officer of the Order of Canada two years ago, and has received an award from the non-profit Public Policy Forum for his many contributions to public policy in Canada.

President Gertler said Faculty of Arts & Science Dean Melanie Woodin, Vice-President and Provost Cheryl Regehr and he have asked Sabia “to lead a consultative process within the university to determine whether establishing the Munk School as a free-standing faculty would be a constructive step forward.”

“I’m immensely proud of everything that has been accomplished at the Munk School so far,” President Gertler said.

“With the invaluable financial and ongoing commitment of the Munk family and other generous donors, and with the dedication of the school’s first-class faculty and staff, I am confident of our continued success.”

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Metro Vancouver Transit strike to resume bargaining on Wednesday

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If talks on Wednesday aren’t productive, Unifor negotiators say job action could escalate as early as Friday with drivers refusing overtime shifts.

The union representing transit workers in Metro Vancouver is returning to the bargaining table on Wednesday morning, with warnings of strike escalation on Friday if talks don’t progress.

“We will see if the company is serious about achieving a resolution to this dispute and if so, bargaining can be wrapped up in a matter of hours,” said Unifor lead negotiator Gavin McGarrigle during a news conference on Tuesday morning.

According to McGarrigle, the union has heard TransLink CEO Kevin Desmond change his tune in recent days, acknowledging some of the concerns that prompted roughly 5,000 transit workers to begin job action on Nov. 1.

Bargaining teams are scheduled to return to the table on Wednesday morning but if talks aren’t productive, McGarrigle said transit operators have been advised to refuse overtime shifts beginning Friday, which would see massive impacts to bus service across the region.

Talks broke off earlier this month after the company tabled offers that included “loopholes big enough to drive a SeaBus through,” said McGarrigle.

“In short, the company decided to pick this fight,” he said, adding that passengers were the ones who “suffer from a broken model everyday.”

McGarrigle also cited massive pay increases and bonuses granted to TransLink executives, and pointed out the discrepancies between the treatment of bus workers and SkyTrain workers.

Coast Mountain Bus Company handles Lower Mainland bus and SeaBus routes on behalf of TransLink, but talks between the company and Unifor broke off nearly two weeks ago.

Wages, benefits and working conditions are key issues.

A ban on overtime by maintenance workers slowed or cancelled runs on about two dozen bus routes last week, and there have been frequent cancellations on the SeaBus link between Vancouver and the North Shore, including six planned cancellations late this afternoon.

The union had previously warned the overtime ban could be extended to drivers, potentially affecting as much as 15 per cent of bus service across the region; that came to fruition with Tuesday’s announcement.

Premier John Horgan warned last week that lengthy job action, similar to a four-month transit strike in 2001, will not be tolerated.

More to come.

–with files from Canadian Press

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US$1 billion in 67 seconds and other numbers to know

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Singles’ Day in the world’s most populous country has become a mammoth marketing event for China’s e-commerce businesses that have turned it into the world’s biggest online shopping extravaganza.

Singles’ Day, which originated on university campuses in Nanjing, China in the 1990s, became an annual shopping bonanza after Alibaba, China’s biggest e-commerce retailer, made it into an event a decade ago.

This year’s sales surpassed last year’s record, with two of the country’s largest online retailers reporting combined sales of more than US$63 billion, even before final numbers were reported. The eye-popping figures make Black Friday and Cyber Monday in the U.S. seem somewhat anemic and humdrum by comparison. Alibaba posted live updates on its website and on Twitter, but for the very keen, the company also provided a real-time sales counter.

Singles’ Day by the numbers:

1. Singles’ Day takes place on November 11, because the number one and the date, 11/11, looks like a single person.

2. Alibaba said sales by merchants on its platforms totalled 268.44 billion yuan (US$38.38 billion) by midnight local time, handily surpassing last year’s total of US$30.8 billion.

3. Alibaba said the number of delivery orders exceeded 1.042 billion in 18 hours and 31 minutes; surpassing the 2018 total.

4. Alibaba said sales exceeded US$1 billion just 1 minute and 7 seconds after midnight on November 11, and surpassed US$10 billion after 29 minutes and 45 seconds.

5. In the U.S. in 2018, Black Friday brought in US$6.2 billion last year, and US$7.9 billion on Cyber Monday, according to Adobe Analytics.

6. Alibaba rival, JD.com, reported sales of 179.4 billion yuan ($25.6 billion) by mid-afternoon, according to The Associated Press.

7. More than 200,000 brands from over 200 countries and regions were expected to participate in this year’s event; only 27 brands participated in 2009.

8. A once-informal day, a countdown gala leading up to Singles’ Day that included a performance from Taylor Swift was broadcast on nearly 30 online streaming platforms and TV channels.

9. Online shopping makes up 19.5 per cent of Chinese consumer spending, compared with about 11 per cent for American consumers, according to The Associated Press.

10. Alipay said it set a record on Singles’ Day in 2017 for most payment transactions, processing 256,000 payment transactions per second, just 5 minutes into Singles’ Day; 1.48 billion transactions were ultimately processed over the course of 24 hours.

11. China’s State Post Bureau is expected to handle 2.8 billion packages from Nov 11 to 18, according to state-run press agency Xinhua.

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