On Thursday, US benchmark West Texas Intermediate crude oil prices experienced a 2% decline, reaching a one-week low. The drop then continued on Friday morning. This drop can be attributed to several interconnected factors that impact supply and demand including inflation, Federal Reserve policy, the US debt ceiling, OPEC+ projections, and inventories.
US Debt Ceiling Standoff Raises Concerns of a Potential Recession
One significant factor contributing to the decline in oil prices is the political standoff over the US debt ceiling. This standoff has raised concerns about a potential recession in the world’s largest oil consumer, as it creates uncertainties and dampens investor sentiment. Furthermore, rising US jobless claims and weak Chinese economic data have added to market anxieties, resulting in the lowest closing prices for the benchmark since May 4.
Strong US Dollar and Uncertainties Pose Obstacles for Oil Markets
The strong US Dollar is another factor affecting crude oil prices. A stronger dollar makes oil more expensive in other countries, reducing demand and putting downward pressure on prices. Moreover, uncertainties related to recent banking issues that could lead to a credit crunch across the oil industry, and the persistent possibility of a recession pose significant obstacles for the oil markets.
Federal Reserve’s Pause on Interest Rate Hikes Impacts Oil Demand
The strengthening dollar data has supported the case for the Federal…
On Thursday, US benchmark West Texas Intermediate crude oil prices experienced a 2% decline, reaching a one-week low. The drop then continued on Friday morning. This drop can be attributed to several interconnected factors that impact supply and demand including inflation, Federal Reserve policy, the US debt ceiling, OPEC+ projections, and inventories.
US Debt Ceiling Standoff Raises Concerns of a Potential Recession
One significant factor contributing to the decline in oil prices is the political standoff over the US debt ceiling. This standoff has raised concerns about a potential recession in the world’s largest oil consumer, as it creates uncertainties and dampens investor sentiment. Furthermore, rising US jobless claims and weak Chinese economic data have added to market anxieties, resulting in the lowest closing prices for the benchmark since May 4.
Strong US Dollar and Uncertainties Pose Obstacles for Oil Markets
The strong US Dollar is another factor affecting crude oil prices. A stronger dollar makes oil more expensive in other countries, reducing demand and putting downward pressure on prices. Moreover, uncertainties related to recent banking issues that could lead to a credit crunch across the oil industry, and the persistent possibility of a recession pose significant obstacles for the oil markets.
Federal Reserve’s Pause on Interest Rate Hikes Impacts Oil Demand
The strengthening dollar data has supported the case for the Federal Reserve to pause interest rate hikes. However, it has not generated expectations of year-end rate cuts. Higher interest rates can weigh on oil demand by increasing borrowing costs and exerting pressure on economic growth. It is important to note that an extended period of high interest rates could place additional stress on banks, as stated by Minneapolis Federal Reserve President Neel Kashkari. This delicate balance between interest rates, inflation, and economic factors plays a crucial role in shaping oil prices.
On the demand side, the oil market has largely disregarded OPEC+ projections for 2023. OPEC+ projected an increase in oil demand in China, the world’s largest oil importer. However, the market remains cautious due to potential economic risks, including the US debt ceiling battle. Economic uncertainties can impact oil demand and lead to fluctuations in prices.
Iraq’s Request for Oil Exports Adds Supply Dynamics to the Market
Turning to the supply side, Iraq has officially requested Turkey to resume oil exports through a pipeline running from the semi-autonomous Kurdistan Region to the Turkish port of Ceyhan. If approved, this could contribute an additional 450,000 barrels per day (bpd) to global crude flows. Changes in supply levels have a direct impact on oil prices, as they affect the overall market dynamics and balance between supply and demand.
Fluctuations in Inventories Impact Crude Oil Prices
In terms of inventories, fluctuations in crude oil stocks can influence prices. An unexpected build in US crude oil inventories, along with lower crude imports and softer export growth in China, has affected prices in recent sessions. On the other hand, the decline in US gasoline inventories and the rise in jet fuel demand ahead of the summer driving season have somewhat limited the decline in crude oil prices.
Analysts Forecast Range for Oil Prices in 2023
Looking ahead, some analysts forecast oil prices to range from $75 to $95 during 2023, considering fundamental supply and demand dynamics. The anticipation of a rally as the summer driving season approaches reflects expectations of increased demand for transportation fuels.
Investor Sentiment Tied to US Debt Ceiling Talks
Investors are closely monitoring talks on raising the US government’s debt ceiling, as it has implications for the overall economic stability. Concerns about a potential default have led to apprehension on Wall Street, affecting investor sentiment. However, once a compromise is reached, analysts believe that investors will be encouraged to act, leading to a rally in stocks and providing support for oil prices. Additionally, inflation data showing a slight easing could provide cover for the Federal Reserve to pause further interest rate increases, which can have an impact on oil demand.
Weekly Technical Analysis
Weekly June WTI Crude Oil
Trend Indicator Analysis
The main trend is down according to the weekly swing chart. It turned down last week when sellers took out the previous main bottom at $64.58.
A trade through $63.64 will extend the downtrend. A move through $83.38 will change the main trend to up.
Retracement Level Analysis
The contract range is $37.04 to $100.48. Its retracement zone at $68.76 to $61.27 is the major support. The market tested this area last week and held its ground at $63.64, with enough buying coming in to reestablish the zone as support.
The minor range is $83.38 to $63.64. Its retracement zone at $73.51 to $75.84 is resistance. It stopped the rally this week at $73.89. The market would have to overcome this zone to get excited about the upside.
Weekly Technical Forecast
The direction of the June WTI crude oil market the week-ending May 19 is likely to be determined by trader reaction to the minor 50% level at $73.51.
Bullish Scenario
A sustained move over $73.51 will signal the presence of buyers. This could lead to a quick test of the minor Fibonacci level at $75.84. Overcoming this level could trigger an acceleration to the upside with the resistance cluster at $82.06 – $83.38 the next target.
Bearish Scenario
A sustained move under $73.51 will signal the presence of sellers. This could lead to a retest of the major 50% level at $68.76. This level has to hold or prices could collapse into the support cluster at $63.64 – $61.27.
Taking into consideration all the factors driving the price action at this time, one has to conclude that the short-term forecast for oil prices suggests a mixed outlook. The decline in crude oil prices, driven by the US debt ceiling standoff, weak economic data, and a strong US Dollar, has created uncertainties and dampened investor sentiment. However, the anticipation of a compromise being reached on the debt ceiling and a slight easing in inflation data could provide support for oil prices.
In terms of supply dynamics, the potential addition of 450,000 barrels per day through Iraq’s request to resume oil exports could impact the overall market balance. Fluctuations in inventories, with unexpected builds in US crude oil stocks but declining gasoline inventories, also contribute to the complex price dynamics.
Looking ahead, analysts forecast a range for oil prices in 2023 between $75 and $95, taking into account fundamental supply and demand dynamics. This forecast considers the anticipation of increased demand for transportation fuels during the upcoming summer driving season.
Investor sentiment remains tied to the ongoing US debt ceiling talks, as a compromise and resolution could encourage market participants and potentially lead to a rally in stocks, providing support for oil prices.
It’s important to note that the oil market has disregarded OPEC+ projections for increased oil demand in China, given the prevailing economic risks, including the US debt ceiling battle.
Overall, the short-term forecast for oil prices suggests a cautious outlook, with various factors contributing to price fluctuations. Monitoring developments in the US debt ceiling discussions, inflation data, supply dynamics, and investor sentiment will be crucial in understanding the future trajectory of oil prices.
Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.
The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.
Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.
The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.
Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”
“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.
“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”
Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.
The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.
It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.
Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.
It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.
“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.
Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.
The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.
Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.
The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.
“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.
Asked how long that environment could last, he said that’s out of Telus’ hands.
“What I can control, though, is how we go to market and how we lead with our products,” he said.
“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”
Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.
On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.
That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.
Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”
“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.
“We will continue to monitor developments and will take further action if our codes are not being followed.”
French said any initiative to boost transparency is a step in the right direction.
“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.
“I think everyone looking in the mirror would say there’s room for improvement.”
This report by The Canadian Press was first published Nov. 8, 2024.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
