Canada’s oilpatch is bracing for the impact of plunging crude prices after OPEC and its allies failed to reach a deal aimed at cutting production as economies slow because of the novel coronavirus.
Prices began sliding after Russia refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production.
Brent crude, the global oil benchmark price, had its biggest daily percentage loss in more than 11 years on Friday, down $4.72 US, or 9.4 per cent, to settle at $45.27 US a barrel.
The benchmark crude contract in North America, West Texas Intermediate (WTI), closed down 10 per cent on Friday, dropping $4.62 to $41.28 US per barrel. It was its worst drop in more than five years.
Brent and WTI are both down over 30 per cent so far in 2020.
‘Not good for governments reliant on oil revenues’
COVID-19 concerns and the impact on oil demand — plus the prospect of OPEC abandoning its role in trying to limit supplies — have the makings of a “toxic recipe” for oil prices, said Judith Dwarkin, chief economist at RS Energy Group.
“That’s not good for oil producers; it’s not good for governments reliant on oil revenues,” Dwarkin said.
“It’s generally not good for the Canadian economy, for which oil production and all the taxes and royalties and other revenue collected from that [are] an important part of the economy.”
OPEC sources told Reuters that Russia, one of the world’s biggest oil producers but not a member of OPEC, and Saudi Arabia, the biggest crude producer in OPEC, had failed to find a compromise despite several rounds of bilateral talks this week in Vienna.
Canada’s oilpatch is bracing for the impact of plunging crude prices after OPEC and its allies failed to reach a deal aimed at cutting production as the reach of the novel coronavirus spreads. (Leonhard Foeger/Reuters)
As a result, the existing deal for output cuts will expire in March, so OPEC members and non-OPEC producers can in theory pump at will in an already oversupplied market, sources told Reuters.
OPEC members are responsible for about 40 per cent of the world’s oil production.
Coronavirus is cutting world crude demand
Oil prices have dropped in recent weeks over concerns about the spread of the coronavirus. It’s estimated the impact of the disease in China sliced about 900,000 barrels of daily oil demand from that country alone.
The impact has rippled out across global energy markets, including Canada.
On Friday, Calgary-based Vermilion Energy cut its dividend in half to deal with weakness in commodity prices and global economic fallout from the novel coronavirus.
Dwarkin said today’s news might add to the incentive for oil companies to cut capital spending, if they were already moving in that direction and should the price spiral continue.
At oil prices as low as they were on Friday, she said, the industry does not make money. Over time, that might mean gasoline will cost a little less at the pump, but it could also mean layoffs and even bankruptcies.
“We’ve seen the punch and the counter-punch today, the Russians and the Saudis,” Dwarkin said.
“Let’s see what emerges in the next few days on that front before you declare this bout over.”
Martin Pelletier, a portfolio manager with Trivest Wealth Council in Calgary, said he expects Canada’s oilpatch to “batten down the hatches” with oil prices falling.
“You’ve got to manage your balance sheet,” Pelletier said.
“Those who don’t manage their balance sheet — if this sell-off continues — are not going to make it.
“This [situation] could be over in a week or two weeks, but it may not be over for a couple months.“
Western Canada’s oilpatch had been hoping for a better year, especially with recent progress on three key pipeline projects. But the shelving of a major oilsands project and now struggling oil prices are again heightening uncertainty.
Tristan Goodman, president of the Explorers and Producers Association of Canada, whose membership represents a fifth of the oil and gas production in the country, said there is significant concern about where oil prices are headed.
Though he thinks oil markets have “partially” overreacted to the news, it will take time understand the true impact.
“We have to sort of give this a few weeks to figure out, OK, how is this really going to impact the global economy?“
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
