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Bear Run Sends Oil Down For 10th Straight Session

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A bear stampede has taken hold of oil markets as the coronavirus plague continues to spread FUD (fear, uncertainty and doubt) amongst the investing universe. Oil futures slid for a 10th straight session Monday as casualties hit 426 and the number of infections surpassed 20,000.

And now big money managers have joined the stampede as new data reveals the virus is creating severe demand shocks that could further depress prices. Reuters has reported that fund managers and hedge funds were heavy sellers of crude oil and various refined products last week as the worsening outbreak heightened fears of a demand meltdown in China, the world’s leading importer of crude.

Brent crude prices have dropped 21% over the past 30 days, less than two months after the first coronavirus case was reported in the Chinese city of Wuhan. Nearly 60 million people in the country remain under lockdown in the cities as international researchers frantically race to develop a vaccine that will halt the spread of the virus.

Brent Crude Price 1-Month Change

Source: Bloomberg

Bear Stampede

According to the Commitments of Traders (COT) report by the CFTC, hedge funds and other money managers sold petroleum futures and options in the six most important contracts equivalent to 147 million barrels in the week ending Jan. 28. Contracts that were out of favor include Brent (27 million), NYMEX and ICE WTI (56 million barrels), U.S. gasoline (28 million), U.S. diesel (16 million) and European gasoil (20 million).

This marked the largest sale by funds in any one week since July 2018 and among the heaviest sales over the past eight years.

That’s quite alarming considering that fund managers have largely remained bullish even in the midst of the ongoing bear stampede. To be fair, fund selling in oil has been going on since Jan. 7; however, it was initially in only small volumes, mostly reflecting profit-taking after a large accumulation of bullish positions over much of last year. But the wave of selling has now accelerated with funds having sold a total of 236 million barrels of crude and products over the last three weeks compared to purchases of 533 million barrels over the previous three months. Related: Citi: Brent Oil Could Fall To $47 As Demand In China Crashes

Following the latest wave of selling, hedge fund positioning in crude and products has fallen to 4:1 with bullish long positions outnumbering bearish short ones. That’s below the long-term average of 5:1 and a sharp turnaround of a 7:1 long-short ratio at the start of the year.

Demand Shocks

Oil traders appear justified in their anticipation for oil consumption to take a massive hit in the short term.

Last week, Bloomberg reported that Chinese oil demand had dropped by about 3 million barrels a day, or ~20% of total consumption. The drop marks the largest demand shock in the market since the global financial crisis that ended in 2009. It’s also the most sudden shock the market has suffered since the Sept. 11 attacks nearly two decades ago.

It remains to be seen what measures OPEC and its allies will take to ameliorate the situation when they meet on Tuesday and Wednesday. Helima Croft, global head of commodity strategy at RBC Capital Markets, has told CNBC that the cartel could lower production by another million barrels per day or risk further collapse in prices. It’s going to be a tough call though for the members to agree to such a heavy cut considering that the group had already agreed to deeper production cuts in December.

Selloff Overdone

Investors typically hate uncertainty, and this is the key reason why the coronavirus has been wreaking so much havoc on financial markets. China’s lunar new year has already been extended with many businesses and factories remaining shut with little clarity regarding when the situation will be contained. Meanwhile, several prominent airlines have suspended flights to China while the US, Australia, Japan, Italy, Russia, Pakistan and Singapore have issued a travel ban that prevents travelers that have been to China in recent weeks entry into their respective countries.

While it’s almost inevitable that oil demand will suffer in the short-term, not everybody believes that the sky is falling or that the heavy oil selloff is merited.

Vandana Hari, founder and CEO of energy markets consultancy Vanda Insights, says it’s unfair to compare the coronavirus epidemic to the SARS outbreak of 2003 because the last one was compounded by the US invading Iran. Vandana notes that the fear premium peaked before the invasion, with oil prices falling from $30/barrel to $20/barrel before recovering rapidly after OPEC quickly stepped in and filled the gap left by Iran.

Vandana sees OPEC stepping in to defend Brent at the $60/barrel psychological floor though she says it’s a bit premature for the organization to do so at this time.

S&P Platts is also a bit more bullish about the situation and sees the effects of the coronavirus cooling off around June-July.

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Oil Jumps On Massive Crude Inventory Draw – OilPrice.com

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Oil Jumps On Massive Crude Inventory Draw | OilPrice.com


Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Crude oil prices moved higher today, after the Energy Information Administration estimated a draw in oil inventories of 7.1 million barrels for the week to August 12.

This compared with a build of 5.5 million barrels reported for the previous week. A day earlier, the American Petroleum Institute estimated a modest crude draw of 448,000 barrels for the week to August 12.

In gasoline, the EIA estimated an inventory draw of 4.6 million barrels for last week, which compared with a 5-million-barrel decline for the previous week.

Gasoline production averaged 10 million bpd last week, which compared with 10.2 million bpd during the previous week.

In middle distillates, the EIA reported an inventory build of 800,000 barrels, which compared with a much needed build of 2.2 million barrels for the previous week as inventories have fallen to critical levels.

Middle distillate production averaged 5.1 million barrels daily, compared with 5.1 million bpd for the previous week.

Oil prices hit the lowest in six months earlier this week but recovered after the API report as it suggested demand for oil remained stable despite the challenging economic situation.

At the time of writing, Brent crude was trading at $92.47 per barrel, with West Texas Intermediate changing hands for $87.01 per barrel.

“A drawdown of U.S. gasoline stockpiles for a second straight week has reassured investors that demand is resilient, prompting buys,” one oil analyst from Fujitomi Securities told Reuters this week.

“Still, the oil market is expected to stay under pressure, with fairly high volatility, due to worries over a potential global recession,” Kazuhiko Saito added.

The volatility is being fed also by continued uncertainty about the Iran nuclear deal, after Iran sent a written response to the EU’s latest proposal with Iranian media suggesting it won’t accept it as is.

Another factor fuelling price volatility are the latest oil demand figures from China, which were weaker than many expected.

By Irina Slav for Oilprice.com

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Airbnb to roll out new 'anti-party' technology in Canada, U.S. – CBC News

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Airbnb says it will use new methods to spot and block people who try to use the short-term rental service to throw a party.

The company said Tuesday it has introduced technology that examines the would-be renter’s history on Airbnb, how far they live from the home they want to rent, whether they’re renting for a weekday or weekend and other factors.

Airbnb said the screening system that it is rolling out for listings in Canada and the United States has been tested since last October in parts of Australia, where it produced a 35 per cent drop in unauthorized parties.

The San Francisco-based company said the technology is designed to prevent a customer’s request for reservation from ever reaching the host of the property involved. Airbnb said people blocked from renting an entire home might be able to book a single room because the host is more likely to be around.

Worldwide party ban implemented in 2020

Airbnb has been under growing pressure to clamp down on parties since 2019, when a Halloween house party in a San Francisco suburb ended with five people dead in a shooting.

The following year, Airbnb announced a worldwide party ban at its listings and banned people under 25 from renting an entire house near their home unless they had a record of positive reviews on the site.

In 2020, the company suspended more than 40 listings in Ontario alone, targeting hosts who had received warnings, complaints, or had otherwise violated company’s party policy in the year prior.

Last October, a municipality in Quebec temporarily suspended short-term listings when an Airbnb party attracted over 500 attendees. 

The party ban was initially cast as a temporary health measure during the pandemic, as more people moved from bars and clubs into rented homes, but was made permanent in June.

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Hudson's Bay to resurrect discount retail chain Zellers – CBC News

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Canadian department store Zellers hopes to make a comeback next year, a decade after the discount chain shuttered most of its locations.

Hudson’s Bay Co. says Zellers will debut a new e-commerce website and expand its brick-and-mortar footprint within select Hudson’s Bay department stores across the country in early 2023.

  • What do you remember about shopping at Zellers? Let us know in an email to ask@cbc.ca

The company says the relaunched Zellers will offer “a digital-first shopping journey that taps into the nostalgia of the brand.”

In an email to CBC News, a spokesperson for Hudson’s Bay did not confirm where the new Zellers stores will be located.

Initial inventory will include housewares, furniture and toys, with apparel to be introduced later in the year. The company also plans to launch a private brand, according to the release.

Lawsuit over Zellers brand ongoing

The return of Zellers comes as soaring inflation drives consumers to discount retailers in search of lower prices. It follows Tuesday’s announcement from Hudson’s Bay that outdoor gear retailer MEC will open shops in three Bay department store locations this fall.

It also comes amid an ongoing lawsuit over a Quebec family’s use of the Zellers brand.

The Moniz family is behind various recent trademark applications and corporate registries, including Zellers Inc., Zellers Convenience Store Inc. and Zellers Restaurant Inc.

In a statement of claim filed last fall, HBC accused the Moniz family of trademark infringement, depreciation of goodwill and so-called passing off — the deceptive marketing or misrepresentation of goods.

Bruce Winder, a Toronto-based retail analyst, said he believes the Zellers revival is partly a reaction to the lawsuit.

“They need to demonstrate that they are still interested in the brand and there’s no better way to do that than actually open some stores,” Winder said.

Mixed reaction from consumers, retail strategists

A Zellers storefront announces its closure in 2013. Consumers and retail strategists offered mixed reactions after the Hudson’s Bay Company announced it will resurrect the discount chain this year. (CBC)

CBC News heard a range of responses from consumers with fond — and not-so-fond — memories of shopping at Zellers. Some are hoping for the return of the in-store restaurant and the brand’s mascot, Zeddy.

Others expressed hope that Zellers could compete with big-box stores such as Walmart and Giant Tiger.

“I always thought the Zellers was the store that catered to everyone, and I was very disappointed to see it go,” said Diane, a longtime resident of Toronto’s Richmond Hill neighbourhood.

“And then we had Target. It didn’t meet up to the Zellers standards. I would love to see it come back. I think it would service a lot of people from different incomes.”

Others recalled bad customer service experiences, a shortage of advertised products and understaffed stores. Some expressed concern that the store wouldn’t carry locally made products.

Mark Satov, a strategy adviser at Toronto-based Satov Consultants who worked with Zellers in the past, is cautiously optimistic about the brand’s resurrection. 

“They probably have to spend a little less to resurrect this brand than to create a new brand,” he said. 

Satov added that he doesn’t think the brand has a negative connotation among consumers — but it wasn’t a successful business, which is why it was sold, he said.

“I think it’s an OK move. I’m not sure that this is going to be a home run, but let’s see.”

Others have lower expectations. While the move is meant to capitalize on consumers’ nostalgia for the Zellers brand, many will associate the company with a negative shopping experience, according to Craig Patterson, the founder and publisher of retail media site Retail Insider.

“I think people are just excited to get something that was in their lives in the past, and that could be almost anything. But I’m not sure if this Zellers move is going to be a positive one long term for Hudson’s Bay,” Patterson said. “It really remains to be seen in how it’s executed.”

“I think that there is going to be an uphill battle in developing this new brand and creating these shops and stores, as well as this entire new e-commerce division for the Hudson Bay Company, which is, again, an expansion for that company.”

Most stores closed by 2013

Hudson’s Bay launched a pop-up Zellers shop inside Hudson’s Bay department stores in Burlington, Ont., and Anjou, Que., in 2021. (Anis Heydari/CBC)

The Zellers department store was founded in 1931 and acquired by HBC in 1978.

It operated as the discount division of its flagship Hudson’s Bay department stores, with the slogan “Where the lowest price is the law.”

The store hit its peak of about 350 locations in the late 1990s, before losing ground to big-box competitors such as Walmart.

In 2011, HBC announced plans to sell the majority of its remaining Zellers leases to Target Corp., closing most stores by 2013.

The retailer kept a handful of Zellers locations open as liquidation outlets until 2020.

The company launched a pop-up Zellers shop inside Hudson’s Bay department stores in Burlington, Ont., and Anjou, Que., in 2021.

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