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China's Biggest Move In Oil Markets To Date – OilPrice.com

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China is making an aggressive entrance into the world of energy exchanges, but will it help the markets like some analysts suggest, or will it spell doom for oil prices?

Persistent oversupply in the global oil and gas market has created a difficult situation for smaller oil and gas companies who must find ways to compete in a debt-laden, low-priced environment against state-run oil titans like Saudi Aramco and deep-pocketed oil giants such as Exxon.

But the small oil and gas players—those private companies that are facing an uncertain future despite sitting atop a literal wealth of oil and gas in prolific US shale plays—may have just been handed their ticket out of trouble by the largest oil importer in the world, China. 

Or have they?

China, in its quest to shore up its energy security, is launching a new energy exchange that will make it much easier for buyers and sellers of all things energy—including gas, oil, LNG, carbon credits, and even chemical products—to find each other and do business together in the robust Chinese market that might otherwise seem daunting to enter.

For smaller US energy businesses—which account for nearly 60-70% of all energy companies in the United States–the Greater Bay Area International Energy Transaction Center, as the exchange is called, could be just what the doctor ordered: easier access to a tricky but colossal market.  

For China, the exchange is designed to protect its energy security at a time when its voracious appetite for crude oil exceeds its domestic production. 

On the surface, it seems like a marriage made in oil heaven.

But concerns with the new energy exchange are widespread, and global–from the United States to the Middle East.

Small Independents

Today, there are approximately 9,000 independent oil and gas companies operating in the United States—this includes only those businesses that produced fewer than 75,000 bpd and have less than $5 million in oil and gas sales per year. This class of producers accounts for 83% of all oil produced in the U.S., and 90% of all natural gas.

It’s a booming business—and no doubt some of these smaller players will jump at the chance to engage with Chinese companies to sell their oil and gas products. There are concerns, however, that easier access to the huge Chinese energy market will erode prices further—a price situation that China is looking forward to. 

As for those independents, some of which are struggling in the already lower oil price environment, additional price erosion could mean death.

Middle East

And then there are the Middle East producers. There was a time when the United States imported almost 150 million barrels of oil monthly from OPEC member countries, according to the Energy Information Administration. But then just a few years ago, the United States lifted the export ban on crude oil, and everything changed. In January 2017, the United States imported 117.6 million barrels of oil from OPEC. In September 2019—the last month for which there is data—the United States imported just 48 million barrels. 

That’s less than half.

OPEC nations—mostly Saudi Arabia, Venezuela, and Iraq—had enjoyed hawking their wares on the US market. But as the U.S. slowed its oil imports, Middle East producers set their sites on another large market: Asia, including China.

Those same OPEC nations that were hurt by U.S. oil production will also be hurt by China’s courting of U.S. oil companies through this exchange.  For OPEC, who has come up against the United States oil industry time and time again as it tries to lift prices through production cuts, American oil producers keep turning up like a bad penny.

A Geopolitical Foothold

China is hoping that the new international exchange platform will rival the LSE and NYSE when it comes to online trading of crude oil and other energy-related products, including settling trade and delivering it. In addition to crude oil, chemical products, and LNG mentioned above, it will also deal with LPG, methane, ethane, and energy derivatives. And there’s more: it will also make available market information.

But the exchange will also increase—to the worry of many—China’s geopolitical foothold in new markets.

China is fast sinking money into developing oil and gas resources in foreign countries, despite lower oil prices. Its state-run oil companies, including CNOOC, have been throwing money at oil projects in Brazil, Mexico, Guyana, Nigeria, and Canada–and the US Gulf of Mexico, to name just a few. And while some see this as just a method of filling the oil void left by its own domestic production, others see this as China’s way of controlling oil resources across the globe for geopolitical gain. 

China has already sunk money into Iran and Venezuela in the form of loans in exchange for cheap crude–two countries that have found themselves on the receiving end of US sanctions that have crippled their respective oil industries. This move has upset the geopolitical apple cart as the U.S. struggles to bring oil exports for both to zero–without China’s backing, the U.S. might have been successful in doing so.

The growth of a massive new energy exchange not only improves China’s global positioning to influence oil prices, but also increases its geopolitical clout as its money gives it influence in state-run oil companies that carry political sway within their governments–particularly with Venezuela’s PDVSA and Angola’s Sonangol.  

There is no doubt that the exchange will increase the energy trade between smaller players. Whether this will have a positive result for small U.S. energy companies or whether this will crush prices and increase China’s political might remains to be seen. 

Byt Julianne Geiger for Oilprice.com

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RBC warns house price correction could be deepest in decades | CTV News – CTV News Toronto

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A housing correction, which has already led to four consecutive months of price declines in the previously overheated Greater Toronto Area market, could end up becoming “one of the deepest of the past half a century,” a new report from RBC warns.

New data released by the Toronto Regional Real Estate Board (TRREB) last week revealed that the average benchmark price for a home in the GTA fell six per cent month-over-month in July to $1,074,754.

Sales were also down a staggering 47 per cent from July, 2021.

In a report published on Aug. 4, RBC Senior Economist Robert Hogue said recent data from real estate boards underlines that higher interest rates are beginning to take a “huge toll” on the market.

Hogue said that with further hikes to come, prices will likely continue to slide in the coming months.

That prediction, it should be noted, goes against a report from Royal LePage last month which painted a rosier forecast for sellers in which values would more or less holding for the rest of the year following some declines in the second quarter.

“Our expectations for further hikes by the Bank of Canada—another 75 basis points to go in the overnight rate by the fall— will keep chilling the market in the months ahead,” Hogue said. “We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.”

The Bank of Canada has hiked the overnight lending rate by 225 basis points since March and has warned that further hikes will be necessary given that inflation remains at a near 40-year high.

In his report, Hogue pointed out that the housing correction “now runs far and wide across Canada” but he said that it is particularly pronounced in the costlier markets of Toronto and Vancouver.

In fact, Hogue said that housing resale activity in Toronto is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.

The stockpile of available homes is also up 58 per cent from a year ago, he noted.

“With more options to choose from and higher interest rates shrinking their purchasing budgets, buyers are able to extract meaningful price concessions from sellers,” he said, pointing out that the average price of a home in the GTA is down 13 per cent from March. “We expect buyers to remain on the defensive in the months ahead as they deal with rising interest rates and poor affordability.”

While Hogue did say that condos in the City of Toronto are likely to remain “relatively more resilient” he said that prices elsewhere will continue to fall for the time being, especially in the 905 belt “where property values soared during the pandemic.”

The July data from TRREB suggested that the average price of a home in the GTA was still up one per cent from July, 2021.

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Commuters face GO transit cancellations, possible strike – CityNews

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Canada Revenue Agency plans email blitz to get Canadians to cash outstanding cheques worth $1.4-billion – The Globe and Mail

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The Canada Revenue Agency (CRA) is planning a massive e-mail notification campaign to reach Canadians across the country who have uncashed cheques worth a net $1.4-billion.

The e-mail notifications will target recipients of the Canada child benefit and related provincial and territorial programs, as well as recipients of the GST/HST credits and the Alberta Energy Tax Refund.

The CRA said it plans to send approximately 25,000 e-mails in August, another 25,000 in November and a further 25,000 e-mails by May, 2023.

However, even without receiving an e-mail notification, the agency said a taxpayer can check if they have a cheque by logging into My Account, a secure portal on its website to check if they have an uncashed cheque over a period of six months. It added that representatives can also view uncashed cheques of their clients.

Each year, the CRA said it issues millions of payments to Canadian taxpayers in the form of refund benefits. These payments are issued by either direct deposit or by cheque.

“Over time, payments can remain uncashed for various reasons, such as the taxpayer misplacing the cheque or even a change of address which did not allow for delivery,” the agency said in a statement.

The CRA said since the e-mail notification initiative was first launched in February, 2020, about two million uncashed cheques valued at $802-million were redeemed by May 31, 2022.

The average amount per uncashed cheque is $158 with some of them dating as far back as 1998, the agency said.

As of May, 2022, there were an estimated 8.9 million uncashed cheques with the CRA. In May, 2019, about five million Canadians had an estimated 7.6 million uncashed cheques.

“As government cheques never expire or stale date, the CRA cannot void the original cheque and re-issue a new one unless requested by the taxpayer,” the statement read. “These upcoming e-notifications are to encourage taxpayers to cash any cheques they have in their possession.”

The agency said taxpayers can register for the direct deposit option on its website to receive payments directly into their bank accounts.

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