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Chinese Investors Lost $1 Billion In Epic Oil Price Crash – OilPrice.com

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Chinese Investors Lost $1 Billion In Epic Oil Price Crash | OilPrice.com

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Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Chinese investors

For many decades, the Chinese financial markets remained a tightly controlled affair that, for the most part, locked out foreign and exotic investments. That started to change during the last decade with the country’s capital markets slowly but surely moving into the global investment mainstream. Two years ago, the world’s largest oil importer achieved another milestone after it launched crude oil futures trading that allowed its citizens to participate in the giant market.

While the futures market flourished during its first two years of existence, it did not take long for the proverbial ‘Yang’ to arrive: Chinese investors have suffered horrendous losses after the latest oil market crash that has also devastated their American brethren.

South China Morning Post has reported that Bank of China clients have suffered losses amounting to more than 7 billion yuan (US$1 billion), or 11x bigger than its earlier estimates. The bank had estimated the losses at ~600 million yuan ($85.7 million) during the middle of the week but sharply hiked the estimate after gathering more information from more than 10,000 outlets.

The final tally is subject to change and could still rise as more data comes in.

WTI Collapse

The massive losses stem from the oil price crash on April 21, which sent the price of WTI deep into negative territory. The ill-fated May contracts underpinned Bank of China “Crude Oil Treasure” that it launched in May 2018, leaving thousands of customers counting their losses and demanding that the bank should shoulder some of the pain.

Source: BloombergQuint

Although the bank does not disclose the performance of “Crude Oil Treasure,” the losses could be significantly higher than the latest estimate considering that as many as 60,000 customers had invested in the product as per a report by Chinese publication Caixin. 

The crude futures appear to have rapidly gained in popularity, challenging well-established crude futures markets just a few months after their launch. 

Premium: 2 Stocks To Consider As Oil Nears $15

In January 2019, investment firm Jordan Knauff and Co (JKC) reported that daily trading volumes for front-month crude futures at the Shanghai International Energy Exchange clocked in at nearly 250 million barrels, ~20% of global trading in similar contracts and pretty close to Brent front-month futures trading volumes. That was less than a year since their launch.

Source: JKC

It could have been a lot worse, though.

The Bank of China doesn’t allow any leverage, which is a good thing because applying leverage would have multiplied those losses. The bank revealed that ~46% of the investors liquidated their positions a day before the contracts were due for settlement while the rest either chose to settle at expiry or roll over their positions.

The result: Investors lost 4.2 billion yuan of their margin and another 5.8 billion yuan that they owe the bank

However, just like its U.S. peer, the USO ETF, which quickly moved its money from near-term to longer-term contacts in a bid to minimize risk, Bank of China has said that it will review the product’s design and risk controls as well as take responsibilities within the legal framework. It also went a notch higher after suspending trading in the product, with China’s other big banks following suit.

However, that might not be enough to prevent further carnage in the future, if the American market is any indication.

Greenhorn Investors

Over the past few months, oil punters have been betting that the coronavirus pandemic would be quickly brought under control, thus allowing crude prices to rebound. However, many retail investors might not be aware that where the USO ETF, the largest crude oil ETF in the country, is one of the easiest instruments to gain exposure to the oil market due to its ample liquidity, it does not accurately track the physical commodity.

Traditionally, the oil ETF is meant to hold long the front-month contract, which gives investors access to the oil spot price. Yet, it has changed its mandate multiple times over the past couple of weeks and now acts more like a hedge fund. While its latest move to shift its money to longer-term dated contracts is likely to make it less volatile, oil prices are not likely to recover in a hurry given that most oil producers would rather sell at low prices than risk even heavier losses through well shut-ins.

The chilling development is that USO long positions have actually tripled since last week’s huge selloff to 200,000, meaning greed is still rampant in the oil market.

Over the past couple of years, Beijing has gone into a heavy deleveraging drive while also trying to instill more risk awareness among millions of its retail investors. The latest rout shows that the lessons have been falling on deaf ears, and these investors are just as likely to follow the heady path being taken by their American peers once the shackles are removed.

By Alex Kimani for Oilprice.com

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Oil Prices Erase Gains as Iran Downplays Reports of Israeli Missile Attack – OilPrice.com

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Oil Prices Erase Gains as Iran Downplays Reports of Israeli Missile Attack | OilPrice.com



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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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  • Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
  • Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
  • Iranian media reported activating their air defense systems, not an Israeli strike.

oil

Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.

Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.

The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.

Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.

However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.

Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.

The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.

The Isfahan province is home to Iran’s nuclear site for uranium enrichment.

“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.

The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”

At the time of writing Brent was trading at $87.34 and WTI at $83.14.

By Tsvetana Paraskova for Oilprice.com

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Rules limiting short-term rentals in effect May – Times Colonist

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Premier David Eby is warning real estate investors and speculators that his government is tilting the rules toward families seeking homes as it tightens the rules on short-term rentals.

Eby said Thursday that the rule changes on May 1 will limit short-term rental units to within the principal home of a host, but the move isn’t a ban on platforms such as Airbnb if they aren’t used to create de facto hotels from B.C.’s housing stock.

“If there’s a major event [such as a] Taylor Swift concert, a FIFA-like event and somebody wants to rent out their primary residence and go away for the weekend to avoid the crush of the crowds, they can still do that,” Eby said.

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The changes were announced by the government last spring, giving those who own short-term rentals a year to conform.

Eby said the changes will allow both the province and local governments to crack down on speculators.

“If you’re flipping homes, if you’re buying places to do short-term rental, if you’re buying a home to leave it vacant, we have consistently, publicly, repeatedly sent the message: Do not compete with families and individuals that are looking for a place to live with your investment dollars.”

Eby made his comments as the province announced new figures gathered in March that showed more than 19,000 entire homes being listed as short-term rentals.

Housing Minister Ravi Kahlon said the new rules also require short-term rental platforms such as Airbnb to share listed property data with the province and local governments.

He said they expect a significant amount of the homes listed on short-term sites to be back in the long-term rental pool.

“Our view is even if half of those units were to come back onto the market, that is substantial,” Kahlon said. “The cost that it takes to build new housing, when you can get even half of the 19,000 back on the market, that’ll make a substantial difference in our communities.”

He said previous efforts to limit short-term rentals are increasing housing supply in some places.

“We’re seeing, already, in many communities that action happening,” Kahlon said. “We have heard many stories of people finding rentals now because of opportunities when it comes to short-term rentals coming onto the market.”

The new principal residence requirement for short-term rentals will allow local governments to request that a platform remove listings that don’t display a valid business licence.

Valid short-term rental hosts will also be required to display a business licence number on their listings if a licence is required by local government.

The new rules will apply to more than 60 B.C. communities, and Kahlon said a compliance enforcement unit will be phased in to help municipalities deal with rule violations.

Much of the monitoring and enforcement, however, will be conducted online through a new rental data portal that will allow local governments to track and request removal of listings from platforms.

“With this new digital portal, local governments will be able to upload, within moments, listings that they believe are operating illegally within their community,” Kahlon said.

The platform will have five days to remove listings that aren’t following the rules, and if they don’t, they will be fined, he said, noting there’s an up-to-$10,000-a-day-per-listing fine for platforms that don’t co-operate.

“We believe that’s enough of a deterrent for the platforms to co-operate with local governments,” said Kahlon

A website launched Thursday for hosts will allow them to get information about their requirements from the province and their municipality, and their responsibility to notify anyone that’s booked.

“Hosts and platforms have a responsibility to notify anyone that’s booking of all the changes that have been coming,” said Kahlon. “They’ve been notified about this since September or October when the legislation has come in, and they’ve had plenty of time to set up their policies to do that.”

The rules do include some exceptions, including some strata hotels and motels operating before last December being exempt if certain criteria are met.

Eby said the overall message to property investors looking for short-term gains is clear: Build homes that people need and government will do all it can to help expedite the process.

“But if you are standing neck and neck with a family that’s looking for a place to live, and you’re trying to do a speculative investment, [while] they’re looking for a place to live, we are going to tilt the deck every single time towards that family,” Eby said. “And we’re gonna keep doing it.”

Eby also said a positive side-effect of short-term rental regulation has been the re-emergence of hotel construction, with 1,400 rooms “in the development pipeline” in Vancouver.

“Those investors in those hotel rooms weren’t able to make the decision to proceed,” Eby said, citing the previous competition from short-term rentals. “Very clearly, with these regulations in place, there will be visitors to stay in hotel rooms, there will be a market for hotel rooms and they’re making the decision to proceed. This is very good news.”

Victoria-based Property Rights B.C. has filed a lawsuit against the province and city of Victoria to fight the new regulatory system.

It maintains the province overstepped its authority and its lawsuit is focused on preserving the rights to own and operate short-term vacation rentals. The organization is also seeking a delay in enforcement.

Asked about the lawsuit, Eby said he can’t comment on a matter that’s before the courts, “but what I can say is we’re very confident in the legal authority of the province to regulate the housing sector in this way and we’ll make the arguments that are needed in court to address that.”

More communities initially exempt from the province’s new regulations have opted in, including Gabriola Island, Mill Bay/Malahat, Cobble Hill, Cowichan Station/Sahtlam/Glenora, Cowichan Lake South/Skutz Falls, Saltair/Gulf Islands and North Oyster/Diamond. Tofino previously announced it would opt in.

Municipalities with fewer than 10,000 people, resort communities and regional districts are exempt from a requirement restricting short-term rentals to principal residences and either a secondary suite or laneway home/garden suite.

— With files from Carla Wilson and Cindy Harnett

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Gas prices see 'largest single-day jump since early 2022': En-Pro International – Yahoo Canada Finance

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On Thursday afternoon, En-Pro International posted on X that

On Thursday afternoon, En-Pro International posted on X that “gas prices spiked 14 cents overnight, the largest single day jump since early 2022.” (AP Photo/Jenny Kane) (The Associated Press)

Gas prices across Canada climbed an average of 9.4 cents per litre of regular fuel over the past seven days, the biggest weekly gain so far in 2024. Cities in Ontario and Quebec booked eye-watering 20 cent-plus gains, while prices were virtually flat for drivers in the Western and Maritime regions.

The average cost per litre of regular gasoline in cities nationwide rose to $1.806 from $1.712 between April 11 and April 18, according to data firm Kalibrate. Chicoutimi, Que. saw the biggest increase at 26.7 cents per litre, followed by Gatineau, Que., and North Bay, Ont. The Greater Toronto Area was hit with widespread gains above 15 cents per litre.

On Thursday afternoon, En-Pro International posted on X that “gas prices spiked 14 cents overnight, the largest single-day jump since early 2022.”

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“The steady build in U.S. crude inventories, combined with the reluctance of the Fed to lower interest rates, which would increase gasoline demand, should neutralize the impact of the conflict in the Middle East,” En-Pro chief petroleum analyst Roger McKnight wrote in a blog post.

“The refining industry will come back to normal levels by mid-June, so supply will balance demand, and prices should fall soon after the U.S. Memorial Day launch of summer.”

Rising gas prices was the top factor behind Statistics Canada’s slightly higher annual inflation reading for March. Year over year, the agency found gasoline prices increased 4.5 per cent last month, following a 0.8 per cent rise in February.

“Higher global prices for crude oil stemmed from supply concerns amid geopolitical conflict and continued voluntary production cuts, leading to higher prices at the pump,” StatCan said on Tuesday.

Follow Yahoo Finance Canada for more weekly gas price updates. Scroll below to find your nearest city.

(All figures in CAD cents)

LOCATION

April 11

April 18

Price change

Canada Average (V)

171.2

180.6

9.4

WHITEHORSE

189.9

189.9

0

VANCOUVER*

210.7

212.7

2

VICTORIA

206.2

206.9

0.7

PRINCE GEORGE

169.6

169.3

-0.3

KAMLOOPS

172.5

181

8.5

KELOWNA

174.6

175.8

1.2

FORT ST. JOHN

171.2

174.9

3.7

ABBOTSFORD

194.2

198.5

4.3

YELLOWKNIFE

161.9

161.9

0

CALGARY*

161.2

158.8

-2.4

RED DEER

159

159

0

EDMONTON

154.9

153.6

-1.3

LETHBRIDGE

161.9

161.9

0

LLOYDMINSTER

154.6

154.6

0

GRANDE PRAIRIE

156.9

158.7

1.8

REGINA*

158

157.3

-0.7

SASKATOON

157.4

156.9

-0.5

PRINCE ALBERT

154.6

155.8

1.2

MOOSE JAW

158.7

158.7

0

WINNIPEG *

141.4

141.6

0.2

BRANDON

142.5

143.3

0.8

CITY OF TORONTO*

163.7

179.3

15.6

BRAMPTON

164.3

179.6

15.3

ETOBICOKE

163.4

179

15.6

MISSISSAUGA

162.8

179.3

16.5

NORTH YORK

163.9

179.6

15.7

SCARBOROUGH

163.3

179.5

16.2

VAUGHAN/MARKHAM

163.5

179.2

15.7

OTTAWA

162.4

179

16.6

KINGSTON

162.3

179.3

17

PETERBOROUGH

160.1

172.2

12.1

WINDSOR

162.4

177.8

15.4

LONDON

163.5

177.4

13.9

SUDBURY

167.4

185.8

18.4

SAULT STE MARIE

160.2

174.3

14.1

THUNDER BAY

165.8

175.5

9.7

NORTH BAY

161.5

182.6

21.1

TIMMINS

169.7

183.6

13.9

HAMILTON

161.6

178

16.4

ST. CATHARINES

160.4

177.1

16.7

BARRIE

162.8

178.2

15.4

BRANTFORD

161.1

176.2

15.1

GUELPH

163.4

178.4

15

KITCHENER

163.1

179

15.9

OSHAWA

163.8

179.4

15.6

SARNIA

161.7

178.9

17.2

MONTRÉAL*

173.7

190.5

16.8

QUÉBEC

172.1

187.4

15.3

SHERBROOKE

169.5

185.3

15.8

GASPÉ

172.7

189.4

16.7

CHICOUTIMI

155.1

181.8

26.7

RIMOUSKI

169.4

189.4

20

TROIS RIVIÈRES

169.8

186.7

16.9

DRUMMONDVILLE

166.7

183.9

17.2

VAL D’OR

169.6

182.7

13.1

GATINEAU

152.7

175.9

23.2

SAINT JOHN*

175.1

179.1

4

FREDERICTON

176.6

181.7

5.1

MONCTON

176.8

181.9

5.1

BATHURST

176.8

182.3

5.5

EDMUNDSTON

175.2

175.8

0.6

MIRAMICHI

177.9

183.1

5.2

CAMPBELLTON

175.7

179.9

4.2

SUSSEX

176.2

181

4.8

WOODSTOCK

177.8

183.1

5.3

HALIFAX*

172.1

175.4

3.3

SYDNEY

174.1

177.2

3.1

YARMOUTH

173.2

176.3

3.1

TRURO

173.3

176.4

3.1

KENTVILLE

172.7

175.8

3.1

NEW GLASGOW

173.3

176.4

3.1

CHARLOTTETOWN*

173

173

0

ST JOHNS*

190.4

193.9

3.5

GANDER

192.9

196.4

3.5

LABRADOR CITY

197

200.5

3.5

CORNER BROOK

191.1

194.6

3.5

GRAND FALLS

192.9

196.4

3.5

SOURCE: KALIBRATE • All figures in CAD cents

(*) Denotes markets used in Volume Weighted Canada Average

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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