Global stock markets fell in a broad-based decline as crude oil prices sank to their lowest level in more than two decades on heightened supply concerns.
After moving into unprecedented negative territory on Monday, the May oil contract turned positive on the last day to US$10.01 per barrel.
However, the more heavily traded June crude contract plunged more than 43 per cent or US$8.86 to US$11.57 per barrel.
“It’s not good for the producers because during that roll forward, the June contract has fallen to about $10 to $11 per barrel and really no one’s making money at those levels,” said Craig Jerusalim, portfolio manager at CIBC Asset Management.
Oil contracts a few months out are in the $20 to $30 range but the longer that the spot price stays low the more production will be cut and not everyone will survive, he said.
“The cure for low prices is low prices, and it’ll ultimately correct itself by supply coming off the market,” he said in an interview.
“Ultimately, the price of oil should balance out where supply equals demand and where the marginal cost of production is, which is higher than where it is.”
U.S. President Donald Trump tweeted that he’s instructed the energy and treasury secretaries to “make funds available so that these very important companies and jobs will be secured long into the future!”
Jerusalim said that will allow unprofitable businesses to avoid bankruptcy.
“It might help that producer in the short term, it doesn’t help the industry in the medium or long term.”
The May natural gas contract was down 10.3 cents at US$1.82 mmBTU.
Despite the fall in prices, energy was the second-best performer among the 11 major sectors on the TSX.
It fell 1.2 per cent, just behind materials, which lost less than a percentage point on lower metals prices.
The June gold contract was down US$23.40 at US$1,687.80 an ounce and the May copper contract was down nearly nine cents at US$2.23 a pound.
Technology was the biggest loser on the day, falling 5.45 per cent as shares of Lightspeed POS Inc. dropped 9.2 per cent.
The heavyweight financials sector was down more than four per cent with Great-West Lifeco Inc. down 7.6 per cent and Canada’s large banks losing between 3.5 and 4.5 per cent.
Efforts to flatten the curve in terms of confirmed cases of COVID-19 means the path back to normalization will be slow, corporate earnings are going to remain depressed and some companies won’t survive.
“Bankruptcies are going to be elevated, consumers are not going to be able to pay their credit cards to the same extent as they were, which means provisions for credit losses are going to go up and overall profitability in many financials is going to be deteriorated for some time,” Jerusalim said.
The S&P/TSX composite index closed down 448.22 points or 3.1 per cent at 13,940.06.
In New York, the Dow Jones industrial average was down 631.56 points at 23,018.88 for a two-day decrease of more than 1,200 points. The S&P 500 index was down 86.60 points at 2,736.56, while the Nasdaq composite was down 297.50 points at 8,263.23.
The Canadian dollar traded for 70.41 cents US, compared with an average of 70.99 cents US on Monday. Investors sought safety in the U.S. dollar which pushed it higher at the expense of the loonie and commodities.
Jerusalim said the positive news on the day was the human story as the global trend for virus infections in hot spots seems to have peaked, meaning the pace of growth has slowed.
“And that’s beginning to change the dialogue to reopening.
This report by The Canadian Press was first published April 21, 2020.
OPEC and allies reportedly agree to extend record production cut – CNBC
An OPEC sign hangs outside the OPEC Secretariat in Vienna, Austria, on Nov. 29, 2017.
Akos Stiller | Bloomberg | Getty Images
OPEC and its oil-producing allies reportedly agreed to extend the historic 9.7 million barrels per day production cut that was set to expire at the end of June, according to two sources familiar with the matter.
The cut will be extended through the end of July, and the group is expected to confirm the agreement at its meeting on Saturday, which kicked off a little before 8:30 a.m. ET.
The closely watched meeting was initially scheduled for June 9-10, but was pulled forward after Iraq agreed to comply with its quota.
On Friday West Texas Intermediate jumped 5.72% to settle at $39.55, while international benchmark Brent crude gained 5.78% to settle at $42.30. It was each contract’s sixth straight week of gains, and the highest settle since March 6.
“OPEC+ looks set to formally announce a one-month deal extension at [Saturday’s] ministerial meeting,” said Helima Croft, RBC’s global head of commodities strategy. “Nevertheless, there could be some last minute theatrics at the virtual gathering and we suspect that some individual producer performance will still be less than perfect on a go-forward basis.”
Under the current agreement, which was set during an extraordinary multi-day meeting in April, the 23-member group cut production by 9.7 million bpd beginning May 1 and through the end of June. The cuts would then begin to taper. From July through the end of 2020, 7.7 million bpd would be taken offline, followed by 5.8 million bpd from January 2021 through April 2022.
The cut — the largest in history — came as oil demand fell off a cliff due to the coronavirus pandemic. The International Energy Agency estimates that about one quarter of demand was sapped in April as billions of people around the world stayed home in an effort to slow the spread of Covid-19. The hit to demand came as producers continued to pump oil, which sent WTI tumbling into negative territory for the first time on record, while Brent fell to a 20-year low.
Since then, prices have steadily climbed higher as economies begin to reopen and as producers further rein in output. In the U.S., production has fallen from a record 13.1 million bpd in March to 11.2 million bpd, according to the U.S. Energy Information Administration. WTI is still about 40% below its January high of $65.65, however.
“Although small in scale, this cut is however important in squaring the group’s strategy, which has this year alone swung from price focused cuts, to market-share recapture, to internal price war to finally a record large cut,” Goldman Sachs’ Damien Courvalin wrote in a note to clients Friday.
– CNBC’s Brian Sullivan and Michael Bloom contributed reporting.
Unemployment rate increases in Alberta despite more jobs: StatCan – CTV News
Alberta gained 28,000 jobs in the month of May, according to the latest Labour Force Survey released Friday morning from Statistics Canada.
The increase in employment follows a cumulative decline of 361,000 jobs from February to April.
Alberta’s job increases were entirely driven by the services-producing sector after the province allowed some businesses such as restaurants and non-essential shops to reopen as of May 14.
The unemployment rate in the province increased by 2.1 percentage points to 15.5 per cent, which is now the second highest in the country behind Newfoundland and Labrador at 16.3 per cent.
Nationwide, the average rate of unemployment is now 13.7 per cent, topping the previous high of 13.1 per cent set back in December 1982.
Canada added a total of 290,000 jobs across the country. According to Statistics Canada data, the total number of hours worked is increasing at a faster pace than employment.
Total hours worked across all industries grew by 6.3 per cent in May, compared with an increase of 1.8 per cent (290,000 jobs) in employment.
Alberta Economic Recovery Plan
In response to one of the most dramatic economic downturns in Alberta’s history, the provincial government will start rolling out an economic recovery plan later this month focused on cultivating key industries.
Premier Jason Kenney said last week that Alberta’s strategy will take a “pedal to the metal” approach to diversification after a steep decline in the price of oil.
On Monday, Finance Minister Travis Toews announced that his financial blueprint will be centred on growing sectors such as energy, agriculture, technology and petrochemical manufacturing.
A recent study from the Conference Board of Canada projects Alberta will see its economy shrink by 6.8 per cent this year.
Toews called that report realistic and noted the downturn will be measured in months not weeks.
Canadian government pushes 3500MHz spectrum auction to June 15, 2021 – MobileSyrup
In light of the ongoing COVID-19 pandemic, the government announced that it has postponed the 3500MHz spectrum auction by six months.
The new date for the auction is now June 15th, 2021. Several of the other key dates associated with the auction are listed on the government’s site since they’ve also been pushed back by six months.
“Canada’s telecommunications service providers are doing their part in this difficult time, providing essential services to keep Canadians connected as we face the realities of the COVID-19 pandemic together. A number of providers have raised concerns, and the Government is implementing measures to address them,” said Navdeep Bains, Minister of Innovation, Science and Industry.
“The Government will continue to reach out to telecommunications service providers—and to the private sector more broadly—to understand their challenges and support them to ensure that Canadians have access to high-quality networks and broad coverage at low prices.”
The government’s press release from June 5th, 2020 states that this is in line with what other countries are doing. It will help the telecommunication companies focus on providing robust service to Canadians as many of us are still self-isolating at home.
Beyond this, a consultation on the 3800MHz spectrum is set to begin in August to get the ball rolling on that slice of 5G spectrum as well. Notably, both the 3500MHz and 3800MHz are considered key due to their ability to transport data at 5G speeds at a reasonable range.
In a statement to MobileSyrup, Chethan Lakshman, the vice president of external affairs at Shaw, stated, “given the pandemic’s impact on Canadian society and overall business operations, we support the decision to provide additional time for industry and the government to prepare for this auction. A well-run auction process will ensure that Canadians and the Canadian economy will benefit from strong competition in wireless and 5G for years to come.”
“Our networks are the backbone of so much of our economy and as we continue to rollout Canada’s first 5G network, driving innovation and productivity, we look forward to accessing 3500 Mhz spectrum as soon as it is available,” Rogers said in a statement to MobileSyrup.
Telus, meanwhile, sent MobileSyrup the following statement:
“While we would like to see the auction proceed as soon as possible, we appreciate the government’s recognition of facilities-based carriers for keeping Canadians connected at all times, even during the pandemic. Because of our continued investment in building out communications infrastructure, TELUS’ 4G LTE network speeds are among the fastest in the world; faster even than South Korea’s 5G network speeds, according to Opensignal. We have long been ready to make the crucial investment in 3500 MHz spectrum and network infrastructure required to realize the full promise of 5G so that Canadian entrepreneurs, businesses, and innovators can leverage the next generation of connectivity that promises to benefit us all. In the interim, we will continue to provide our customers with access to the fastest and most reliable networks possible and focus our efforts on supporting Canada’s recovery from COVID-19 in whatever ways we can.”
Update 05/06/20 4:19pm ET: Updated with statements from Rogers and Telus.
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