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How Oil Prices Could Go To $100 – OilPrice.com

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How Oil Prices Could Go To $100 | OilPrice.com

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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    “We’re in a deflationary moment that surpasses anything seen in most people’s lifetimes,” proclaimed a New York Times byline on Tuesday, the morning after oil prices went negative. The West Texas Crude Intermediate benchmark plummeted to previously unimaginable depths, closing the day at negative $37.63 per barrel.  The novel coronavirus has wreaked unprecedented havoc on the global economy, shutting down entire industrial sectors and bringing countries across the world to a halt as the global community shelters in place to slow the spread of the COVID-19 pandemic. Economists have warned that the fallout is going to be the largest economic downturn that we have seen in our lifetimes, but few could have foreseen the absurdity of negative oil prices. 

    Few, but not none. Three weeks ago, on April 1, CNBC published a report titled “Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn,“ which predicted exactly what is happening now. “Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output.”

    While the situation is totally unprecedented it’s impossible to say what will happen next for oil markets, some experts think that oil is poised for a major comeback. Even though oil prices are lower than they have ever been, “one energy fund thinks $100 a barrel is achievable,” reported the Midland Reporter-Telegram earlier this week. At the time of the report, oil was only at an 18-year low rather than an all-time low. The article intro continued:  “But first, prices need to fall even further.” Well, they got their wish. 

    As oil prices have tanked over the past two months, “Westbeck Capital Management’s Energy Opportunity Fund climbed 20.2 percent in March after declines in the first two months of the year, according to an investor letter. That puts the commodities-focused fund up 3.7 percent in the first quarter after U.S. oil futures cratered 66 percent — their worst quarter ever,” reports the Midland Reporter Telegram. “The fund, which gained 40 percent last year shorting U.S. shale companies, has turned its attention to oil tanks filling up at various points around the world, particularly at the biggest U.S. hub in Cushing, Oklahoma. With too much oil and not enough places to put it, Cushing may reach storage limits by mid-May, a market dislocation that could portend the next leg of a price rout.”

    Related: How Much Longer Will Indian Oil Demand Slump?

    This all points to a huge comeback for oil prices. As the world rushes to scale back oil production, they are setting up a bull market for the future. “When we are on the other side of the pandemic, we think oil demand will normalize very quickly. And next year, we could even see unprecedented inventory draws and the world quickly running out of spare capacity,” Westbeck Chief Executive Officer Jean-Louis Le Mee told MRT in an interview. 

    “That rout will mean more U.S. shale producers will have to throttle back output, some of which could be permanent, […]. The shut-ins, coupled with a recent deal by OPEC and allied members to curb production, could set the stage for a price rebound in coming years.”

    U.S. shale had already been in serious decline as West Texas wells aged and the gush of the shale revolution. Now, with the oil price crash, the Permian Basin has been burdened with bankruptcies and tens of thousands of fired and furloughed employees. So when we are able to return to business as usual, there will likely be a shortage of spare capacity. Low supply, high demand. That’s how these things work. Keep an eye out for $100 barrels coming down the pike.

    By Haley Zaremba for Oilprice.com 

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      Profit falls at TD and CIBC as loan loss provisions soar – CBC.ca

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      Canadian Imperial Bank of Commerce (CIBC) and TD Bank Group missed quarterly earnings expectations on Thursday, as they set aside billions to cover future loan losses due to the COVID-19 outbreak.

      The massive jump in provisions took the total amount set aside by Royal Bank of Canada, Bank of Montreal , Bank of Nova Scotia, National Bank of Canada , CIBC and TD Bank to $10.93 billion.

      The money set aside for credit losses on both performing and impaired loans as a result of the COVID-19 pandemic and continued pressure on oil prices has added to pressure on Canada’s biggest lenders from decade-low interest rates.

      Canadian banks have grown their oil and gas loan books faster than total lending in recent quarters, and their business loan books overall expanded during the second quarter as borrowers unable to access debt markets drew down credit lines.

      CIBC posted an adjusted profit of 94 Canadian cents per share for the quarter ended April, compared with analysts’ expectations of $1.58 per share.

      TD Bank, Canada’s second-biggest lender, reported an adjusted profit of 85 Canadian cents per share, missing estimates of 89 Canadian cents.

      Net income was $1.5 billion at TD, down 52 per cent from last year. Net income was $392 million at CIBC, down 70 per cent from last year.

      CIBC also reported lower net income across divisions and higher expenses. Controlling costs is particularly vital for CIBC, which has already said it expects expenses to grow this year at about double the rate of its rivals.

      It flagged layoffs earlier this year to aid its efforts to cut costs and become more efficient.

      CIBC set aside $1.41 billion in the quarter for future loan losses, compared with $255 million a year earlier, while total provisions for TD Bank jumped to $3.22 billion, compared with $633 million a year earlier.

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      Irving Oil Purchasing North Atlantic Refining Corp. – VOCM

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      A tentative deal has been struck for Irving Oil to take over North Atlantic Refining and the Come by Chance oil refinery.

      Irving Oil signed the agreement with Silverpeak to acquire North Atlantic, subject to a regulatory review and the conditions of sale being met.

      Silverpeak purchased the facility from the Korea National Oil Company back in 2017 amid widespread speculation that Irving was also eyeing the refinery at the time.

      Operations at the refinery were idled in March due to a downturn in the industry and concerns around the COVID-19 pandemic.

      The refinery shutdown came ahead of planned upgrades and expansion work that officials had indicated would extend the life of the facility.

      New Brunswick-based Irving says North Atlantic Refining provides a “reliable supply of fuel products to businesses and consumers across Newfoundland.”

      There’s no immediate word on Irving’s plans regarding a possible restart of operations at Come by Chance.

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      Irving signs purchase agreement for dormant Come by Chance oil refinery – CBC.ca

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      In another shakeup in the Newfoundland and Labrador oil sector, Irving Oil announced Thursday that it has reached an agreement to purchase the idled refinery at Come by Chance.

      In a news release late Thursday morning, New Brunswick-based Irving confirmed it will acquire North Atlantic Refining Corp. from U.S. investment firm Silverpeak, with the deal subject to regulatory review and conditions of sale being met.

      The agreement includes the refinery in Placentia Bay, which has the capacity to refine 135,000 barrels per day of oil, and North Atlantic’s network of retail sites and other marketing assets.

      “As a family-owned international refining and marketing company based in Atlantic Canada, Irving Oil has proudly served the people of Newfoundland and Labrador since 1950, providing a secure supply of energy to its customers across the province,” states the news release.

      The refinery stopped making fuels in March because of the pandemic, and a resulting collapse in the oil market. Hundreds of workers have been laid off.

      A source tells CBC News that Irving plans to keep the refinery in “care and maintenance” mode for now.

      It’s yet another chapter for a refinery that has had a checkered past since it opened in the 1970s, including five different owners, an extended closure and a political scandal at the outset.

      But prior to the pandemic, the refinery was riding a wave of optimism, with performance and environmental upgrades, and plans for more.

      “We are coming from what we call a basket-case refinery to become a refinery of the future,” Thomas Jenke, former CEO at North Atlantic, said prior to his departure late last year.

      If approved, the deal will represent another large investment by the Irving family in Newfoundland and Labrador.

      Irving Oil Limited is already a powerful player in the retail gasoline market, with a chain of gas stations and restaurants, including its iconic Big Stops. J.D. Irving Limited operates a chain of Kent home improvement stores in the province, and owns Atlantic Towing, a company that operates a fleet of supply vessels in Newfoundland and Labrador’s offshore oil sector.

      Meanwhile, North Atlantic provides fuel products to businesses and consumers across the province, and is a major contributor to the province’s economy, with some estimates putting its value to the gross domestic product at three per cent.

      It has a deepwater terminal that welcomes oil tankers from around the globe, and a network of retail assets.

      “Irving Oil would look forward to the opportunity to continue to provide a secure supply of energy to customers across the province,” says the press release.

      Most workers at the refinery are represented by Local 9316 of the United Steelworkers. CBC has requested comment from union president Glenn Nolan.

      This is not new territory for Irving. The company operates Canada’s largest oil refinery, in Saint John.

      Read more from CBC Newfoundland and Labrador

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