Oil markets continued to roil Monday amid fears of escalating tensions between the United States and Iran.
And observers expect further volatility, as the world watches to see what, if any, retaliation might follow a U.S. decision to kill a high-ranking Iranian military leader last week.
“Buckle up for more price volatility,” said Judith Dwarkin, chief economist with RS Energy Group in Calgary.
North America’s benchmark oil price, West Texas Intermediate, climbed 22 cents on Monday to settle at $63.27 US a barrel. Brent crude, the global benchmark, rose above $70 US a barrel on Monday for the first time in more than three months.
The Brent contract for oil touched a high of $70.74 US a barrel, the highest since mid-September, when it spiked over an attack on Saudi crude-processing facilities. Monday’s price later settled at $68.91 US per barrel, up 31 cents.
Mourners gather for slain Iranian military commander Qassem Soleimani, Iraqi paramilitary chief Abu Mahdi al-Muhandis and other victims of a U.S. attack in Tehran on Monday. (Atta Kenare/AFP/Getty Images)
For Canadian oil producers, a few days of higher prices may provide some short-term opportunities to help the bottom line, Dwarkin said, but she doesn’t think it’s enough to spur companies to alter plans.
“It’s an opportunity to sell some crude at an unexpectedly higher price for a little while,” she said.
However, she noted oil prices had already been experiencing some tailwinds even before last week.
For one, there was hope OPEC and its allies would follow through with deeper production cuts, at least through the first quarter of the year, she said. Some optimism also followed the U.S. decision not to hit China with more tariffs as they worked toward a Phase One trade deal.
But there were also potential risks to the market, Dwarkin noted, including concerns OPEC wouldn’t follow through on its planned cuts and the U.S. might waive its sanctions on Iranian exports of crude.
“Since [last week], we have seen the likelihood that sanctions being waived on Iran as more remote than ever — and we’re waiting for the other shoe, or shoes, to drop,” she said.
Kevin Birn, an analyst with IHS Market in Calgary, said the impact of higher prices to Western Canadian producers is going to come down to how long they last.
There’s been no physical supply disruption to oil supplies, he noted, saying the price impact so far is “psychological.”
“There is a price premium to be had here for Western producers — and all global producers — because of this,” he said. “The duration is the question and how that translates.“
Qassem Soleimani, commander of Iran’s Quds Force, was killed last week at the Baghdad airport. (Ebrahim Noroozi/The Associated Press)
The U.S. killed Iranian Maj.-Gen. Qassem Soleimani in an airstrike at the Baghdad airport on Friday, dramatically heightening tensions between Tehran and Washington.
Early Sunday, as Iran threatened to retaliate, President Donald Trump tweeted that the U.S. was prepared to strike 52 sites in the Islamic Republic if any Americans are harmed.
Fears that Iran could strike back at oil and gas facilities important to the U.S. and its Persian Gulf allies stem from earlier attacks widely attributed to Iran.
The U.S. has blamed Iran for a wave of provocative attacks in the region, including the sabotage of oil tankers and an attack on Saudi Arabia’s oil infrastructure in September that temporarily halved its production.
Iran has denied involvement in those attacks.
Jim Krane, an energy and geopolitics researcher at Rice University in Texas, said if Iran targeted oil infrastructure, it would still wreak havoc on the global economy because of the way that oil markets affect other energy-intensive industries, such as airlines, shipping and petrochemicals.
But some experts say the effect of a Middle Eastern geopolitical crisis on oil prices may not be as great as it once was. The U.S. energy industry, for instance, can ramp up shale oil production in places such as Texas.
“We’re in this new territory where the world oil markets are more dynamic and can tolerate this disruption more than they used to,” said Michael Webber, a mechanical engineering professor at the University of Texas at Austin.
Roger McKnight, chief petroleum analyst with En-Pro International, believes the market response to U.S.-Iranian tensions has been “subdued,” especially compared to what might have happened in the past.
“Say 10, 15 years ago, if something like this would have happened then, the sky would have actually fallen,” he said.
“But when you have the largest exporter of petroleum products, being our largest customer to the south, and their ability to turn on a dime so far as shale oil production is concerned, it sort of dampens the panic … in the markets.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
