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Oil heads for biggest selloff of month on virus, Manchin fallout – BNN

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Oil headed for its worst single-day rout this month on growing concern over the rapid spread of the omicron virus variant and turmoil for President Joe Biden’s economic plans.  

Futures in New York fell as much as 6.8 per cent to trade near US$66 a barrel ahead of the January contract’s expiration on Monday. Pessimism prevailed across financial markets as rising infections prompted restrictions on travel, while U.S. economic sentiment took a hit after Biden’s US$2 trillion spending package was derailed by the surprise revolt of Senator Joe Manchin. 

“The uncertainty around the response to omicron” is fueling the fear and volatility in oil markets, said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. While some governments at first said they were trying to avoid lockdowns, more may be forced to capitulate as omicron takes hold.

Oil’s market structure is also showing signs of weakness. West Texas Intermediate futures for delivery in January slipped to a discount to February contacts as omicron darkened the near-term demand outlook. The Brent prompt spread was also in a bearish contango pattern.

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Oil has fluctuated in recent weeks amid conflicting signals about omicron’s potential impact to demand. Bearish headwinds continue mounting with consumption in Asia softening and central banks pivoting toward tighter monetary policy to rein in accelerating inflation. As the year comes to an end, moving into the holiday period, thinner trading volumes can exacerbate prices swings.

Manchin blindsided the White House on Sunday with his rejection of Biden’s tax-and-spending package, leaving Democrats with few options for reviving it. Goldman Sachs Group Inc. economists cut their U.S. economic growth forecasts. 

Prices

  • West Texas Intermediate for January delivery, which expires Monday, fell US$3.64 to US$67.22 at 12:35 p.m. in New York
    • The more active February contract dropped US$3.55 to US$67.18
  • Brent for February settlement dropped US$3.30 to US$70.22 a barrel

Meanwhile, New York state broke a record for new infections and New York City Mayor Bill de Blasio called on the federal government to step up supplies of tests and treatments amid a spike in infections caused by omicron. The Dutch government announced plans to enforce a stricter lockdown, while Germany’s health minister warned of another virus wave caused by omicron. The World Economic Forum postponed its annual meeting in Davos, Switzerland, next month.

“It is not a case of if but when governments impose tougher restrictions,” Stephen Brennock, an analyst at brokerage PVM Oil Associates, said of the impact of the omicron variant.

Other oil-market news:

  • Libya’s oil production has been hit after militias caused a shutdown of the OPEC member’s biggest field. The country may introduce contracts with private oil companies that would give bonuses to those that meet targets and penalize those that don’t.
  • The U.K. proposed a series of climate change tests to determine whether new oil and gas fields can be built off its shores, but said its net-zero pledge doesn’t require the industry to be shut down.
  • Equinor ASA will drill about 25 exploration wells off Norway’s coast next year in a bet that it will be among the last companies still producing oil and gas when the world has achieved net-zero emissions.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Economy

September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

The Canadian Press. All rights reserved.

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