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Oil Prices Climb As Default Fears Fade

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Crude oil began trading this week with a gain after President Biden and House Speaker Kevin McCarthy were reported to have reached a provisional agreement on raising the debt ceiling.

At the time of writing, Brent crude was trading at over $77 per barrel and West Texas Intermediate was changing hands at over $73 per barrel.

Debt ceiling negotiations have been a major factor for oil price movements in the past couple of weeks, mostly because of the apparent inability of Republicans and Democrats in Congress to strike any semblance of an agreement on how to increase the federal government’s borrowing power.

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According to early reports on the tentative deal, it involves flat spending over the next two years and the recycling of unused Covid funds.

Although such tense negotiations have been relatively regular in past years, they have eventually ended with an agreement, and default has invariably been avoided.

This historical evidence could have served to stabilize prices but it did not, and neither did mixed data about China’s recovery. On the one hand, PMI readings are showing an uneven rebound in economic activity, but on the other, demand for oil as evidenced by import rates, is going strong.

To complicate the picture further, OPEC+ is reportedly in two minds about what to do with its output at its next meeting.

According to reports quoting Saudi Energy Minister Abdulaziz bin Salman, he has hinted at another round of output cuts.

According to reports quoting Russia’s Deputy Prime Minister and top OPEC+ official Alexander Novak, the co-leader of the extended cartel is fine with production where it is right now.

Thanks to its recent gains, oil’s decline since the start of the year has shrunk from about 14% earlier this month to just 9% as of the start of this week, according to Bloomberg.

By Irina Slav for Oilprice.com

 

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Clean electricity regulations can be tweaked, but Alberta won't get special deal: Guilbeault – National Post

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Canada's economic growth misses forecasts, backing interest rate pause – Financial Post

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Strikes at 2 more U.S. auto factories to start Friday as UAW ratchets up pressure

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A picketer holds a "UAW On Strike" sign while attempting to block a truck from entering the Ford Motor Co. Michigan Assembly plant in Wayne, Michigan
A picketer holds a ‘UAW On Strike’ sign while attempting to block a truck from entering the Ford Motor Co. Michigan Assembly plant in Wayne, Mich., earlier this month. The autoworkers’ union says 7,000 more workers at two GM and Ford plants are going to walk off the job on Friday at noon ET. (Emily Elconin/Bloomberg)

The United Auto Workers union is expanding its strike against U.S. automakers to two new plants, as 7,000 workers at a Ford plant in Chicago and a General Motors assembly factory near Lansing, Mich., will walk off the job at midday on Friday.

Union president Shawn Fain told workers on a video appearance Friday that negotiations haven’t broken down but Ford and GM have refused to make meaningful progress.

“Despite our willingness to bargain, Ford and GM have refused to make meaningful progress,” Fain said. “That’s why at noon eastern we will expand our strike to these two companies.”

“Not a single wheel will turn without us,” Fain said, adding that the 7,000 soon-to-be picketers are the “next wave of reinforcements.”

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Stellantis, the third major automaker targeted by the union, and the maker of brands like Chrysler, Jeep and Dodge, was spared further action, as Fain said the company’s management has made significant concessions on things like a cost-of-living allowance and a freeze on outsourcing.

The Ford plant in Chicago makes the Explorer and Police Interceptor, as well as the Lincoln Aviator SUV.

The GM plant in Michigan’s Delta Township near Lansing manufactures large crossover SUVs such as the Chevrolet Traverse.

The two new plants join 41 other factories and distribution centres already seeing job action.

So far, the impact on Canada’s auto industry has been muted, as none of the idled factories are major users of Canadian-made components.

Biden says striking autoworkers deserve a ‘significant’ raise

U.S. President Joe Biden visited the United Auto Workers picket line in Detroit on Tuesday, saying the workers deserve a significant raise after sacrifices made during the 2008 financial crisis. Auto companies are doing ‘incredibly well,’ Biden said, ‘and you should be doing incredibly well, too.’

Edward Moya, a strategist with foreign exchange firm Oanda, says that despite the expanded job action, the strike seems to be nearing an “endgame” as the two sides are clearly making slow but steady progress.

“Yesterday, the UAW said they are targeting a 30 per cent pay raise, which is down from the 46 per cent they were asking for in early September,” he said. “Automakers have raised their offer to 20 per cent but were not offering much on retirement benefits. The longer this drags, the more both sides lose, so a deal should be reached in the next week or two.”

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