Hedge funds and other money managers sold the equivalent of 87 million barrels in the six most important petroleum futures and options contracts over the seven days ending on April 25.
Economy
Oil prices drift down on renewed economy concerns: Kemp
The combined position fell to 447 million barrels (23rd percentile for all weeks since 2013) down from 534 million barrels (38th percentile) seven days earlier.
The ratio of bullish long to bearish short positions fell to 3.52:1 (39th percentile) from 5.00:1 (64th percentile) a week before.
Chartbook: Oil and gas positions
Heightened fears about a business cycle slowdown hitting petroleum consumption overwhelmed any residual bullishness stemming from the OPEC+ production cut announced on April 2.
Funds held a net position in middle distillates of just 7 million barrels (21st percentile) and bullish longs outnumbered bearish shorts by just 1.13:1 (21st percentile) on April 25.
Persistent inflation, increasing corporate layoffs, and heightened caution around spending by businesses and households signal a further slowdown in the business cycle over the next few months.
U.S. NATURAL GAS
Investors also tempered their recent optimism about U.S. gas prices as inventories continued to swell faster than normal for the time of year despite very low prices.
The position slipped to 12 billion cubic feet net short (31st percentile for all weeks since 2006) from 87 billion cubic feet net long (34th percentile) a week earlier.
The ratio of bullish long to bearish short positions slipped to 1.00:1 (31st percentile) from 1.03:1 (34th percentile) the previous week.
Inventories continue tracking much higher than normal despite ultra-low prices fostering more consumption and the re-starting of the Freeport LNG export terminal.
Stocks were 280 billion cubic feet (+16% or +0.61 standard deviations) above the prior ten-year seasonal average on April 21, up from a deficit of 263 billion cubic feet (-8% or -0.98 standard deviations) on Jan. 1.
Stocks have continued to swell even though inflation-adjusted prices are in the 3rd percentile for all days since 1990, a signal that there is a persistent production surplus that will necessitate a further slowdown in drilling.
Related columns:
– Oil market has absorbed surprise production cut by OPEC⁺ (April 26, 2023)
– Oil buying slows amid renewed concerns about economy (April 24, 2023)
– Oil prices stall as short-covering rally is completed (April 17, 2023) John Kemp is a Reuters market analyst. The views expressed are his own (Editing by Mark Potter)
Economy
Energy stocks help lift S&P/TSX composite, U.S. stock markets also up
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Economy
Canada’s inflation rate hits 2% target, reaches lowest level in more than three years
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
The Canadian Press. All rights reserved.
Economy
Federal money and sales taxes help pump up New Brunswick budget surplus
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
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