© Reuters. FILE PHOTO: Pump jacks operate at sunset in Midland
By Florence Tan
SINGAPORE (Reuters) – Oil prices climbed by more than $1 a barrel on Monday, supported by output cuts and signs of gradual demand recovery amid easing coronavirus curbs, with U.S. oil showing no signs of last month’s contract expiry price rout.
Brent crude () was up $1.06, or 3.3%, at $33.56 a barrel by 0452 GMT, after touching its highest since April 13. U.S. West Texas Intermediate crude () was up $1.29, or 4.4%, at $30.72 a barrel, after rising to its highest since March 16.
“Oil prices may show further upside momentum as the easing in mobility restrictions grows,” said Stephen Innes, chief global market strategist at AxiCorp in a note, referring to curbs that were designed to counter the coronavirus.
The June WTI contract expires on Tuesday, but there was little indication of WTI repeating the historic plunge below zero seen last month on the eve of the May contract’s expiry amid signs that demand for crude and derived fuels is recovering from its nadir.
Production is also falling as U.S. energy firms cut the number of oil and rigs operating to an all-time low for a second consecutive week. That partly helped ease concerns about the WTI contract’s delivery point in Cushing, Oklahoma, running out of space. [EIA/S]
“Given particularly that surprise draw that we saw on inventories last week in the U.S., it seems unlikely that those concerns about storage facilities will reassert themselves,” Michael McCarthy, chief market strategist at CMC Markets in Sydney said.
(Graphic: WTI crude prices versus Cushing oil stockpiles – https://fingfx.thomsonreuters.com/gfx/ce/oakvezwaapr/Pasted%20image%201589764750386.png)
The Chicago Mercantile Exchange, which hosts trading in WTI futures, brokerages and the United States Oil Fund LP (P:), the largest oil-focused exchange-traded product in the country, have all taken steps that reduce open positions ahead of the WTI contract’s expiry.
The positive mood was reinforced as U.S. Federal Reserve Chairman Jerome Powell issued an optimistic outlook for economic recovery later this year.
“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year,” Powell said Sunday night in broadcast remarks.
Also supporting oil prices are production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a grouping known as OPEC+.
The world’s top exporter Saudi Arabia announced last week that it would cut an additional 1 million barrels per day in June, while OPEC+ wants to maintain existing oil cuts beyond June when the group is next due to meet.
Kuwait and Saudi Arabia have agreed to halt oil production from the joint Al-Khafji field for one month, starting from June 1, Kuwait’s Al Rai newspaper reported on Saturday.
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Scotiabank profit plunges 40% as bad loans more than double amid COVID-19 – CBC.ca
Scotiabank posted a profit Tuesday morning of $1.32 billion in the three months up to the end of April, a fall of more than 40 per cent from last year’s level as the bank set aside twice as much money for bad loans.
The bank’s provisions for credit losses totalled nearly $1.85 billion for the quarter. That’s up 111 per cent from the $873 million worth of bad loans the bank revealed in the same three months last year, well before the COVID-19 pandemic crushed the economy.
Higher loan loss provisions don’t necessarily mean that all of those loans will end up defaulting. Rather, it just means that they aren’t being actively being paid back as planned.
The bank revealed on Tuesday that 300,000 of its Canadian customers have applied for some sort of financial relief on the $60 billion they collectively owe to the bank. That would include mortgagees who asked for interest rate deferrals.
Scotiabank has a huge presence in Latin America, and the bank says it has processed two million applications for loan relief from its international customers.
Not all of those loans will necessarily end up defaulting, but some may. So the uptick in loan loss provisions is troubling.
Scotia is the first of Canada’s big banks to reveal its financial performance through the current pandemic, numbers which will be closely scrutinized as they are considered to be a bellwether for the broader economy. That’s because pain at other businesses tends to show up on the books of the banks that lend to them.
Canada’s other big banks — Royal, Toronto-Dominion, Canadian Imperial Bank of Commerce and Bank of Montreal — will report earnings in the next few days.
On an adjusted basis, Scotiabank’s profit for the quarter came in at $1.04 per diluted share. That’s well down from $1.70 per diluted share a year ago, but ahead of the 98 cents that analysts who cover the bank were expecting.
Not all bad news
But not all parts of the bank’s business saw tough times. Indeed, some did even better than usual.
Scotia’s global wealth management business posted a profit of $314 million, an increase of four per cent over last year’s level. That uptick came about with investors around the world becoming much more active than usual as global stock markets plummeted.
“This quarter saw record results for both new client account openings and trading volumes in Scotia iTRADE,” the bank said.
Similarly, the global banking and markets business posted a profit of $523 million, up 25 per cent from a year earlier.
Scotiabank's loan-loss provisions double on coronavirus risks – The Globe and Mail
Bank of Nova Scotia on Tuesday reported quarterly profit that beat analysts’ estimates due to a strong performance in the capital markets business, but the bank’s loan loss provisions jumped two-fold.
Provisions for loan losses at Scotia more than doubled to $1.85 billion from a year earlier as it set aside more money to meet future losses.
Canadian banks are expected to face loan defaults as the coronavirus pandemic drives the world into a recession, leaving small and medium-sized businesses scrambling to meet their debt payments.
The bank said commercial and corporate performing loan provisions increased by $275 million, hurt by the poor macroeconomic outlook and a plunge in oil prices that impacted the energy sector globally.
Adjusted net income at its global wealth management segment rose 3 per cent to $314 million, while profit at the global banking and markets business jumped 25 per cent to $523 million.
Canada’s third-biggest lender said net income fell to $1.24 billion, or $1 per share, in the quarter ended April 30, from $2.13 billion, or $1.73 per share, a year earlier.
On an adjusted basis, the lender earned $1.04 per share, compared with analysts’ estimate for profit of $0.98 per share, according to IBES data from Refinitiv.
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