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Oil Prices Rise As Bullish Sentiment Builds

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Crude oil began trade today with a gain on the back of expectations that China may begin to ease its Covid restrictions and on data from the American Petroleum Institute pointing to another decline in U.S. crude oil inventories.

China’s Covid lockdowns have been one of the big headwinds for oil prices, keeping a lid on any rally since the summer as one of the world’s biggest consumers continues with its zero-Covid policy.

Yet stock price movement data this week reflects growing hopes that Beijing will soon begin to relax restrictions, which would have a strong positive effect on oil demand and, therefore, prices.

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Meanwhile, the API estimated that crude oil inventories in the United States had shed 6.53 million barrels last week, with gasoline stocks also declining, by 2.64 million barrels, while distillate stocks added a modest 865,000 barrels, according to the industry group.

Government data on crude oil and fuel inventories is due out later today.

On Tuesday, crude oil benchmarks Brent and WTI both gained about 2 percent thanks to the news from China but also to a weaker U.S. dollar, after their first monthly gain since May, as October proved cumulatively positive.

Analysts quoted by Reuters in a recent report have pointed to even higher prices, too, citing the OPEC+ production cuts, record U.S. exports, and the possibility that the Biden administration will stop releasing crude from the strategic petroleum reserve.

Meanwhile, OPEC reported steady production rates through October despite an agreement to cut output by a modest 100,000 bpd, which was more symbolic than actual with so many members of the cartel already falling short of their quotas.

Russia’s October output, however, was significantly lower than a year ago, at 9.9 million bpd. This compares to an OPEC+ quota of 11 million bpd.

 

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RBC buying HSBC Canada for $13.5B – CBC News

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Royal Bank of Canada has agreed to buy the Canadian arm of mutinational bank HSBC for $13.5 billion in cash.

RBC chief executive Dave McKay said the deal offers the opportunity to add a complementary business and client base.

“This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities,” McKay said in a statement Tuesday.

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“It will help us better serve global clients looking to invest and grow in Canada.”

The Canadian arm of British-based HSBC has been up for sale this year because the parent company has been facing pressure from its largest shareholder, China’s Ping An Insurance Group, to boost returns.

130 branches in Canada

“The deal makes strategic sense for both parties, and RBC will take the business to the next level,” HSBC Group chief executive Noel Quinn said in a statement.

“Our group strategy is unchanged, and closing this transaction will free up additional capital to invest in growing our core businesses and to return to shareholders.”

HSBC has had operations in Canada since 1981 and currently has approximately 130 branches and 4,200 employees.

According to its most recent quarterly report, HSBC Canada had $125 billion worth of assets as of the end of June, and posted an operating income of more than $1.1 billion in the first half of this year. HSBC has about two per cent of all the bank deposits and mortgages in Canada.

The deal is expected to close next year, pending regulatory and shareholder approval.

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Musk: Apple wants to block Twitter from its app store – Al Jazeera English

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The billionaire CEO of Twitter and Tesla said on Monday that Apple was pressuring Twitter over content moderation demands.

Elon Musk has accused Apple Inc of threatening to block Twitter Inc from its app store without saying why in a series of tweets that also said the iPhone maker had stopped advertising on the social media platform.

The billionaire CEO of Twitter and Tesla said on Monday that Apple was pressuring Twitter over content moderation demands.

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The action, unconfirmed by Apple, would not be unusual as the company has routinely enforced its rules and previously removed apps such as Gab and Parler.

Parler, which is popular with conservatives in the United States, was restored by Apple in 2021 after the app updated its content and moderation practices, the companies said at the time.

“Apple has mostly stopped advertising on Twitter. Do they hate free speech in America?” Musk, who took Twitter private for $44bn last month, said in a tweet.

He later tagged Apple Chief Executive Officer Tim Cook’s Twitter account in another tweet, asking, “What’s going on here?”

Apple did not immediately respond to requests for comment.

“It wasn’t clear to me how far up the Apple food chain that idea went internally and without knowing that, it isn’t clear how seriously to take any of this,” said Randal Picker, a professor at the University of Chicago Law School.

The world’s most valuable firm spent an estimated $131,600 on Twitter ads between November 10 and November 16, down from $220,800 between October 16 and October 22, the week before Musk closed the Twitter deal, according to ad measurement firm Pathmatics.

In the first quarter of 2022, Apple was the top advertiser on Twitter, spending $48m and accounting for more than 4 percent of total revenue for the period, the Washington Post reported, citing an internal Twitter document.

Twitter did not immediately respond to a Reuters news agency request for comment on the report.

‘Go to war’

Among the list of grievances tweeted by Musk was the up to 30 percent fee Apple charges software developers for in-app purchases, with Musk posting a meme suggesting he was willing to “go to war” with Apple rather than paying the commission.

The fee has drawn criticism and lawsuits from companies such as Fortnite-maker Epic Games while attracting the scrutiny of regulators globally.

The commission could weigh on Musk’s attempts to boost subscription revenue at Twitter, in part to make up for the exodus of advertisers over content moderation concerns.

Companies from General Mills Inc to luxury automaker Audi of America have stopped or paused advertising on Twitter since the acquisition, and Musk said earlier this month that the company had seen a “massive” drop in revenue.

Advertisement sales account for about 90 percent of Twitter’s revenue.

The self-described free speech absolutist, whose company has in the past few days reinstated several Twitter accounts including that of former US President Donald Trump, has blamed activist groups for pressuring advertisers.

Ben Bajarin, the head of consumer technologies at research firm Creative Strategies, said that Musk may be reading too much into a regular process Apple goes through for app reviews.

“App review from Apple is not perfect by any means and a consistently frustrating process for developers but from what I hear it is a two-way conversation,” he said.

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Oil: Why Goldman Sachs is still bullish despite headwinds

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Goldman Sachs strategists say the supply situation for oil will “inevitably” require “much higher prices.” (GETTY)
Goldman Sachs strategists say the supply situation for oil will “inevitably” require “much higher prices.” (GETTY)

Goldman Sachs is holding on to its bullish 2023 call on the global oil benchmark as prices test new year-to-date lows.

Strategists at the New York-based investment bank see Brent crude (BZ=F) averaging US$110 per barrel next year, due in large part to supply overshadowing headwinds for demand.

Oil prices danced around positive territory on Monday as investors responded to news of street protests in China over government efforts to halt the spread of COVID-19 amid record case counts. At the same time, investors are awaiting final details of the G7 nations’ price ceiling on Russian oil, set to take effect on Dec. 5.

Brent crude was down 0.18 per cent to US$83.45 as at 1:09 p.m. ET on Monday, largely erasing 2022 gains fuelled by Russia’s war in Ukraine. Meanwhile, U.S. benchmark West Texas Intermediate gained 1.25 per cent to US$77.23 per barrel, after trading near its lowest level of the year.

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Goldman Sachs predicts a strong U.S. dollar and weaker demand expectations will remain a “powerful headwind to prices.” However, the bank says the supply situation will “inevitably” require “much higher prices,” due to lack of investment in the industry, as well as low spare capacity and inventories.

“We are tactically cautious, structurally bullish,” Goldman Sachs strategists wrote in a wide-ranging outlook for next year. “We reiterate our bullish price view, and expect Brent crude oil prices to average US$110 per barrel in 2023.”

Goldman Sachs says seasonal demand from heating is likely to pick up as temperatures drop during the winter months. The strategists also note the impact of so-called gas-to-oil switching, where certain utilities and industrial consumers swap more expensive natural gas for refined oil products like diesel or gasoline.

“At the same time, we believe the EU embargo on Russian oil will demand an unachievable redirection of flows, causing Russian production to fall by 0.6 million barrels per day, at the same time as OPEC+ has agreed to an effective cut of 1.2 million barrels per day,” the strategists wrote.

They add that it would also take a “hard landing” for the U.S. economy to justify sustained lower prices.

Goldman Sachs’ structural bullishness echoes comments from RBC Capital Markets in June.

“The supply-side shock absorbers have been removed from the market,” analyst Micheal Tran wrote in a note to clients.

Tran described the oil market at the time as caught between “the strongest fundamental oil market set up in decades, maybe ever,” and a deteriorating macroeconomic backdrop threatening the outlook for demand.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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