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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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Ford to cut prices of Mustang Mach-E, following Tesla's lead – Reuters

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Jan 30 (Reuters) – Ford Motor Co (F.N) on Monday cut prices of its electric crossover SUV Mustang Mach-E by as much as $5,900 per vehicle, weeks after rival Tesla Inc (TSLA.O) slashed prices globally on its electric vehicles by as much as 20%.

Shares of Ford closed down 2.9% in above average trading to $12.89. Tesla fell 6.3%.

The move comes as electric vehicle manufacturers are feeling pressure from Tesla’s price cut to respond.

“Ford just cut Mustang EV prices in response to Tesla’s price cut. Mini price war about to begin with EVs in the US with Tesla’s shot across the bow on price cuts,” said Dan Ives, an analyst at Wedbush Securities, on Twitter.

The move will make at least one additional version of the Mach-E again eligible for a $7,500 federal tax credit, which requires the Ford EV to have a suggested retail price of no more than $55,000 to be eligible.

Ford had already planned to increase Mach-E production this year at its plant in Mexico to 130,000 vehicles from 78,000 in 2022, and said in November it was accelerating Mustang Mach-E production and targeting global annual production rate of 270,000 by the end of 2023 including its China production.

Ford builds the Mach-E in Mexico and China.

“Tesla’s price cut was a major blow to the prospects of competing EV models and the Mustang Mach-E directly competes with Tesla’s Model Y,” said Garrett Nelson, an analyst at CFRA Research.

Ford is cutting prices by up to 8% on various versions of the Mach-E, as well as cutting the price of the extended range battery by about 19%. The lowest-price models are getting smaller $600 to $900 price cuts. The Ford price cuts only impact North American prices.

Ford Chief Executive Jim Farley said on Twitter, “scaling will shorten customer wait times. And with higher production, we’re reducing costs, which allows us to share these savings with customers.”

Ford sold 39,458 Mach-Es in the United States last year, up from 27,140 in 2021.

General Motors (GM.N) said Monday it had no plans to adjust prices in response to others. The Detroit automaker in June cut prices on the Bolt by around $6,000 and by as much as 18% for the lowest-price version and earlier this month the vehicle became eligible for the $7,500 federal tax credit.

Ford said existing Mustang Mach-E customers awaiting delivery of vehicles will automatically receive the price cut.

Reporting by David Shepardson in Washington, Joseph White in Detroit and Aishwarya Nair and Nathan Gomes in Bengaluru; Editing by Krishna Chandra Eluri, Nick Zieminski and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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Nike sues Lululemon for infringement of footwear patents – CBC.ca

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Nike Inc. sued Lululemon Athletica Inc. on Monday, saying that at least four of the Canadian athletic apparel company’s footwear products infringe its patents.

In a complaint filed in the U.S. federal court in Manhattan, New York, Nike said it has suffered economic harm and irreparable injury from Lululemon’s sale of its Blissfeel, Chargefeel Low, Chargefeel Mid and Strongfeel footwear.

Nike, based in Beaverton, Ore., said the three patents at issue concern textile and other elements, including one addressing how the footwear will perform when force is applied.

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Nike is seeking unspecified damages. 

Lululemon, based in Vancouver, did not immediately respond to requests for comment.

This wasn’t the first time Nike has sued Lululemon for patent infringement — on Jan. 5, 2022, it accused the athleisure brand of making and selling the Mirror Home Gym and related mobile apps without authorization.

Nike accused its smaller rival of infringing six patents, including technology that enables users to target specific levels of exertion, compete with other users and record their own performance.

Nike has sought triple damages for Lululemon’s alleged willful infringement and a variety of other remedies regarding the Mirror Home Gym and related mobile apps.

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Stock market news live updates: Stocks sell off to start blockbuster week – Yahoo Canada Finance

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U.S. stocks tumbled Monday as investors await a blockbuster week that includes the latest Fed meeting, a flurry of heavyweight earnings reports, and jobs data.

The S&P 500 (^GSPC) was down 1.3%, while the Dow Jones Industrial Average (^DJI) lost nearly 0.8%. The technology-heavy Nasdaq Composite (^IXIC) declined by roughly 2%.

The yield on the benchmark 10-year U.S. Treasury note ticked up to 3.546% on Monday morning. The dollar index ticked up 0.32% to $102.26.

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Stocks closed a winning week Friday following data that pointed to stronger-than-expected U.S. economic growth. All the major market averages finished higher for the week, with the S&P 500 gaining 2.5%, the Dow Jones Industrial average ending up 1.8% and the Nasdaq climbing north of 4%.

The Commerce Department said Friday the personal consumption expenditures price index, excluding energy and food, showed prices rose 4.4% from a year earlier. Friday’s report came in a day after the government reported a better-than-expected 2.9% gain in gross domestic product for the fourth quarter, boosting hopes that the Federal Reserve may head toward the elusive “soft landing” scenario.

Fed officials will be meeting in Washington, D.C., Tuesday and Wednesday. The meeting will wrap up with Fed Chair Jerome Powell holding a press conference Wednesday afternoon as he offers signs of the central bank’s path forward on rate hikes.

“The FOMC’s work is not yet done, even if the recent declines in inflation and wage growth give it more time to assess the effects of past policy actions. A key challenge for the FOMC will be to execute its transition to smaller rate hikes without furthering expectations that an end to its hiking cycle is imminent,” the team at Barclays wrote.

At the end of week, investors will get another clue of the Fed’s path as the government’s January jobs report is set to be released Friday morning. Economists surveyed by Bloomberg expect 185,000 jobs were added to the economy last month, a slowdown from the gain of 223,000 jobs in December.

Chair of the Board of Governors of the Federal Reserve System Jerome H. Powell participates in a panel during a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden, January 10, 2023. TT News Agency/Claudio Bresciani/via REUTERS      ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. SWEDEN OUT. NO COMMERCIAL OR EDITORIAL SALES IN SWEDEN.
Chair of the Board of Governors of the Federal Reserve System Jerome H. Powell participates in a panel during a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden, January 10, 2023. TT News Agency/Claudio Bresciani/via REUTERS      ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. SWEDEN OUT. NO COMMERCIAL OR EDITORIAL SALES IN SWEDEN.


Chair of the Board of Governors of the Federal Reserve System Jerome H. Powell participates in a panel during a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden, January 10, 2023. TT News Agency/Claudio Bresciani/via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY. SWEDEN OUT. NO COMMERCIAL OR EDITORIAL SALES IN SWEDEN.

Meanwhile, it’s the biggest week of the fourth-quarter earnings season, with Big Tech results taking the spotlight amid thousands of layoffs in the industry. Despite the already announced job cuts, the tech companies’ are in part to blame for the disaster, Yahoo Finance’s Dan Howley writes.

The heavy earnings slate includes reports from tech heavyweights Amazon (AMZN), Apple (AAPL), Alphabet (GOOG), and Meta Platforms (META).

Elsewhere in markets, shares of Lucid (LCID) sank nearly 9%. On Friday, the electric-vehicle maker surged more than 88% following speculation that a Saudi Arabia Public Investment Fund (PIF) is considering buying its remaining stake in the company.

Alibaba (BABA) shares fell 6% Monday after reports that the Chinese e-commerce site is moving its headquarters out of the country, suggesting the new campus could be in Singapore, according to reports.

SoFi Technologies (SOFI) shares rose 12.5% Monday after the digital financial services company posted an upbeat earnings guidance for the year ahead.

Shares of Johnson & Johnson (JNJ) fell nearly 4% Monday after an appeals court said the company can’t use bankruptcy to end cancer lawsuits.

In the cryptocurrency market, Bitcoin (BTC-USD) has fallen over 1% to $23,168 over the last 24 hours, according to CoinMarketCap. However, the largest token is on its way for its best January since 2013, per Bloomberg, on bets that monetary tightening and the sector’s crisis are both receding.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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