OPEC and its partners concluded their meeting on Saturday afternoon, announcing that it would extend its current production cut deal.
Algeria’s Energy Minister Mohamed Arkab, OPEC’s current President summed up the group’s sentiment by saying that “Despite the progress achieved to date, we cannot afford to rest on our laurels,”.
The last couple of days, the cartel’s de-facto leader Saudi Arabia negotiated with other OPEC members and some non-OPEC countries including Russia, Kazakhstan and Azerbaijan to extend the current 9.7 million bpd output cuts for at least another month.
Most countries partaking in the record production cuts were willing to continue the current deal, but poor compliance from countries like Iraq, Nigeria and Kazakhstan has caused discontent among other OPEC members, some of which have even made deeper cuts than agreed on in April.
During the virtual meeting on Saturday, the cartel agreed that the countries that were unable to reach full conformity in May and June will have to compensate for this in July, August and September.
Oil prices effectively doubled during the month of May as global demand started to recover and record output cuts and worldwide well shut-ins decreased the monster glut.
While the OPEC+ deal extension undoubtedly will have a bullish effect on markets, prices aren’t likely to rip much higher on Monday as the OPEC+ news has largely been priced in already.
For oil prices to make a full recovery, global demand will have to recover and crude inventories have to be drawn down, both of which will likely take up to two years. Pioneer’s Scott Sheffield said that the quick rebound of demand to around 94-95 mb/d following the “reopening” of so many economies will give way to stagnation, saying that demand won’t reach pre-pandemic levels until 2022 or even 2023.
For now, the next bullish catalyst for oil could come from Saudi Aramco, which could set the trend for higher oil prices in June as it is expected to release its OSPs (official selling prices) on Monday. Aramco’s OSPs are often a leading indicator for Iraqi, Iranian and Kuwaiti crude prices, and last month, Brent futures rallied after Riyadh hiked its prices for crude to Asia.
Tucked away under lock and key in a former railroad depot turned small-town museum in the U.S. state of Washington, a wooden printing press cranked back to life to mint currency after nearly 90 dormant years.
The end product: $25 US wooden bills bearing the town’s name — Tenino — with the words “COVID Relief” superimposed on the image of a bat and the Latin phrase “Habemus autem sub potestate” (We have it under control) printed in cursive.
With the coronavirus pandemic plunging the United States into a recession, decimating small businesses and causing job losses across the country, some local governments are looking for innovative ways to help residents weather the storm.
For Tenino, the answer was the revival of the local currency that had bolstered the town’s economy in 1931 in the wake of the Great Depression.
“It was kind of an epiphany: Why don’t we do that again?” Mayor Wayne Fournier told the Thomson Reuters Foundation. “It only made sense.”
Tenino, a town of less than 2,000 people located about 95 kilometres southwest of Seattle, started printing the local banknotes in April, five weeks into Washington state’s lockdown.
$300 a month per person
Anyone with a documented loss of income as a result of the pandemic is eligible for up to $300 US a month of the local currency.
Businesses up and down the town’s quaint Main Street accept the wooden note for everything except alcohol, tobacco, cannabis and lottery tickets.
Tenino’s city government backs the local currency, which merchants can exchange for U.S. dollars at city hall at a 1:1 rate.
Susan Witt, executive director of the Schumacher Center for a New Economics, a Massachusetts-based think tank, said alternative currencies like Tenino’s banknote are better than direct cash payments at boosting local economies.
“The City of Barcelona gave donations (in 2017/18) to sports teams and cultural groups as well as social programs (then) watched these donations go to big box stores,” she said in emailed comments.
“So, it created a local currency so that these ‘discretionary’ funds in its budget would circle back to support locally-owned businesses.”
Mayor Fournier noted that, for long-time Tenino residents, the wooden notes are nothing new.
The tiny town founded around a sandstone quarry achieved national prominence in 1931 when civic leaders printed a wooden local currency to restore consumer confidence after the town’s bank failed during the Great Depression.
“This is woven into the DNA of the community,” Fournier said. “My great aunt Erlene has the family collection all stashed away.”
The mayor brought the idea of resurrecting the town’s legacy project to the city council as a way to provide economic relief to businesses and residents suffering as a result of lockdown measures to slow the spread of COVID-19.
In April councilors approved the proposal to issue up to $10,000 in local scrip.
So far, 13 residents have successfully applied for the funds and some $2,500 worth of wooden bills have been issued, Fournier said, with donations upping the total funds available to $16,000.
Fournier views the project as the kind of initiative towns and small cities must take upon themselves to survive the coronavirus outbreak amid what he views as an inadequate federal response.
He pointed out that the federal Paycheck Protection Program (PPP), a fund of forgivable loans designed to keep businesses afloat through the pandemic, is not scaled for the businesses in Tenino that have just a handful of employees.
“A federal program dumps money from the top and these blue-chip companies steal it all,” Fournier said. “If we do it from the ground up, there’s no stealing. It’s a direct ballast to Main Street.”
From the outset, the unprecedented first-come-first-served program struggled with technology and paperwork problems that led some businesses to miss out while some affluent firms got funds they did not necessarily need.
“From mom-and-pop shops on Main Street to local employers who are anchors in our community, we have seen the PPP save millions of jobs and keep small firms moving forward,” said Jeremy Field, the regional administrator for the Small Business Administration, which oversees the program.
He noted in emailed comments that 86.5% of loans granted nationally were for less than $150,000 and that the program covered almost three-quarters of the small business payroll in Washington state.
‘Hacking the system’
Fournier said he has already fielded queries from towns across the country looking to emulate Tenino’s effort.
“What if 5,000 other small cities did that same thing and took it upon themselves to put $10,000 into Main Street?” he asked.
“That’s $50 million US directly into small businesses. It totally hacks the system.”
So far, however, Tenino’s currency does not appear to be circulating much among local businesses.
At the grocery and hardware store that anchors Main Street, manager Chris Hamilton said that by mid-June customers had spent $150 US in the local bills to buy necessities like groceries and a new faucet to replace a broken tap.
“I’ll redeem it for cash at city hall,” he said. “I hadn’t thought about recirculating it.”
Next door at Don Juan’s Mexican Kitchen, owner Juan Martinez Jr. has four of the wooden $25 notes sitting in his cash register.
In a case of history repeating, he said coin collectors have offered to buy the bills from him for double their value in U.S. dollars.
Back in the 1930s, coin collectors fueled a speculative rise in the value of the town’s wooden scrip, according to Washington state online encyclopedia HistoryLink.
50 local currencies currently in use
The Schumacher Center for a New Economics has documented more than 50 local alternative currencies globally that were active as of summer 2019.
They range from the artfully designed Brixton Pound in London, England, to the Mumbuca, which bankrolls the basic income scheme in Marica, Brazil.
The centre also sponsors BerkShares, a local currency that has been circulating in the Berkshire region of western Massachusetts for 14 years.
Witt cautions that notes backed by U.S. dollars are only a halfway measure, because the amount of local currency available is limited by the amount of federal dollars the town has on hand to exchange it with.
“A truly independent currency would allow for issuing currency as needed,” she said.
That “new” money would circulate through the local economy and then eventually go toward paying property taxes over the course of several years, she added.
But, for now, Witt said, Tenino’s project is an effective way to empower a community being brought to its knees by factors beyond its control.
“I don’t believe the good people of Tenino meant for their wooden (banknotes) to serve as a robust local currency,” she said.
“They are instead making an important point. COVID and the lack of federal response to the crisis has motivated municipalities to explore what could be done with their own currencies.”
B.C. Premier John Horgan did not directly address the issue Thursday of restricting U.S. citizens from businesses in B.C.
During a media availability Horgan says he understands businesses want to see the millions of travellers come back from the U.S.
Residents and health officials have expressed concern that U.S. citizens crossing the border could lead to a rise in COVID-19 cases in the province.
Cases have surged in many parts of the U.S. recently and the border between Canada and the U.S. has been closed to all but essential travel until at least July 21. A mandatory 14-day quarantine period for people entering Canada is in place until Aug. 31.
However, vehicles with U.S. licence plates are being spotted at Vancouver hotels and in more remote parts of the province.
Horgan was optimistic about how the spread of COVID-19 has slowed down in B.C., adding the province’s restart plan is going well.
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He said coping with the virus was the strategy all along in B.C.
On schools, Horgan takes a shot at @realDonaldTrump and the approach in the states. Horgan says BC will be better prepared than any other province in the country for return to school. #bcpoli#covid19BC
People will also need to leave the premises as of 1 a.m., Dubé said, and dancing will be banned — everyone consuming drinks will need to be seated.
Customers will also be asked to sign a register so they can be traced in the event of an outbreak, but it won’t be required.
The measures come into effect tomorrow.
“We’re asking for a collective effort. I’m counting on people’s intelligence and for them to take what just happened seriously,” Dubé said, referring to an outbreak on the South Shore earlier this week following parties.
“If this doesn’t get the job done, there’s a next step: closing (venues) down,” Dubé said.
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