OPEC+ agreed to a one-month extension of its record output cuts and adopted a stricter approach to ensuring members don’t break their production pledges.
The deal will underpin the oil market recovery, easing the financial pain felt by resource-dependent emerging economies, shale explorers in Texas, and blue-chip companies like Royal Dutch Shell Plc.
It’s a victory for Saudi Arabia and Russia, who put a destructive price war behind them to successfully cajole Iraq, Nigeria and other laggards to fulfill their promises to cut production. The two leaders of OPEC+ showed that they intend to keep a close watch on the oil market, meeting every month to assess the balance between supply and demand amid an uncertain economic recovery from the global pandemic.
“Our collective efforts have borne fruit, and despite many uncertainties, there are encouraging signs that we are over the worst,” said Saudi Energy Minister Prince Abdulaziz bin Salman. “Demand is returning as big oil-consuming economies emerge from pandemic lockdown,” he added.
After a video conference lasting several hours on Saturday, delegates said all nations had signed off on a new deal for a production cut of 9.6 million barrels a day next month. That’s 100,000 barrels a day lower than the reduction in June because Mexico will end its supply constraints, but a tighter limit than the 7.7 million barrels a day set for July in the group’s previous agreement.
In addition, the communique states that any member that doesn’t implement 100 per cent of its production cuts in May and June will make extra reductions from July to September to compensate for their failings.
Those promises are a particular vindication for the Saudi minister, who has consistently pushed fellow members to stop cheating on their quotas since his appointment last year.
But they could also add an element of risk. In theory, the entirety of the 23-nation production agreement, which runs until April 2022, is now contingent on every member making 100 per cent of their pledged cuts, according to the communique. That’s something rarely achieved in the three-and-a-half years that OPEC+ has existed, or indeed the decades-long history of the Organization of Petroleum Exporting Countries itself.
Daunting Challenge
Oil has just posted a sixth weekly gain in London, more than doubling to US$42.30 a barrel since April with traders anticipating tighter supplies as demand recovers from lockdown. U.S. President Donald Trump on Friday hailed the cuts from OPEC and its allies for saving America’s energy industry, and U.S. Energy Secretary Dan Brouillette welcomed the deal on Saturday.
I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world.https://t.co/Z47PT8uqtp
The oil market “is still in a fragile state and needs support,” Russia’s Energy Minister Alexander Novak said in opening remarks at the virtual meeting. “That is why today more than ever it is important to adhere to 100 per cent compliance.”
The group hopes to build on its success by pushing the market into a supply deficit next month, using a price structure called backwardation to start to chip away at the billion barrels of oil stockpiles that built up during the pandemic.
There was no discussion in the meeting about the future of the additional 1.2 million barrels a day of voluntary output cuts being implemented by Saudi Arabia and its Gulf allies in June, delegates said.
The cartel will meet again in the second half of June for another review of the oil market. Talks are scheduled on June 18 for the Joint Ministerial Monitoring Committee, which could recommend a further extension if it’s deemed necessary, pushing the deep production cuts into August, a delegate said. That panel will meet every month until December, according to the communique.
The next full ministerial OPEC+ meeting has been scheduled for Nov. 30 to Dec. 1, delegates said, although the communique notes that a conference could be held whenever it is required.
Cutting production is always painful for oil-dependent states. Iraq in particular needs every penny because it’s still rebuilding its economy following decades of war, sanctions and Islamist insurgency.
The country made less than half of its assigned cutbacks last month, so compensating fully would require it to slash production by a further 24 per cent to about 3.28 million barrels a day, according to Bloomberg calculations. Accepting such terms could risk a backlash from Iraqi parliamentarians and rival political parties for bowing to foreign pressure.
The traditional shirkers in OPEC+ have promised many times before to do better. Some analysts were skeptical that this occasion will be any different.
“Everyone saves face with this agreement,” Jan Stuart, global energy economist at Cornerstone Macro LLC, said on Friday after a tentative deal was in place. “But it begs the question: What is the enforcement mechanism? I’m very curious to see how the organization is going to elicit greater compliance from the cheaters.”
There’s also a risk that future OPEC+ curbs could be undermined by a return of Libyan oil. The civil war there halted more than one million barrels a day of production, helping OPEC+ rebalance the market, but a cease fire now opens the door for a gradual recovery of supply.
For now at least, members of OPEC+ can enjoy the price gains resulting from their deal.
“The oil market is on its way to recovery,” said Ann-Louise Hittle, oil analyst at consultant Wood Mackenzie Ltd. “Supply has shifted dramatically already”
–With assistance from Julian Lee and Khalid Al-Ansary.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
