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The Downside Risk Of Tomorrow's OPEC Meeting –



The Downside Risk Of Tomorrow’s OPEC+ Meeting |


Tom Kool

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is’s Head of Operations

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– After more than 2 years of coordinated production cuts, OPEC+ has reached the point when it no longer must increase production targets and needs to rethink the future of the 23-member oil group. 

– Most analysts expect no or just very moderate changes to the OPEC+ September 2022 production guidance – with June figures already reaching a hefty 320% compliance rate, incremental supply remains the main challenge for members. 

– The worsening demand outlook will play a part in OPEC+ decision making as the group wants to keep oil prices high enough to generate bumper profits without stymieing adequate supply to the market. 

– With Russia facing a series of sanctions from 2023 onwards and thus susceptible to production drops, Saudi Arabia is seeking to keep OPEC+ as the oil market’s coordination force, preferring to avoid sudden market shocks as Riyadh has finally grown to enjoy a protracted windfall period. 

Market Movers

Saudi Aramco (TADAWUL:2222) has reportedly bought US lubricants producer Valvoline (NYSE:VVV) as it seeks to expand its foothold in the downstream business, for a reported sum of $2.65 billion. 

– The world’s largest EV battery maker, the Chinese CATL (SHE:300750) has seen its vice chairman Huang Shilin resign this week, with founder and chairman Zeng Yuqun taking over the concurrent role of general manager, sending the stock up 5% on Monday alone.  

– One of the largest wind turbine producers globally, Siemens Gamesa (BME:SGRE) is considering cutting some 10% of its current workforce or 2,500 jobs, on the back of yet another 2022 guidance decrease. 

Tuesday, August 02, 2022

One oil major after another is announcing phenomenal quarterly earnings and revved-up share buyback programs, with the likes of BP, Marathon, and Devon Energy joining the list this week. Meanwhile, Brent prices have been bogged down at around the $100 per barrel mark so far this week. Should tomorrow’s OPEC+ meeting devolve into another campaign of smoke and mirrors, the structural weakness in demand coming from weak global manufacturing data and Europe’s ongoing struggle to contain Russia’s energy blackmail might reappear again, pushing oil further down into double-digit territory. 

Taxing of US Crude Imports Raises Questions. President Biden’s $433 billion tax and climate bill, potentially seeing a Senate vote this week already, aims to slap a 16.4 cents-per-barrel tax on imported crude and products, raising fears that this would inadvertently boost inflation as USGC refiners rely on heavy crudes from Latin America and elsewhere.

US Targets Iranian Oil Trade Again. The US Treasury and State Department imposed sanctions on a further six companies, based in Hong Kong, Singapore, and the UAE, for allegedly facilitating trade in Iranian oil and petrochemical products, the third round of blacklisting in the last two months.  

OPEC Woos Russia to Stay in Oil Group. Haitham al-Ghais, OPEC’s new secretary general, stated Russia’s participation in OPEC+ is vital for the success of the agreement, adding that the group does not control oil prices but finetunes the market in terms of supply and demand.

Nord Stream Blame Game Never Stops. With markets still having no idea where the ominous Nord Stream 1 turbines are, Russia has said that there is little it can do to revamp pumping along the pipeline as it continues to supply only 20% of nameplate capacity with only one turbine working. 

Iran Signals Readiness for New Round of Talks. With the European Union still proposing new initiatives to breach the gap between the US and Iran, with Brussels submitting a new draft text on the JCPOA revival, Tehran said it is ready to set new talks provided they lead to a “sensible and stable” deal. 

Australia Wants to Keep Its Gas at Home. Australia is considering curbing exports of its LNG after a national watchdog that more natural gas is needed to satisfy the needs of its east coast amidst dramatically declining onshore production, with some restrictions likely even looking into 2023. 

Luxembourg Moves to Freeze Ecuador Assets. Banks in Luxembourg were ordered to freeze assets held by Ecuador after the Latin American failed to honor a $391 million payment towards Anglo-French oil firm Perenco, a result of its unlawful ending of a production-sharing agreement. 

ADNOC Finds Offshore Gas. UAE national oil firm ADNOC, along with block operator ENI (NYSE:E) and PTTEP, discovered a second gas play in Offshore Block 2, adding 1-1.5 TCf to a shallower target appraised earlier this year, all this only three years after the acreage was awarded in Abu Dhabi’s first-ever block bid round. 

Nigeria’s Main Export Grade Halted Amidst Leaks. The Shell (LON:SHEL)-operated Forcados terminal has been out of operation since July 17 after a leak was found from a subsea hose, with August cargoes already deferred into September as the 200,000 b/d stream remains marred by force majeure events. 

US Diesel Becomes Hedge Funds’ New Favorite. According to CFTC figures, hedge funds and other money managers purchased the equivalent of 9 million barrels in US diesel futures in the week to July 26, a sign that slow stock builds of middle distillate spell trouble for diesel prices ahead.

Copper In Jitters After Giant Chilean Sinkhole. Chilean authorities started an official investigation into a giant sinkhole at the Alcaparrosa mine operated by Lundin Mining (TSE:LUN), 82 feet in diameter, potentially spelling trouble for copper production in Chile’s northern regions, home to almost 30% of global copper production. 

China Pioneers Offshore Shale Oil Drilling. With China’s upstream segment increasingly focusing on shale plays, state-controlled oil firm CNOOC (HKG:0883) successfully tested production at the Weiye-1 well, the country’s first-ever offshore shale oil well. 

Texas Struggles With Unbearable Heat. The Electric Reliability Council of Texas (ERCOT) issued a warning that power use in the Lone Star State will break records this week again, with peak demand expected to come on Wednesday at 80,076 MW (the previous all-time high was reached two weeks ago, at 78,828 MW).

By Tom Kool for 

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B.C. hit with tax and fare hikes starting April 1 – CTV News Vancouver



April Fools’ is bringing more than just practical jokes to British Columbians — the province will be hit with new taxes and fare hikes starting on Saturday.

One of next month’s changes will leave many commuters debating on walking or taking public transit due to the federal government’s increased carbon prices.

The bump will see carbon pricing go from $50 a tonne to $65, which the Canadian Taxpayers Federation says will account for a spike of over three cents per litre of gas.


Alcohol sales are also expected to climb, although a recent announcement could temper it.

The federal government initially planned to implement a 6.3 per cent increase, but decided to scrap it after receiving backlash from alcohol operators and breweries nationwide. So instead, the spike will be capped at two per cent for a year.

The duties are imposed at the manufacturing level and adjusted annually based on inflation.

National increase aside, BC Hydro says the residential electricity rate will increase by two per cent, or about $2 per month on average, following interim approval by the BC Utilities Commission.

“Last year, we reduced residential rates by 1.4 per cent, and in 2024, we expect to increase rates by 2.7 per cent. Over the three-year period, it works out to an average rate increase of 1.1 per cent per year. This is below forecast inflation in B.C. over this period,” said BC Hydro in an email.

The increases in British Columbia will also be seen at the ferry terminals.

BC Ferries is expected to raise its prices by over two per cent, which is curranty capped until next year.

They projected this increase could have been more than three times larger due to inflation.

“It was clear BC Ferries users could face fare increases of 10.4 per cent a year for the four-year period of 2024 to 2028,” wrote the province.

The province announced in late February that a $500-million investment in BC Ferries was intended to keep fare increases below three per cent.

Other additional expenses coming into effect in April will be Stanley Park parking fees.

For the next six months, parking will be an additional dollar per hour or $14.25 per day. For fall and winter parking, it is set at $2.75 per hour and $7.75 per day.

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Rogers-Shaw deal approved — with ‘unprecedented’ conditions. Here’s what to know – Global News



Rogers Communications Inc.’s proposed takeover of Shaw Communications Inc. will go ahead after it received the final sign-off it needed from Industry Minister Francois-Philippe Champagne.

He called the merger a “watershed moment” for the telecom sector that he claimed would drive wireless prices down for Canadians while growing the combined firm’s overall headcount.


The merger, a union between two Canadian telecom giants valued at $26 billion, including debt, has changed significantly in response to political and industry pressure since it was first announced in March 2021.

The final permutation of the merger will see Shaw sell its Freedom Mobile business and transfer wireless spectrum to Quebecor’s Videotron as the latter seeks to expand outside Quebec.

“We are at a crossroad for the telecom sector in Canada,” Champagne said in his announcement.

“We have… an historic opportunity to see a real fourth national player emerge and most importantly, compete in a way that will drive down prices for Canadians.”

Click to play video: 'Rogers takeover of Shaw approved by Ottawa: Minister Champagne'

Rogers takeover of Shaw approved by Ottawa: Minister Champagne

Read more:

Rogers-Shaw deal: Champagne says ‘public interest’ key as former deadline arrives

Champagne’s approval came on the companies’ March 31 deadline to close the transaction.

More on Canada

Rogers, Shaw and Quebecor released a joint statement Friday morning saying they have agreed to extend that closing date to April 7 in order to give enough time to finalize the agreement and meet other closing conditions.

While shares of Shaw were up slightly in trading on the Toronto Stock Exchange on Friday, Rogers’ stock price had dropped 2.8 per cent on the day.

Rogers CEO Tony Staffieri called the merger “transformative” in a statement on Friday, and said the combined companies “will invest substantially to bring more choice, more value, and more connectivity to Canadians across the country.”

Brad Shaw, the CEO of Shaw, said in a statement that “the merger will provide the scale necessary for the future success and competitiveness” of the Calgary-based company.

Shaw Communications and Corus Entertainment, the parent company of Global News, are owned by the Shaw family based in Calgary.

Pierre Poilievre, leader of the federal Conservative Party, fired a shot at the government’s approval of the deal in Question Period on Friday.

Click to play video: '‘Liberals love to suck up to big oligopolistic corporations’: Poilievre opines on Rogers-Shaw deal approval'

‘Liberals love to suck up to big oligopolistic corporations’: Poilievre opines on Rogers-Shaw deal approval

“When will they start standing up for consumers instead of standing up for price raising and high cost corporate oligarchs?” he asked.

Brian Masse, the NDP’s industry critic, said Friday’s approval was a “cave” to the big telcos that would see Canadian consumers continue to pay some of the highest wireless prices in the world.

“We’re going to see less competition. We’re going to see higher prices and we’re going to see continued frustrations for Canadians as things go forward,” he said.

Pierre Karl Péladeau, president and CEO of Videotron-owner Quebecor Inc., said in a statement Friday that the company would bring its competitive force to bear on the national market.

“Just as Videotron has done in the Québec market, Freedom will promote competition by competing aggressively with Canada’s wireless carriers in order to lower prices for the benefit of consumers,” he said.

‘Unprecedented’ conditions added to the deal

In an effort to get ahead of criticisms that the merger would hurt competition, Champagne said Friday his approval is subject to 21 “unprecedented and legally enforceable” conditions.

Videotron’s wireless prices in Quebec, which tend to be 20 per cent lower than other parts of the country, must be expanded out of the province and into Western Canada as part of Champagne’s stated goal of creating a fourth-national player to drive down Canadians’ phone bills.

“The way to drive down prices is through competition. Having a fourth, strong national player does lead to lower prices,” he told reporters Friday.

Rogers is also expected to keep a headquarters in Calgary and add 3,000 new jobs in Western Canada, both of which are expected to be maintained over the next 10 years. Champagne did not say whether any job protections are extended to Rogers’ operations in Eastern and Central Canada.

The newly merged telecom giant is also expected to spend $5.5 billion expanding 5G network coverage and invest $1 billion in connections for rural, remote and Indigenous communities.

The $6.5 billion in spending and promises to add jobs and maintain the western HQ were included in the original announcement from Rogers and Shaw in March 2021.

Violating the conditions would come with “significant” penalties of up to $200 million in fines for Videotron and up to $1 billion in charges for Rogers, Champagne said.

He added that all of these conditions are set out in a legal undertaking he called a “contract with Canadians” and are subject to arbitration if the companies violate the agreement.

Champagne said he would watch the telcos “like a hawk” on Canadians’ behalf.

Read more:

Rogers-Shaw deal: Champagne says ‘public interest’ key as former deadline arrives

Michael Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, argues that the significant number of conditions placed on the deal amount to a tacit confession from the federal government that what they’ve approved won’t benefit consumers.

“It’s largely illusory,” he tells Global News.

“Let’s recognize we’re talking about a 10-year horizon. We don’t even know who’s going to be in the government at that stage, much less what the environment will look like.”

The NDP’s Masse, too, was skeptical of Champagne’s conditions and critical of the proposed penalties, which he said would end up being paid by Rogers and Videotron’s customers on their bills, not by the companies or their executives.

“He may be watching them like a hawk, but I mean, he’s left Canadian consumers to be basically open to the buzzards,” Masse said.

Champagne’s office confirmed in a statement to Global News on Friday that the companies’ agreement is signed with the Government of Canada, not the minister himself, and will remain in force even if the Liberals leave office over the next decade.

Minister threatens more regulation if prices don’t drop

The industry minister also announced a freeze on the transfer of large amounts of spectrum from major carriers for an indeterminate period and a comprehensive review of Canada’s spectrum transfer rules for the first time in a decade to ensure the framework is appropriate for the modern telecom landscape.

If prices do not materially lower following the completion of this deal, Champagne threatened that he might seek more legislative powers to force companies to offer Canadians better deals.

Click to play video: 'What Rogers purchase of Shaw will mean for Canadian consumers'

What Rogers purchase of Shaw will mean for Canadian consumers

“Everything is on the table,” he said.

Michael Osborne, a competition lawyer with Cozen O’Connor in Toronto, says the conditions imposed on the deal largely amount to “political theatre” but they are “real.” He says the conditions reinforce actions Rogers already said it would take, like maintaining a presence in Western Canada.

He says the introduction of Videotron, which will be incentivized on its own to offer cheaper rates to compete in the market, will result in less concentration in Canada, rather than more.

Read more:

Rogers ‘confident’ it can compete with bigger Videotron if Shaw merger goes forward

As for Champagne’s suggestion that he could seek more powers to force telecom prices lower in the years to come, Osborne says the impulse to regulate the market rather than letting competition run its course is misguided.

“There seems to be a bit of a view out there that we should regulate prices charged by businesses in our economy. We’re seeing that in telecom. We’re seeing that from people in relation to groceries,” he says.

“Having the government decides what prices are going to be is not historically a winning formula for having an efficient, competitive, strong economy that grows.”

How did we get here?

Champagne’s sign-off was the final regulatory hurdle needed to get the deal across the finish line.

The Competition Tribunal approved the deal on Dec. 30, 2022.

The Competition Bureau had appealed the tribunal’s decision, citing what it claimed were legal errors in the judgment. But a Federal Court of Appeal judge ruled last month that the Bureau’s arguments did not meet the threshold needed to overturn the ruling.

The Bureau had lobbied against the merger, saying the transaction would hurt competition in the telecom industry in Canada.

The Competition Tribunal concluded that the merger was not likely to result in higher prices for wireless customers in Western Canada, and that the Tribunal was satisfied the plan to sell Shaw’s Freedom Mobile to Videotron was adequate to ensure competition isn’t substantially reduced.

Osborne believes that if Champagne had shut down the deal — disagreeing with the call made by a judicial body — Canada’s reputation as a good place to do business could be at risk.

“It would be catastrophic for merger review in this country,” Osborne says.

Read more:

Rogers-Shaw deal: Analyst says watchdog faces ‘uphill battle’ to overturn ruling

“It would mean that instead of a system which is governed by law and by an objective, measurable standard … that in fact, merger review in this country is based on how many letters the minister got opposing the deal.”

But Keldon Bester, co-founder of the Canadian Anti-Monopoly Project, tells Global News that the deal’s approval reflects the “poor state of Canada’s competition laws” and called for a boost in oversight that would prevent industry consolidation like this in the future.

While he says it’s “entirely possible” that Videotron will become a strong national competitor, there are many questions about the effectiveness of the conditions imposed on the deal and whether the long-term drop in prices described by Champagne will come to pass.

Finance Minister Chrystia Freeland said Friday that, like the 2023 budget tabled earlier in the week, the Liberal government’s focus is on “affordability” for consumers.

“Our focus is very much on Canadians. It’s on Canadian consumers. It’s on imposing tough conditions to ensure that Canadian consumers get the services they need at prices they can afford,” she said.

— with files from Global News’s Anne Gaviola, David Baxter

Click to play video: 'Liberals pitch their ‘fiscally responsible’ budget'

Liberals pitch their ‘fiscally responsible’ budget

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