Few markets have been hit harder by coronavirus than United States shale. While global oil prices as a whole have taken quite a beating from a fall in oil demand, a deficit of oil storage, and an oil-price war between the OPEC+ leading members of Saudi Arabia and Russia, the Brent international crude benchmark never went negative. In the United States, it was a different story. Not only did the West Texas Intermediate (WTI) crude benchmark dip below zero on April 20, it plummeted to nearly $40 below zero per barrel in a previously unthinkable upset.
While oil prices have since recovered, shale prices have not bounced back to the$40 a barrel that the U.S. shale industry needs just to break even. In light of this, it’s no surprise that the Permian Basin has been swept by a wave of bankruptcies, shut-in wells, and tens of thousands of fired and furloughed employees.
This severe downturn has many wondering what will become of the U.S. shale industry once demand bounces back post-corona. This weekBloomberg suggested one possible outcome that may come as a shock to the sector. “Once the global oil market emerges from the coronavirus crisis,” Bloomberg wrote on Sunday, “it may be greeted by a surprising change: greater dependence on crude from OPEC.”
Right now, this outcome is pretty far from becoming a reality. “For the time being, the Organization of Petroleum Exporting Countries and its allies are relinquishing their share of the market in a bid to prop up crude prices, slashing millions of barrels of output as the pandemic crushes fuel demand.” In fact, just this week OPEC+ confirmed that they will retain output caps until 2022. But the current oil industry chaos could provide a unique opportunity for OPEC to once again rise to the top of the oil production totem pole.Related: The Cowboy State Is Hurting As Low Oil Prices Persist
“From the point of view of oil-market share, OPEC will be a clear winner in the coming years,” Michele Della Vigna, head of energy industry research for Goldman Sachs Group Inc. told Bloomberg. “Under-investment in the rest of the industry ultimately plays to their favor.” These predictions should be taken with a large grain of salt, however, as it’s not the first time that this prophecy has been foretold for OPEC, and it has yet to be fulfilled. “Warnings abounded during the last decade that the plunge in investment which followed the 2014 oil-market crash would leave a supply gap for OPEC to fill. But the shortage never materialized as American shale proved surprisingly resilient,” writes Bloomberg.
Can U.S. shale pull off that kind of renaissance again? Some experts certainly think so. This current test of the U.S. shale sector could trim the fat of the shale play and leave the Permian Basin with only the most resilient and resourceful companies, leaving the shale sector inbetter shape than ever, at least according to Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.
Yergin is not alone in his optimism. Some experts are anticipating that the current shutting-in of wells and decrease of production capacity create a supply gap, which will allow oil prices to soar once demand returns, with some experts even predicting$100 barrels in the not-so-distant future. But as Bloomberg reports, “it’s too early to tell whether the latest predictions of a supply gap will prove unfounded, or whether this time really is different. But initial indications do suggest that OPEC could re-emerge from the current round of cutbacks in a stronger position.”
For as many energy-industry pundits who are predicting a U.S. shale comeback, there are also just as many industry experts who are questioning whether or not we are seeing the inevitable demise of the shale industry. With the world (too) slowly trending toward a green energy transition, big-picture thinkers like those brainiacs at the World Economic Forum have suggested that the upset caused by coronavirus is exactly the interruption to business-as-usual that we need to redirect the country’s energies (so to speak) towards renewables and begin building a “new energy order.” Other think pieces have argued (with statistics to back it) that renewable energy may be the most economically viable option to employ the tens of thousands of shale workers that have now found themselves in the lurch.
As for OPEC, they may have another shot at leading the world in oil production, but when even Saudi Aramco admits that peak oil is right around the corner, perhaps even that accolade will soon have lost its luster.
A&W, Tim Hortons and McDonald’s restaurants with drive-thrus are again offering packages of the masks to customers in a bid to limit the spread of COVID-19. About 20 million non-medical, single-use masks will be served up at more than 600 outlets across Alberta, the province said in a statement.
Masks will also be provided to municipalities without access to the participating restaurants, including First Nations and Métis settlements, places of worship, transit services, shelters and long-term care facilities.
Sylvan Lake was trending on Twitter Sunday afternoon after photos surfaced on social media that appeared to show groups of people closer than the required two-metre separation on a thin stretch of sand fronting the lake. An infectious disease expert at the University of Calgary said the pictures are worrisome as the risk is still “quite high” in such gatherings. He said they indicate “COVID fatigue” — people appearing to lose track of public health guidelines that exist as a condition of the province’s relaunch plan.
Alberta universities plan to do away with dormitory residences in favour of apartment-style housing during COVID-19 pandemic — and the move comes with a cost increase of $3,000 for students at the University of Calgary. According to the university’s website, meal plans are not included.
That move would join Calgary with three other major Canadian cities in making masks mandatory. Here are some of the top questions and answers when it comes to how a mandatory mask bylaw might work and whether the science supports it.
Meanwhile, Edmonton has been chosen as a hub city for the NHL’s return, with the league choosing cities that largely have their coronavirus outbreaks under control when compared to United States counterparts.
Alberta Health reported 77 new cases of the illness on Friday, bringing the total number of active cases to 592.
Here’s the current breakdown of active cases across the province:
Calgary zone: 228.
Edmonton zone: 203.
South zone: 96.
North zone: 44.
Central zone: 13.
What you need to know today in Canada:
As the volume of travellers entering Canada through the U.S. has increased in recent weeks, public health officials are being placed at land borders to bolster screening for COVID-19.
As of 6:30 a.m. ET on Monday, Canada had 107,590 confirmed and presumptive coronavirus cases. Provinces and territories listed 71,467 of those as recovered or resolved. A CBC News tally of deaths based on provincial reports, regional health information and CBC’s reporting stood at 8,819.
Ontario Premier Doug Ford is expected to announce plans for Stage 3 of the province’s reopening today. According to a document released in late April, Stage 3 includes allowing remaining workplaces to reopen “safely,” further relaxing restrictions on public gatherings and likely reopening outdoor playgrounds. The spread of COVID-19 continues to slow in Ontario, with new daily case numbers having steadily declined over the last five weeks.
Alberta Health Services has an online self-assessment tool that you can use to determine if you have symptoms of COVID-19, but testing is open to anyone, even without symptoms.
The province says Albertans who have returned to Canada from other countries must self-isolate. Unless your situation is critical and requires a call to 911, Albertans are advised to call Health Link at 811 before visiting a physician, hospital or other health-care facility.
If you have symptoms, even mild, you are to self-isolate for at least 10 days from the onset of symptoms, until the symptoms have disappeared.
The province also operates a confidential mental health support line at 1-877-303-2642 and addiction help line at 1-866-332-2322, available from 7 a.m. to 11 p.m., seven days a week.
Online resources are available for advice on handling stressful situations and ways to talk with children.
There is a 24-hour family violence information line at 310-1818 to get anonymous help in more than 170 languages, and Alberta’s One Line for Sexual Violence is available at 1-866-403-8000, from 9 a.m. to 9 p.m.
(Bloomberg) — U.S. equities touched a five-week high on expectations earnings will offer an optimistic outlook for the world’s biggest economy amid a raging coronavirus pandemic. Oil erased an earlier loss.
The S&P 500 briefly went back to being even this year, led by the consumer discretionary, health care and materials sectors. The Nasdaq Composite hit another record high. Traders are awaiting reports this week from a slew of companies that have yet to provide concrete guidance on the impact of the virus. Shares of PepsiCo Inc. rose after the snack-maker reported stronger-than-expected second-quarter sales. Tesla Inc. jumped as much as 16%.
“It’s remarkable how optimistic investors seem to be,” said John Carey, portfolio manager at Pioneer Investment Management. “The market has been fairly strong as investors look toward a potential recovery.”
European stocks rose with government bond yields. Oil was little changed ahead of an OPEC+ meeting at which the group may announce plans to start tapering historic production cuts.
With global stocks trading near their highest since February, focus now turns to whether the profit outlook will back up bullishness fueled by central bank and fiscal policy support. Traders have largely shrugged off new coronavirus outbreaks in some parts of the world, with Florida on Sunday posting the biggest one-day rise in cases since the pandemic began in the U.S., reporting 15,300 new infections.
There’s reason for optimism even though earnings are estimated to have contracted by more than 40% in the worst quarter since the financial crisis, as analysts upgrade their forecasts for the rest of the year.
“The backdrop is positive for all sectors of the market,” said Gerry Sparrow, president of Sparrow Capital Management Inc. “The reason for that backdrop is that the recovery has taken hold, so jobs data, consumer credit, home building strength signaled that the economy has shifted in a positive direction.”
Here are some key events coming up:
JPMorgan, Bank of America, Wells Fargo, Goldman Sachs, BNY Mellon and Citigroup start the U.S. earnings season for banks.Wednesday brings the Bank of Japan’s policy decision and a Governor Haruhiko Kuroda briefing.The EIA crude oil inventory report is due Wednesday.China releases second-quarter GDP on Thursday as well as key economic indicators for June.The European Central Bank meets to set monetary policy on Thursday, with President Christine Lagarde holding a virtual press conference afterward.
These are the main moves in markets:
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Stocks extended gains Monday morning after two pharmaceutical companies received “fast track” designation for the development of their vaccine candidates against Covid-19, stoking hopes of near-term inoculation amid the pandemic.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Pfizer (PFE) and BioNTech SE (BNTX) announced that two of the companies’ four investigational vaccine candidates received the designation from the US Food and Drug Administration, which is intended to speed up both the development and review of new drugs and vaccines. Shares of both companies rose in pre-market trading.” data-reactid=”17″>Pfizer (PFE) and BioNTech SE (BNTX) announced that two of the companies’ four investigational vaccine candidates received the designation from the US Food and Drug Administration, which is intended to speed up both the development and review of new drugs and vaccines. Shares of both companies rose in pre-market trading.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Over the weekend, some states again reported surging numbers of new coronavirus cases, as parts of the country struggled to keep new infections at bay. Florida reported a record 15,300 new Covid-19 cases as of Sunday, the highest one-day total for any US state so far during the pandemic, while new deaths in Florida fell by more than half versus the prior day to 45.” data-reactid=”18″>Over the weekend, some states again reported surging numbers of new coronavirus cases, as parts of the country struggled to keep new infections at bay. Florida reported a record 15,300 new Covid-19 cases as of Sunday, the highest one-day total for any US state so far during the pandemic, while new deaths in Florida fell by more than half versus the prior day to 45.
Elsewhere, new deaths in Arizona increased for a third straight day, with 86 reported as of Sunday. The state’s new case count of 2,537 marked a step down from the 3,038 from the day prior. California’s 8,460 new cases were below the state’s average one-day increase over the past seven days.
“The economic implications of the second wave are pretty clear, qualitatively at least. The third quarter recovery will be slower than we previous expected, but we’re hoping that some of the deferred spending will be pushed into the fourth quarter rather than abandoned altogether,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note.
“Markets are caught in the middle. We have argued for months that a full recovery depends on three pillars, namely, sustained progress against the virus, the continuance of super-accommodative Fed policy, and consistent support from fiscal policy,” he added. “Clearly, the first pillar has crumbled, and the third is now in limbo, with the Senate in recess until July 20. The Fed can’t do everything, so we’re not surprised that the S&P 500 has been range-bound since late May.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As for other potential market catalysts, second-quarter earnings season kicks off this week with a packed docket of big bank earnings, along with other early reporters including Netflix (NFLX), UnitedHealth Group (UNH) and Delta Airlines (DAL). Financials, which have lagged for the year to date, outperformed on Friday heading into earnings season, with the KBW Bank Index (KBW) rising by the most in five weeks at the end of last week.” data-reactid=”25″>As for other potential market catalysts, second-quarter earnings season kicks off this week with a packed docket of big bank earnings, along with other early reporters including Netflix (NFLX), UnitedHealth Group (UNH) and Delta Airlines (DAL). Financials, which have lagged for the year to date, outperformed on Friday heading into earnings season, with the KBW Bank Index (KBW) rising by the most in five weeks at the end of last week.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Market participants have so far set a low bar for second-quarter earnings results across sectors, with the coronavirus pandemic and measures taken to contain it at their most widespread in the April through June period this year. The estimated earnings decline for the S&P 500 is 43.8% for the second quarter, according to data from FactSet as of early July. Such a result would represent the largest year-over-year decline in earnings since the fourth quarter of 2008, and a steep downward revision from the estimate as of March 31, which had been for a decline of 13.6%.” data-reactid=”26″>Market participants have so far set a low bar for second-quarter earnings results across sectors, with the coronavirus pandemic and measures taken to contain it at their most widespread in the April through June period this year. The estimated earnings decline for the S&P 500 is 43.8% for the second quarter, according to data from FactSet as of early July. Such a result would represent the largest year-over-year decline in earnings since the fourth quarter of 2008, and a steep downward revision from the estimate as of March 31, which had been for a decline of 13.6%.
9:31 a.m. ET: Stocks open higher
Here were the main moves in markets, as of 9:31 a.m. ET:
S&P 500 (^GSPC): +26.76 points (+0.84%) to 3,211.8
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Food and beverage giant PepsiCo (PEP) reported fiscal second-quarter results that topped consensus estimates, driven by a jump in sales at the company’s North American food and snacking businesses.” data-reactid=”39″>Food and beverage giant PepsiCo (PEP) reported fiscal second-quarter results that topped consensus estimates, driven by a jump in sales at the company’s North American food and snacking businesses.
Core earnings per share of $1.32 per share was better than the $1.25 expected, and net revenue of $15.95 billion also topped estimates for $15.39 billion. Organic sales PepsiCo’s Quaker Foods North America unit surged 23% over last year, or more than three times greater than expected, and Frito-Lay North America also outperformed. However, PepsiCo’s North American beverage unit – its largest by sales – saw organic revenue drop 7% during the quarter.
“Our snacks and food business has performed very well, while our beverage business was challenged but continued to improve its competitive positioning,” PepsiCo CEO Ramon Laguarta said in prepared remarks of 2Q results. We expect our snacks and foods businesses to remain resilient, albeit with some moderation in growth, while our beverages business should deliver better performance during the second half of this year.”
7:26 a.m. ET Monday: Futures extend gains after vaccine hopes rise further
Here were the main moves in markets, as of 7:27 a.m. ET:
S&P 500 futures (ES=F): 3,201.75, up 23.25 points or 0.73%
Dow futures (YM=F): 26,191.00, up 214 points, or 0.82%
Nasdaq futures (NQ=F): 10,931.25, up 94 points, or 0.87%
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