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The Relentless Oil Price Rally – OilPrice.com

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The Relentless Oil Price Rally | OilPrice.com

Tom Kool

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

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    Oil Price Rally

    Oil prices are continuously rising despite the uncertainty surrounding COVID-19, with WTI nearing a two-month high on Friday morning

    For further research, analysis and trade recommendations, make sure you read this morning’s Global Energy Alert newsletter. From an analysis on Saudi Arabia’s current economic crisis to the latest updates on COVID-19, it truly is a must-read.

    Friday, May 15th, 2020

    Oil prices appear to be rising relentlessly, with WTI bouncing above $28 per barrel, nearly at a two-month high. Market sentiment has been gaining steam as supply shut-ins mount and demand begins to come back. Still, the risk of another wave of coronavirus infections presents a major risk to the rally.

    OPEC+ could keep cuts beyond June. “The ministers want to keep the same oil production cuts now which are about 10 million bpd, after June. They don’t want to reduce the size of the cuts. This is the basic scenario that’s being discussed now,” one OPEC+ source told Reuters.

    Analysts see optimism in data. Oil time spreads have seen a narrowing contango, a sign of tightening in the oil market. “We believe stocks will be reduced gradually over the next 12 months or so,” said Rystad Energy head of oil markets Bjornar Tonhaugen. “Brent stabilizing above $30 gives the market confidence that frightening days of negative prices and record daily declines are behind us.”

    Saudi oil “flotilla” delayed at ports. The flotilla of Saudi supertankers heading to U.S. ports have been delayed because there has been a shortage of the smaller ships used to lighten the load near shore.  Related: Are Venezuelan Oil Exports Poised For A Comeback?

    Storage fears subside. Due to sharp cuts in oil production, the pace of inventory builds has slowed dramatically, easing fears of an acute shortage in storage capacity.

    Iraq cuts 650,000 bpd from southern fields. Iraq cut 650,000 bpd from its massive southern oil fields in order to comply with the OPEC+ cuts. The reductions have been split between state-owned companies and the private international companies.

    Exxon CEO under fire. ExxonMobil (NYSE: XOM) CEO Darren Woods is under scrutiny after Legal & General Investment Management, which oversees $1.5 trillion in assets, said it would vote against Woods as CEO and Chairman at the company’s upcoming shareholder meeting. The investment group cited Exxon’s “lack of strategic ambition around climate change,” while its European competitors “step up and reaffirm their sustainability ambitions.” 

    WoodMac: oil demand may not recover until 2026. Wood Mackenzie outlined several scenarios in a new report, all of which paint a pessimistic outlook for oil demand. The firm said it could take years for demand to recover, but ultimately, demand will probably peak within the next decade.

    Fed warns economic damage will persist. Federal Reserve Chairman Jerome Powell warned of an “extended period” of economic damage. St. Louis Fed Chair James Bullard warned job losses could be permanent and businesses could fail “on a grand scale.”

    WHO: Coronavirus may “never go away.” The World Health Organization warned that the world may live with COVID-19 indefinitely. “It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away,” WHO emergencies expert Mike Ryan told an online briefing. 

    Venezuelan opposition wants “change of direction” from U.S. The Venezuelan opposition is reeling after the government easily thwarted a hapless coup attempt by American contractors. Opposition lawmakers have contacted the U.S. State Department and requested a change of direction, according to Bloomberg.   

    Nearly 600,000 clean energy jobs eliminated. The U.S. lost 447,000 clean energy jobs in April, taking the total job losses for the sector close to 600,000 since March. 

    Diamond Offshore takes stimulus, pays executives. Diamond Offshore (OTCMKTS: DOFSQ) took advantage of stimulus money passed by Congress, getting a $9.7 million tax refund. Then it asked a bankruptcy judge to reward top executives the same amount. Oil companies are receiving hundreds of millions of dollars in stimulus money. “This is a stealth bailout for the oil and gas industry,” Jesse Coleman, a researcher with Documented, told Bloomberg. 

    North Dakota to pay to cleanup orphaned wells. North Dakota wants to use $33.1 million in coronavirus aid to pay for cleaning up oil wells “orphaned” by the industry. 

    Alaska oil payout at risk. Alaska sends a check to every citizen every year as a dividend from oil revenues. This year, the check is expected to be about $1,000. But with revenues drying up, that payout is at risk

    Nigeria to cut oil by a quarter. Nigeria said that it would cut its oil production by 417,000 bpd, or about 23 percent of total output, to bring it in line with the OPEC+ agreement.

    Tesla to unveil new low-cost battery. Tesla (NASDAQ: TSLA) is set to introduce a new low-cost battery with a longer range for its Model 3 in China later this year. The improvement will bring the cost of the car in line with gasoline vehicles.  Related: Battery Metal Demand Set To Soar By 500%

    BP said governments should press ahead with clean energy. BP (NYSE: BP) said that governments should “press ahead” with climate change policy. “We have got to do the energy transition — this isn’t an option,” BP CFO Brian Gilvary told the FT. 

    LNG price war could send gas into negative territory. Gas markets are oversupplied and LNG exporters are scrambling, looking for some combination of fighting for market share and storing excess supply. U.S. inventories of natural gas are expected to continue to rise this year.

    By Tom Kool for Oilprice.com 

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      Laurentian Bank cuts dividend by 40% – CBC.ca

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      Laurentian Bank slashed its dividend by 40 per cent on Friday, the first such move by a major Canadian lender in almost three decades.

      The Montreal-based lender said Friday its profit fell by 79 per cent to $8.9 million, and its provisions for credit losses — the amount of money the bank is setting aside to cover loans that may go bad — soared to $54.9 million. That’s up from $9 million in the same period a year ago.

      COVID-19 is throwing uncertainty to the bank’s outlook, so it cut its dividend to 40 cents a share as a precaution. Previously it was 67 cents a share.

      “We have a strong capital and liquidity position, and disciplined risk management, but it is a time for prudence,” CEO François Desjardins said. “Although we believe that current earnings are not reflective of the future earnings power of the organisation, we have reduced the dividend to $0.40 per share which improves operational flexibility until we reap the anticipated benefits of our strategic plan.”

      The last time a major Canadian bank slashed its dividend was 1992, when National Bank cut the payout to its shareholders.

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      First-quarter GDP worst showing since 2009: StatCan – CTV News

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      OTTAWA —
      Canada’s economy had its worst quarterly showing since 2009 through the first three months of 2020 owing to COVID-19, Statistics Canada said Friday, warning an even steeper drop may be coming.

      Gross domestic product fell at an annualized rate of 8.2 per cent in the first quarter, including a 7.2-per-cent drop in March as restrictions by public health officials began rolling out, including school closures, border shutdowns and travel restrictions.

      Preliminary information indicates an 11 per cent drop in GDP for April, but the statistics agency said that figure is likely to be revised as more information becomes available.

      Similarly, the agency said first-quarter figures are likely to have larger than usual revisions in subsequent data releases. Some numbers had to be estimated because they were not available.

      Early indications are that March and April could end up as the largest consecutive monthly declines on record.

      The drastic drop in gross domestic product likely doesn’t fully reflect the experience of every Canadian, said BMO chief economist Douglas Porter, noting GDP is just one barometer of how the pandemic has affected the domestic economy.

      “You don’t get the entire picture just from GDP and even from employment (figures) because policy-makers have stepped up with such unusual and aggressive actions that a lot of the common metrics just don’t apply 100 per cent in this episode,” Porter said in an interview.

      The federal response to date totals about $152 billion in direct spending. The parliamentary budget officer has said that could leave the deficit at $260 billion, with a national debt north of $950 billion.

      A preliminary estimate released by the Finance Department on Friday showed deficit of $21.8 billion for the fiscal year that closed in March. The figure will still be subject to revisions, which may land it closer to the government’s last estimate of $26.6 billion.

      The monthly fiscal monitor also showed the debt pushed past $794.4 billion.

      Many of the items adding to this year’s deficit are expected to show up in supplementary spending estimates. The documents will be scrutinized for four hours in mid-June based on the motion the adopted this week to put the Commons on extended hiatus until late September.

      Budget officer Yves Giroux told a Commons committee on Friday that would provide parliamentarians little opportunity to properly scrutinize tens of billions, if not over $100 billion in proposed spending.

      “It comes up as a very expensive four hours potentially for Canadian taxpayers,” he said. “The amount of scrutiny for this unprecedented spending will also be unprecedented, but for the wrong reasons.”

      The latest federal spending figures showed $41.44 billion has been paid to 8.29 million people through the Canada Emergency Response Benefit, and $7.9 billion in wage subsidies to 181,883 companies.

      MPs on the Commons finance committee were told Thursday the cost of the wage susbidy program is somewhat less than the original $73-billion estimate. Consultations are underway to understand why companies aren’t accessing the program that covers 75 per cent of salaries, subject to a cap of $847 per week, per employee.

      Asked about the lopsided spending, Prime Minister Justin Trudeau said the subsidy will become “more and more important” as restrictions ease and businesses reopen. He also said the CERB has helped “support millions of Canadians who need help paying for groceries, paying their rent.”

      Statistics Canada said household spending, a backbone of the Canadian economy, was down 2.3 per cent in the first quarter of 2020, the steepest quarterly drop ever recorded.

      The drop in household spending was broad, affecting goods like new cars and clothing, and services for food as bars and restaurants in particular were ordered closed. Instead, spending on going out became money spent staying in, Statistics Canada said, noting increases in household food and alcohol by 7.2 per cent and six per cent, respectively.

      As a result of less spending overall, the savings rate rose for the quarter to 6.1 per cent from the 3.6 per cent recorded in the fourth quarter of 2019 with higher rates recorded at higher income levels.

      The savings built up during the shutdown period could translate into extra spending as restrictions ease, said CIBC senior economist Royce Mendes in a note.

      TD senior economist Brian DePratto wrote in a note that it isn’t unreasonable to think a modest recovery may already be forming.

      “The key question is what kind of recovery? Given the significant hits to incomes and longer-lasting impacts on some industries, a marathon appears more likely than a sprint.”

      This report by The Canadian Press was first published May 29, 2020.
       

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      Alberta partners with fast-food restaurants to distribute 4 non-medical masks to every resident – Globalnews.ca

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      The Alberta government will provide every resident with four non-medical face masks, as the province continues its phased approach to relaunch the economy.

      Health Minister Tyler Shandro announced Friday morning that the government has partnered with A&W, McDonald’s Canada and Tim Hortons to distribute the masks at the restaurants’ drive-thru locations.

      The masks will be free of charge.

      “Alberta is the first and so far, as far as I know, the only province that has decided to distribute masks province-wide,” Shandro said. “This program will help Albertans get back to work and enjoy everyday activities safely.”

      While mask use is not mandatory, Alberta’s chief medical officer of health has recommended Albertans wear a non-medical mask when two metres of physical distance cannot be maintained, such as on public transit.


      READ MORE:
      Coronavirus: Non-medical masks now recommended for Canadians, officials say

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      A total of about 20 million non-medical masks will be distributed at a cost of around $20 million. Shandro said partnering with the fast-food restaurants will cut down on the distribution cost to government, which is around $350,000.

      “These three partners are doing it without added expense to the Alberta taxpayer,” Shandro said.


      READ MORE:
      Coronavirus: Alberta changes PPE distribution, businesses must obtain own masks after June 30

      The drive-thru pickup also provides safe physical distancing for Albertans, as people will be able to stay in their vehicles.

      Shandro said the three restaurant companies have about 600 drive-thru locations in the province, and 95 per cent of Albertans live within 10 kilometres of one of these locations.

      The province is working on a plan to ensure distribution of masks is possible to the remaining five per cent of the population, Shandro said.

      “Even if you don’t have an A&W, a McDonald’s or a Tim Hortons in your community, you will be able to get your four masks,” he said.


      READ MORE:
      Coronavirus: Alberta government asks non-AHS staff needing PPE to request via email

      The government’s distribution cost is “for us to be able to pay for the gap distribution for the other five per cent of folks who may not be able to get to a drive-thru,” according to Shandro.

      Story continues below advertisement

      Distribution will be done on the honour system.

      “We’re not asking for folks to bring in their health-care card and get a punch to show that they’re already picked up,” Shandro said.

      [ Sign up for our Health IQ newsletter for the latest coronavirus updates ]

      “This is on the honour system, but Albertans are responsible and they’ve shown us that. Throughout the response to this pandemic, Albertans have shown us that they are responsible.

      “Obviously there may be some folks who will be unable to make their way to a drive-thru — I’m thinking about one of my parents in particular — and whether it’s me or one of my siblings who has to go pick up for my parents, that’s going to be the case. And the folks at the 600 stores, the employees, are going to just have to trust Albertans and we’re going to have to trust Albertans.”






      2:54
      Alberta’s Dr. Hinshaw lays out best practices for wearing face masks to slow COVID-19 spread


      Alberta’s Dr. Hinshaw lays out best practices for wearing face masks to slow COVID-19 spread

      The health minister stressed the three-layered, non-medical face masks are not part of the provincial supply of personal protective equipment (PPE) meant for health-care workers and first responders.

      Story continues below advertisement

      The masks are single-use, Shandro said.

      “They are not medical grade masks. We are not taking away any of the PPE from our front lines,” Shandro said.


      READ MORE:
      University of Alberta works with AHS to make 3D-printed face shields

      In a media release from the province, all three restaurants expressed their pleasure to be part of the mask program.

      “A&W is very pleased to support the government of Alberta with this great initiative. Our restaurants across the province have been quick to step up and help organize the distribution of masks, and are looking forward to welcoming Albertans at our drive-thrus,” A&W Canada president and CEO Susan Senecal said.

      “McDonald’s Canada, together with our franchisees, have been committed to helping our communities throughout this pandemic. We welcome this opportunity to use our drive-thru operations to assist the Alberta government, and do the right thing for Albertans when they need us most,” said Jeff Kroll with McDonald’s Canada.

      “Throughout the pandemic, the 1,500 Tim Hortons owners across Canada have been eagerly supporting their local communities and stepping up to answer calls for assistance. When we were asked by the Alberta government to help distribute masks through our drive-thrus we did not hesitate. We’re proud to have been asked to participate in this important program and do our part to help Alberta move forward on its relaunch strategy,” Tim Hortons COO Mike Hancock said.

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      Tanya Doucette, a Tim Hortons owner who runs eight locations across central Alberta, said the province has asked that they not hand out the mask bags inside the restaurant, just through the drive-thru.

      “They want to ensure safe social distancing, and I think because they’re worried people might show up in large numbers and queues in person, that could create risk,” Doucette said.

      “We have acrylic shields in our drive-thrus and our team members are wearing non-medical grade masks, so this is a safe distance option to hand out the masks.”


      READ MORE:
      Harvey’s makes unique use of hockey sticks during coronavirus pandemic

      She said people must be in a vehicle, they cannot walk through the drive-thru.

      “What you can do if you don’t have a vehicle or you don’t have access to a vehicle, you can ask a friend or family member to pick up your allotment of masks for you through a drive-thru location at Tim Hortons,” she said.

      Representatives from McDonald’s and A&W also say that masks will only be handed out through the drive-thru, and people must be in a vehicle.

      The masks have arrived and will be ready for distribution early next month. Further details of the rollout will be released in the coming days.

      Story continues below advertisement

      Shandro encouraged Albertans to source their own non-medical masks through local businesses or make their own at home.

      “This is not meant to be able to provide Albertans with an unlimited supply.”

      More information on how to safely put on and take off a non-medical face mask can be found on the government’s website.






      1:08
      Hinshaw clarifies that N95 masks are not required for ‘typical care to a patient’


      Hinshaw clarifies that N95 masks are not required for ‘typical care to a patient’

      Shandro said that on Friday morning, Alberta surpassed the 250,000 mark when it comes to how many COVID-19 tests have been performed in the province. He said about 220,000 unique Albertans have been tested, as some people have been tested twice.

      On Thursday, Alberta Health reported 29 new cases of COVID-19 in Alberta and two additional deaths related to the disease.

      There were 652 active cases of COVID-19 in Alberta on Thursday afternoon.

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      © 2020 Global News, a division of Corus Entertainment Inc.

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