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This Oil Price Rebound Is Only Temporary – OilPrice.com

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This Oil Price Rebound Is Only Temporary | OilPrice.com

Josh Owens

Josh Owens is the Content Director at Oilprice.com. An International Relations and Politics graduate from the University of Edinburgh, Josh specialized in Middle East and…

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    The worst week in oil market history is finally coming to an end, but some analysts are suggesting there may be more pain in store as crude storage cross the globe reaches capacity. 

    Friday, April 24th, 2020

    Oil prices stabilized by Friday after arguably the wildest week in the history of the oil market. But the slide is still far from over.

    Continental Resources halts production, declares force majeure. Continental Resources (NYSE: CLR) has stopped most of its production in North Dakota. Harold Hamm’s firm is mostly unhedged, exposed to extremely low market prices. Continental told at least one refiner that it couldn’t deliver a shipment of oil because negative prices constituted “waste.” Refiners are not pleased. “It is the height of hypocrisy for a company to choose not to honor its contracts to supply domestic crude to refineries while also demanding the administration impose restrictions on foreign crude,” the American Fuel and Petrochemical Manufacturers, a trade group representing refiners, told Bloomberg.

    U.S. considering lending program for oil companies. Treasury Secretary Steven Mnuchin said he’s considering creating a government lending program for U.S. oil companies. “Investment-grade companies will be able to either access the normal capital markets or will be able to access the Fed’s investment-grade facility,” he said. “That’s the priority.” Non-investment grade companies may seek “alternative structures with banks,” he said.

    Mexico to shut down wells. After making a big deal out of not agreeing to the OPEC+ cuts, Mexico said it would shut down new wells because of low prices. “Now that oil has no value, we can shut down the valves,” Mexico’s president said. State-owned Pemex was downgraded to junk by both Moody’s and Fitch on Friday.

    Cushing all booked. Storage at the key oil hub of Cushing, Oklahoma technically has available storage, but it is just about all under contract for leasing, according to Reuters. That means that there is essentially nothing left for anybody else.

    Big Oil dividends at risk. Equinor (NYSE: EQNR) cut its dividend by two-thirds this week. Other oil majors will be scrutinized by investors when they begin reporting earnings next week. “The look back into what was a weak first quarter seems almost irrelevant. The game plan for dealing with the next three months and the next 18 months is going to be the focus,” said Jefferies analyst Jason Gammel, according to Reuters. Related: Oil Prices Hit $15 For The First Time In 21 Years

    Argentina plans higher oil price. Argentina plans on decreeing a $45-per-barrel price for its domestic producers in order to keep the industry alive.

    Hackers have oil industry in cross hairs. Hackers have launched spear-phishing campaigns against oil and gas firms to infiltrate with a spyware for the purpose of collecting sensitive company information and credentials, Bitdefender researchers have found.

    Oil ETFs slammed. Roughly $6.2 billion has flowed into the U.S. Oil Fund (NYSEARCA: USO) so far this year. Retail investors, clearly confused about the nature of oil ETFs, have flooded into the funds, betting on rising oil prices. But when the market is in a steep contango, ETFs end up selling low and buying high. A leveraged 3x oil fund also shut its doors.

    Eni cut production and spending. Eni (NYSE: E) cut spending by 30 percent and lowered planned 2021 spending by 30-35 percent. The company lowered production guidance to 1.75-1.8 mb/d for 2020, down from 1.9 mb/d previously. When asked about the company’s dividend, Eni’s CEO was non-committal.

    Negative oil a risk for banks. Negative oil prices have broken the models that banks use for their trading books. “It’s a huge issue for banks if they cannot produce risk metrics correctly,” Richard Fullarton, founder of Matilda Capital Management, told Bloomberg. Meanwhile, Marex Spectron, a large commodities broker, said it would restrict its customers from taking positions in expiring futures contracts, allowing only for “liquidation of existing positions.”

    Regional oil economies at risk. Wyoming, Alaska, Oklahoma, North Dakota and West Virginia all depend more on mining and energy extraction than Texas, according to the Wall Street Journal. For example, energy and mining accounts for 16.4 percent of Wyoming’s GDP.

    Related: Shale’s Decline Will Make Way For The Next Big Thing in Oil

    Baker Hughes cuts jobs and spending. Baker Hughes (NYSE: BKR) cut jobs and spending by 20 percent. The firm expects oil field activity to fall by half this year. The company reported a first-quarter net loss of $10.2 billion, made worse by a $14.7 billion impairment.

    LNG cancellations to soar in June. A large number of LNG cargoes are expected to be cancelled between June and October.

    China to cut EV subsidies 10 percent. China said it would cut subsidies for EVs by 10 percent this year.

    Half of 60 independent oil companies need liquidity. Half of the largest 60 independent U.S. oil producers will need cash in order to stave off bankruptcy, according to energy lawyers at Haynes and Boone. “The reverberations from this price collapse will be felt throughout the industry and by everyone who provides services to the industry,” Buddy Clark of Haynes and Boone told Reuters.

    Pipeline delays after court ruling. The U.S. Army Corps of Engineers has suspended a nationwide program used to approve oil and gas pipelines after a court last week threw out a blanket permit, according to the AP. The decision put roughly 360 pending projects on hold.

    By Josh Owens for Oilprice.com 

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      3 Canadian Dividend Stocks that Haven’t Missed a Payout for 100+ Years

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      Local dividend investors are lucky. They have a good selection of Canada’s finest companies to choose from – stocks that haven’t missed a dividend payment in decades. In fact, a small number of companies have paid uninterrupted dividends for a century or longer.

      That’s a pretty impressive track record.

      There’s just one problem. Instead of sticking with these excellent long-term dividend kings, investors get a little cute. They load up on lesser stocks, enticed by a succulent yield, deep value opportunity, or better growth potential. Sometimes these investments work out, but often they don’t.

      There’s nothing wrong with that approach. After all, diversification is a good thing. But I still think the bedrock of the average Canadian investment portfolio should consist of these dividend kings, the kinds of companies you can count on no matter what.

      This is doubly important in a COVID-19 world.

      Let’s take a closer look at three of Canada’s top dividend kings, shares that have paid investors consistently for at least the past 100 years.

      Bank of Montreal

      We might as well start at the top. Bank of Montreal (TSX:BMO)(NYSE:BMO) has the longest dividend streak in Canada. It started paying a dividend back in 1829 and hasn’t missed a payment since. That’s a remarkable record.

      BMO is hardly the largest bank in Canada. It’s only the fourth-largest. But it’s still a formidable company with a market cap exceeding $45 billion. The company has retail, commercial, and capital markets operations across both Canada and the United States. It’s also a big wealth manager on both sides of the border and is a major player in the exchange-traded fund market. In fact, BMO was the first major Canadian bank to expand into the United States.

      Today is an excellent opportunity to pick up BMO shares on the cheap. Despite rallying significantly earlier in the week, this dividend king trades at just 8 times trailing earnings and slightly below book value. That’s the cheapest shares have been since 2009. BMO also pays a succulent 6% dividend yield, which is about 50% higher than normal.

      Imperial Oil

      Imperial Oil (TSX:IMO)(NYSEMKT:IMO) has been a stalwart in the Canadian energy sector for more than a century with history dating back to John D. Rockefeller and Standard Oil. The company has paid consistent dividends for virtually its entire history, since the 1880s.

      This dividend king has been undoubtedly hurt by the recent collapse in oil prices, but it easily has the balance sheet strength to survive. Its oil sands operations are among the best in the business, producing some 400,000 barrels of bitumen each day. Long-term reserves are also excellent, exceeding 6 billion barrels. And investors have to like the company’s downstream operations, which include several refineries and an fleet of Esso gas stations. It also provides fuel for Mobil branded stations in Canada.

      Imperial Oil hasn’t just paid consistent dividends lately. It has increased its payout for 25 consecutive years. That’s an excellent record. Combine that with the current 3.9% yield and it’s an interesting opportunity.

      BCE

      BCE Inc. (TSX:BCE)(NYSE:BCE) was founded in 1880, just a few years after Alexander Graham Bell invented the telephone. It paid its first dividend to investors the next year and hasn’t looked back since. That’s a dividend streak of nearly 140 consecutive years for this dividend king.

      BCE today looks stronger than ever. The company is the leading telecom provider in Canada, connecting more than 13 million customers to wireless data, cable television, internet, and home phone services. It has customers from coast to coast, too. It also owns a smattering of interesting media assets including top television stations, a collection of radio stations, video streaming service Crave, and pieces of several top sports franchises.

      This dividend king also offers an excellent payout today. The current yield is 5.9%, a payout that is supported by earnings. BCE is a mature company today, meaning it can easily afford to pay out most of its cash flow back to investors.

      The bottom line on these dividend kings

      Don’t try and reinvent the wheel. The smart move is to load up on dividend kings like Bank of Montreal, Imperial Oil, and BCE for your income needs. It’s worked for the last century, and it sure looks good for the next century too.

      Motley Fool Canada‘s market-beating team has just released a brand-new FREE report revealing 5 “dirt cheap” stocks that you can buy today for under $49 a share.
      Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
      Don’t miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

      Source: – The Motley Fool Canada

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      Edited By Harry Miller

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      The close: TSX ends lower, crude has best month on record – The Globe and Mail

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      Canada’s main stock index ended a strong May a little weaker while crude oil prices enjoyed their best ever month, surging 88 per cent.

      The S&P/TSX composite index closed down 69.90 points at 15,192.83. Sectors were mixed, with financials leading decliners with a 2% drop, as investors absorbed a week of earnings reports that featured massive loan loss provisions. Laurentian Bank lost 9.1% after cutting its dividend – the first such move by a major lender in almost three decades.

      U.S. stocks finished mostly higher after President Donald Trump announced measures against China in response to new security legislation that were less threatening to the U.S. economy than investors had feared.

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      The Dow ended the session slightly lower, but all three indexes registered gains for the month and the week.

      The S&P 500 initially extended losses after Trump said he was directing his administration to begin the process of eliminating special treatment for Hong Kong in response to China’s plans to impose new security legislation in the semi-autonomous territory.

      But Trump made no mention of any action that could undermine the Phase One trade deal that Washington and Beijing struck early this year, a concern that had cast a cloud over the market throughout the week.

      “He began speaking in a very tough tone,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. “The market was worried he was going to announce something substantial, something detrimental to the U.S. economy. Then, as he spoke, it became clear the actions being taken were not going to be as dramatic as originally feared.”

      Trump also said the United States is terminating its relationship with the World Health Organization, something he had threatened to do earlier this month.

      S&P 500 technology shares gave the index its biggest boost, while financials were the biggest drag.

      The latest confrontation between the U.S. and China has fueled concern that worsening tensions between the two world’s largest economies could derail the recent sharp gains in the stock market.

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      Expectations of a quick economic recovery from the coronavirus pandemic have driven the S&P 500 up more than 30% from its March lows.

      The Dow Jones Industrial Average fell 17.53 points, or 0.07%, to 25,383.11, the S&P 500 gained 14.58 points, or 0.48%, to 3,044.31, and the Nasdaq Composite added 120.88 points, or 1.29%, to 9,489.87.

      For the month, the Dow added 3.9%, the S&P 500 gained 4.5%, and the Nasdaq rose 6.8%. For the week, the Dow and S&P 500 each rose more than 3%, and the Nasdaq gained 1.8%.

      New York Governor Andrew Cuomo said Friday that New York City is “on track” to enter phase one of reopening on June 8, and he said five upstate regions will now transition to phase two.

      Federal Reserve Chair Jerome Powell, speaking in a webcast organized by Princeton University Friday, reiterated the U.S. central bank’s promise to use its tools to shore up the economy amid the coronavirus pandemic.

      Twitter was down 2% and Facebook Inc shares slipped 0.2%, a day after Trump signed an order threatening social media firms with new regulations over free speech.

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      Upscale department store chain Nordstrom Inc slumped 11% after it reported a near 40% fall in quarterly sales due to pandemic-led store closures.

      Salesforce.com Inc slipped 3.5% as the cloud-based business software maker cut its annual revenue and profit forecasts.

      The July crude contract was up US$1.78 at US$35.49 per barrel and the July natural gas contract was up 2.2 cents at nearly US$1.85 per mmBTU. Futures closed out May with record monthly gains, on hopes that the U.S.-China trade deal would remain intact and on falling crude production.

      The August gold contract was up US$23.40 at US$1,751.70 an ounce and the July copper contract was up 1.2 cents at nearly US$2.43 a pound.

      Read more: Stocks seeing action Friday – and why

      Reuters, The Canadian Press, Globe staff

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      Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

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      Laurentian Bank cuts dividend by 40%

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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.

      Source:- CBC.ca

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