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Traders Are Betting Big On An Oil Price Rebound – OilPrice.com

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Traders Are Betting Big On An Oil Price Rebound | OilPrice.com

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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    Global oil storage space is running low, production is not falling quickly enough, and yet last week hedge funds bought a record amount of WTI contracts, Reuters’ John Kemp said Monday. At the equivalent of 122 million barrels, the amount of crude futures purchased last week was the highest since at least last December. According to Kemp, the reason for the increased buying is an expectation of an oil price rebound. The buyers must expect this rebound to take place soon, even though there are no indications to support such an attitude. On the contrary, the latest price moves suggest the opposite. On Monday, West Texas Intermediate dropped by 25 percent to less than $13 a barrel and continued falling on Tuesday in Asian trading, sinking below $11 a barrel.

    The United States Oil Fund said yesterday that it would sell all its oil futures for June delivery within four days. That had a lot to do with the drop in WTI prices, and it also had a lot to do with the growing worry about storage space – a worry that did not bother hedge funds and other market-making buyers last week. It may change their mind this week, however. 

    And with a good reason.

    Goldman Sachs yesterday became the latest to join the rising number of oil storage doomsayers. The investment bank said that the world’s storage capacity could reach its limit within just three weeks. This, the bank’s analysts said in a note, would heighten volatility and keep it high until supply and demand rebalances. For this to happen, supply needs to decline by another 18 million bpd next month, as this is the size of demand loss that Goldman expects.

    That is much easier said than done, because those additional 18 million barrels per day comes on the heels of a demand loss totaling 29 million bpd, according to International Energy Agency estimates for April. 

    Producers, though, are cutting. 

    Related: Trump Could Use ‘Nuclear Option’ To Make Saudi Arabia Pay For Oil War
    In addition to the 9.7 million bpd in OPEC+ cuts that should begin next month, U.S. production has fallen by some 600,000 bpd and counting, and Canada has slashed its oil production by 300,000 bpd. Brazil has cut 200,000 bpd off its daily average, Reuters reports.

    This is barely above 1 million bpd in production cuts outside OPEC+. While the chances are that U.S. production cuts will likely accelerate in the coming weeks as companies rush to shut in the wells that produce oil at rates higher than the selling price, it may be too little too late.

    Global oil storage is filling at a rate of 10 million bpd, according to data from commodities analysis firm Kayrros, reported by the Wall Street Journal. The firm’s chief analyst Antoine Halff called this rate monstrous and warned that if it continues unabated, storage would be full in a little over three months.

    Luckily for the industry, the rate of additions has slowed down a bit, Kayrros product manager Augustin Prate told Oilprice.

    “Crude demand in China has almost fully recovered, with refinery runs back to pre-lockdown levels,” Prate said. 

    There is bad news as well but also a glimmer of hope. “In both India and the U.S., refinery runs are 25% below pre-lockdown levels,” Prate said. But “In the U.S., after falling to between 25-45% of pre-lockdown level, traffic in major cities is now up 5-10 percentage points from the low points.”

    Related: Are Oil Prices Heading Back Into Negative Territory?

    The United States is among the places where storage space is already tight, so any improvement in demand would be a cause for celebration. Cushing, the country’s largest oil storage complex, added 10 percent last week, to 59.7 million barrels. This is 25 million barrels below maximum capacity, which may sound like a lot. It isn’t if the rate of addition continues. 

    Enterprise Products Partners earlier this month offered producers space in its northbound Seaway pipeline, providing U.S. oil producers struggling to place their oil near the Gulf Coast the ability to ship their barrels to the storage hub at Cushing.

    The problem—for producers and bullish hedge funds alike—is that there isn’t a quick solution to the storage problem. Shutting in wells takes time and even setting wells on fire—which some Russian producers are reportedly considering as one way to reduce output quickly—takes time.

    This is time that many smaller oil producers don’t have, so bankruptcies are on the way. This would mean a more lasting decline in production, which is good news for bulls. The question remains whether this decline will happen soon enough. For now, this is highly unlikely, so we may see another massive selloff when the next front-month oil contract nears expiry.

    By Irina Slav for Oilprice.com 

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      Telus skips Huawei, picks Ericsson and Nokia to build 5G network – Vancouver Sun

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      Telus has opted to go with Ericsson and Nokia — skipping Chinese tech giant Huawei — to build its 5G network.

      The Vancouver-based company announced Tuesday it had signed a deal with Sweden’s Ericsson and Finland’s Nokia to provide the components for its 5G network. No figures were given on how much the deal cost.

      “Telus has a successful track record of building globally leading networks with amazing speeds, robust quality and extensive coverage that are consistently recognized as the best in the world,” Telus president Darren Entwistle said  in a statement.

      “Our team is committed to rolling out superior network technology from urban to rural communities, fuelling our economy and driving innovation as we power Canadians into the 5G era through an unparalleled network experience.”

      Entwistle promised in his statement the 5G boost would support post-pandemic economic recovery, virtual health, remote work and other practices now common as a result of COVID-19.

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      Bell inks 5G equipment deal with Ericsson; leaves door open to Huawei – BNNBloomberg.ca

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      MONTREAL – Huawei Technologies Inc.’s ambitions to be a player in Canada’s 5G network took a major hit Tuesday as two of the country’s three largest telecom companies announced partnerships with the Chinese tech giant’s European rivals.

      Bell Canada announced Tuesday morning that Sweden-based Ericsson will be its second supplier of the radio access network equipment that has been Huawei’s main product line in Canada since entering the market in 2008. Earlier this year, Bell signed its first 5G wireless network supplier agreement with Nokia, a rival of Ericsson and China’s Huawei.

      Later Tuesday, Telus Corp. announced that it had also selected Ericsson, as well of Nokia of Finland, as suppliers for its 5G networks.

      Neither Bell nor Telus provided details on how much their contracts with Ericsson and Nokia were worth.

      Huawei’s participation in the construction of Canada’s 5G network has become a major sticking point between Ottawa and Washington. The U.S. has warned Canada, the United Kingdom and other allies that it will limit intelligence sharing with countries that have Huawei equipment in their 5G networks – citing the potential for spying by China, an allegation Huawei denies.

      “Huawei has worked closely with Bell in Canada for many years, helping them build one of the world’s leading 4G LTE networks,” Huawei Canada spokesman Alykhan Velshi said in a statement.

      He added that Huawei’s remains committed to Canada and looks forward to the federal government completing its 5G review and its decision about Huawei’s role in Canada.

      “We continue investing more than a quarter of a billion dollars a year in R&D in Canada. We continue building new research partnerships with Canada’s world-class universities. As we have for more than a decade, we continue to work with our Canadian telecom partners to help them build and support state-of-the-art networks that connect Canadians,” Velshi said.

      Ericsson, already a supplier of 4G LTE wireless and other technology to Bell and the main supplier for its rival Rogers Communications, also has a major research and development presence in Montreal.

      Bell said Ericsson will also support its rollout of 5G-enhanced fixed wireless home internet service to rural areas, which generally have less access to land-based fibre optics networks.

      On Tuesday, Bell indicated the door remains open to partnering with Huawei, depending on the outcome of the federal government’s review.

      “We’re working with multiple vendors to build our 5G network – as we did with our successful buildout of 4G LTE, which included Cisco, Ericsson, Huawei, Nokia and others,” said Bell spokesperson Marc Choma in an email to BNN Bloomberg. “Huawei has been a reliable and innovative partner in the past and we would consider working with them in 5G if the federal government allows their participation.”

      A spokesperson for Telus did not respond to BNN Bloomberg’s question about whether it is also open to partnering with Huawei on its 5G network if permitted by the government.

      Prior to the arrest of Huawei Technologies chief financial officer Meng Wanzhou in Vancouver in December 2018, the Chinese company wasn’t a household name in Canada.

      Since Meng’s arrest, which has sparked a major rift between China and Canada and focused worldwide attention on Huawei, the federal government has been undecided about whether the Chinese company will be allowed in Canada’s 5G networks – which are currently being assembled.

      Analysts have said Bell and Telus use Huawei extensively in their fourth-generation networks and would be more affected by a Huawei ban than their rival Rogers Communications, which has predominantly used Ericsson network gear.

      Besides Huawei, Ericsson and Nokia, there are other companies that want a piece of the 5G network upgrades.

      Samsung Electronics has announced a deal to supply equipment for Videotron’s wireless network in the province of Quebec and the Ottawa region of Ontario.

      With files from BNN Bloomberg

      BNN Bloomberg is a division of Bell Media, which is owned by BCE.

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      Telus selects Nokia, Ericsson as 5G suppliers – Yahoo Canada Finance

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      Toronto, Canada - June 16, 2019: TELUS Scarborough office building in Toronto, canada. Telus is a Canadian telecommunications company that provides telecommunications products and services.

      Vancouver-based national carrier Telus has selected Nokia and Ericsson as its 5G vendors, a press release from the company said. 

      The news comes the same day that Bell announced it too would use Ericsson to provide radio access network (RAN) equipment. 

      “Our team is committed to rolling out superior network technology from urban to rural communities, fueling our economy and driving innovation as we power Canadians into the 5G era through an unparalleled network experience,” Telus’ CEO Darren Entwistle said in the release. 

      “Our 5G deployment will support economic growth and diversity that will be essential for the virtualization of health, education, teleworking, and stimulating the economic growth and recovery given the impact of COVID-19.”

      During its Q1 2020 earnings, CFO Doug French said its focus right now is to help its customers during the COVID-19 crisis.

      In its Q4 2019 earnings, the carrier said it was not going to pre-announce its 5G launch plans but that its initial module, or the first phase of the 5G rollout, would be with Huawei until the government approves its RFP.

      Bell and Telus use Huawei’s network equipment in some areas. The federal government is still reviewing whether or not it intends to ban the Chinese telecommunications manufacturer from participating in Canada’s 5G rollout.

      Rogers also uses Ericsson as a 5G vendor.

      <p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android&nbsp;and sign up for the&nbsp;Yahoo Finance Canada Weekly Brief.&nbsp;” data-reactid=”31″>Download the Yahoo Finance app, available for Apple and Android and sign up for the Yahoo Finance Canada Weekly Brief. 

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