Canadian banks announced they were raising their prime lending rates after the Bank of Canada surprised markets by hiking it benchmark interest rate on June 7.
Business
Trump says America doesn't need Middle East oil. It's not that simple – CNN
“We are independent, and we do not need Middle East oil,” Trump said during remarks that helped send oil prices tanking because they signaled easing tensions with Iran.
There’s no doubt that America’s historic oil boom has rewritten the rules of the global energy industry, but the real story is much more complicated.
It’s true that the United States is now the world’s leading oil producer, ahead of Saudi Arabia and Russia. US oil output has doubled since 2011 to nearly 13 million barrels per day. And America is pumping so much oil that it’s now exporting 3 million barrels a day.
America’s shale oil boom, which began early in the last decade, has clearly lessened our reliance on foreign oil, especially relative to the 1970s Arab oil embargo that crippled the US economy. That’s a major reason why recent supply disruptions did not have a more dramatic or lasting impact on oil prices.
Yet the United States is still dependent on the Middle East — Saudi Arabia in particular.
“We are not walled off. Shale is not superman,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.
Outages matter, wherever they occur
Remember that oil is a globally traded commodity. That means a supply outage on the one side of the planet can push up prices in the other, such as the United States. Today, for instance, investors are on high alert for any disruptions in the Strait of Hormuz, the Middle East chokepoint where oil leaves the Persian Gulf to reach customers around the world.
“The reality is that a disruption anywhere produces a price spike everywhere, including here,” said Bob McNally, president of consulting firm Rapidan Energy Group.
Recall that crude surged 15% in September, the biggest spike in a decade, after a devastating attack briefly derailed Saudi Arabian oil production. Trump responded by promising to use oil from the Strategic Petroleum Reserve, America’s emergency stockpile of crude, to “keep the markets well-supplied.”
“If we didn’t need oil from the Middle East, then why on earth did the president feel compelled to reassure the world, just before markets opened, that we were ready to use the SPR?” said McNally, a former energy adviser to President George W. Bush.
Saudi Arabia’s success in rapidly restoring production following the attack caused oil prices to sharply retreat. And the brief nature of outage may have altered the perception of America’s reliance on OPEC.
“If Saudi Arabian oil had stayed off the market, we would have a different appreciation of our mutual dependence on the Middle East,” said Croft, a former CIA analyst who is now with RBC.
The Saudis have the firepower to respond to shortages
Second, the United States cannot immediately increase production in response to a shortage. It takes months and the pressure of higher prices for US shale producers to ramp up.
“If there is an outage, shale producers cannot flip on a light switch,” said Croft.
Only Saudi Arabia has the spare capacity required to rapidly respond to a shortage. That’s why Trump pleaded with Saudi Arabia in 2018 to pump more oil to replace barrels sidelined by sanctions on Iran.
“If you are isolated, you don’t need to ask Saudi for barrels,” said Croft. “
US net oil imports (imports minus exports) stood at just 2.9 million barrels per day in October, according to the most recent Energy Information Administration statistics. That’s down dramatically from 8.7 million a decade earlier.
And the United States recently became a net exporter of crude oil and products, which includes finished motor gasoline and diesel.
Not all barrels are created equal
And the US refinery system, which was built in the last century operates most efficiently with a healthy dose of heavy oil that churns out gasoline, jet fuel and diesel.
US shale oil, on the other hand, is very light. That means shale barrels from West Texas can’t easily replace ones from Iraq or Venezuela.
“That is a matchup that was dictated decades ago,” McNally said.
In theory, US refiners could use more light shale oil in an emergency. But that would cause US oil prices to collapse relative to world oil prices, McNally said.
“You’d have to crash the price. That would put some US producers out of business,” McNally said.
That’s why the United States imports heavy oil from overseas.
Most of that foreign oil comes from Canada and Mexico. However, Saudi Arabia and Iraq are the third and fourth-biggest sources of America’s foreign oil.
The United States imported an average of 906,000 barrels per day from the Persian Gulf through the first 10 months of last year, compared with 1.5 million barrels in 2018.
“US production has changed the game. We shouldn’t overlook that,” said Croft. “But the idea that we will not feel significant economic effects if we were to get major, prolonged outages in the Middle East is not accurate.”
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The company says director Chika Stacy Oriuwa indicated she resigned “because of her loss of confidence in board leadership and because of mistreatment.”
In addition to Oriuwa, Indigo says Frank Clegg, Howard Grosfield and Anne Marie O’Donovan have also stepped down as directors. No explanation for their departures was given.
6:05
Indigo CEO Heather Reisman talks about creating a happier planet in her new book ‘Imagine It!’
Indigo wished the departing directors well and thanked them for their contributions.
The retailer says Reisman will retire as executive chair and from the board effective Aug. 22.
Reisman stepped down as chief executive of Indigo last year as part a transition that saw Peter Ruis, who had been the retailer’s president, promoted to chief executive.
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Big banks follow suit after surprise quarter-point hike
Royal Bank of Canada, TD Canada Trust, Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal, National Bank of Canada and Bank of Nova Scotia all said they were increasing the prime rate by 25 basis points to 6.95 per cent from 6.70 per cent, effective June 8, 2023.
Desjardins Group and Equitable Bank also announced it would raise its Canadian prime rate by the same amount.
The Bank of Canada surprised markets and observers when it raised its benchmark policy rate by a quarter percentage point to 4.75 per cent earlier in the day.
The central bank has raised its rate nine times, and 4.5 percentage points, since March 2022, and the commercial banks’ prime rate has moved in lockstep from 2.7 per cent to 6.95 per cent.
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Business
Stock Market News Today, 7/06/23 – Stocks End Mixed as Nasdaq Leads Indices Lower – TipRanks
Last Updated 4:00 PM EST
Stock indices finished today’s trading session mixed. The Nasdaq 100 (NDX) and the S&P 500 (SPX) fell 1.75% and 0.38%, respectively. Meanwhile, Dow Jones Industrial Average (DJIA) gained 0.28%.
Furthermore, the U.S. 10-Year Treasury yield increased to 3.79%, an increase of more than 12 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.56%.
The Atlanta Federal Reserve updated its latest GDPNow reading, which allows it to estimate GDP growth in real-time. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Currently, it estimates that the economy will expand by about 2.2% in the second quarter.
This is higher than its previous estimate of 2%, which can be attributed to recent releases from the U.S. Census Bureau, the Institute for Supply Management, and the U.S. Bureau of Labor Statistics.
Last updated: 1:50PM EST
Stocks are mixed so far in today’s trading session. As of 1:50 p.m. EST, the Nasdaq 100 (NDX) and the S&P 500 (SPX) are down 1.5% and 0.4%, respectively. Meanwhile, Dow Jones Industrial Average (DJIA) is up 0.2%.
Surprising market observers, the Bank of Canada hiked its primary policy rate by 25 basis points, raising it to 4.75% on Wednesday. The bank cited persistent underlying inflation as the main driver for this decision, marking a departure from two consecutive meetings where the rate was held steady.
The bank also continues with its policy of quantitative tightening, indicating a response to worldwide economic growth that’s weakening due to increased interest rates. “Major central banks are signaling that interest rates may have to rise further to restore price stability,” the bank stated.
This unexpected move initially boosted the Canadian dollar but has since lost some ground as it hovers around C$1.338 per US$1. The rate increase follows a rise in CPI inflation to 4.4% in April, its first surge in 10 months, and a stronger-than-anticipated GDP of 3.1% in Q1.
The Bank of Canada’s Governing Council asserts that the rate hike is in response to previous policy not being restrictive enough to balance supply and demand and bring inflation sustainably back to the 2% target.
As a major trading partner, what happens in Canada usually has ripple effects in the U.S. Thus, this could be a sign that the Federal Reserve might have to continue hiking as well going forward.
Last updated: 10:55AM EST
Stocks have turned red so far in today’s trading session after a positive start. As of 10:55 a.m. EST, the Nasdaq 100 (NDX) and the S&P 500 (SPX) are down 0.9% and 0.2%, respectively. Meanwhile, Dow Jones Industrial Average (DJIA) is near the flatline.
Last updated: 9:50AM EST
Stocks ticked higher at open on Wednesday morning even as the trade deficit data showed that the United States’ trade deficit jumped 23% in April to $74.6 billion – a six-month high indicating a surge in imports. Imports were up 1.5% in April to $323.6 billion while exports fell by 3.6% to $249 billion.
The Nasdaq 100 (NDX), S&P 500 (SPX), and Dow Jones Industrial Average (DJIA) were all up by 0.6%, 0.32%, and 0.11%, respectively, at 9:50 a.m., EST, June 7.
First published: 4:38AM EST
U.S. Futures are in the red this morning after the SPX marked its highest close in trading since August 2022 yesterday. We are almost halfway through the trading week, and markets remain elevated in the absence of any negative news. Futures on the Nasdaq 100 (NDX), S&P 500 (SPX), and Dow Jones Industrial Average (DJIA) are down 0.26%, 0.15%, and 0.18%, respectively, at 4:00 a.m., EST, June 7.
On the economic front, traders await reports on the U.S. trade deficit and consumer credit due today, as well as the weekly initial jobless claims data scheduled for June 8. Meanwhile, the Chinese economy is showing signs of slowing, with May exports falling 7.5% year-over-year against the expected 0.4% decline. Also, imports fell 4.5% year-over-year, much lower than the expected 8% decline.
On the earnings front, fewer companies remain to report their quarterly results. Shares of Casey’s General Stores (NYSE:CASY) dropped 4.5% in extended trading yesterday, after missing both sales and earnings expectations. On the other hand, Dave & Buster’s (NASDAQ:PLAY) stock was up over 4% in yesterday’s extended trade following its report of mixed results, with earnings surpassing but sales missing estimates.
Furthermore, meme stock GameStop (NYSE:GME), travel service provider Trip.com Group (NASDAQ:TCOM), e-commerce platform Rent the Runway (NASDAQ:RENT), and discount chain Ollie’s Bargain Outlet (NASDAQ:OLLI) will report their results today.
Elsewhere, European indices are trading in the red today, following weaker-than-expected data from German industrial production for April. After a disastrous March, April seems to continue bleeding from poor performance. Industrial production in April grew by a marginal 0.3% month-over-month, against an expected rise of 0.7%. Economists worry that if data remains weak in May and June, the economy’s recession will spill well into the second quarter.
Asia-Pacific Markets Trade Mixed on Wednesday
Asia-Pacific indices ended the trading session mixed today, following economic data sets from different nations. Mainland Chinese and Hong Kong indices closed mixed on signs that the economy is going into a continued slowdown. At the same time, Australian indices continue their downward spiral after reporting poor GDP growth and following the Reserve Bank of Australia’s unexpected rate hike to a record high yesterday.
Hong Kong’s Hang Seng index and China’s Shanghai Composite ended the day up 0.80% and 0.08%, respectively, while the Shenzhen Component index closed down by 0.60%.
At the same time, Japan’s Nikkei and Topix indices ended down by 1.82% and 1.34%, respectively.
Interested in more economic insights? Tune in to our LIVE webinar.
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