With oil prices having rallied up to the $40 mark, some analysts have come out with bullish forecasts for the near-term.
Plenty of risks remain however, and there are signs that the latest oil price rally may have hit a ceiling.
In the very short term, money managers and hedge funds sold off some of their bullish bets when oil hit $40.
Crude oil has rebounded to $40 per barrel and hoping to stay there. Some analysts have come out with more bullish forecasts for the near-term, but plenty of risks remain.“Good production discipline on the part of OPEC+ coupled with a massive involuntary reduction in production in the US on the one hand, plus the rapid recovery of demand on the other, have caused supply surpluses to be eroded significantly more quickly than anticipated,” Commerzbank wrote in a note on Monday.
WTI hit $40 and retreated a bit in recent days, but appears to be stabilizing for the time being at around that threshold. Rystad Energy says that $40 is the new normal.
“Further gains or 45-50 dollars would not be justified at this stage despite the supply curtailments as there are still valid concerns on the demand side,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen. “Infections are rising in key markets around the world and there are valid concerns that the world is in for a prolonged period of dealing with its consequences.”
But some analysts are beginning to make the case that oil will continue on an upward trend.
“As we head into next year, we believe transportation demand could recover at a faster rate than we initially anticipated and we also think that OPEC+ will likely hold back larger supply volumes than we anticipated three months ago,” Bank of America Merrill Lynch wrote in a new report.
Related: China’s Oil Industry Is In CrisisThe slightly bullish outlook (relative to where oil sits today) is based on three factors: a rebound in demand, deep supply cuts, and OPEC+ sticking with market management. Bank of America estimates that the market saw a supply surplus on the order of 11 million barrels per day (mb/d) in the first half of 2020, but that quickly flips to a deficit of 2.5 mb/d for the remainder of the year.
The bank noted that in the last 15 years, Brent crude averaged less than $50 per barrel only once – in 2016. Not even during the depths of the financial crisis in 2008 and 2009 was Brent below $50 for the full year. It will likely occur again in 2020, but Bank of America thinks Brent will return to $50 in 2021.
U.S. shale will “likely struggle to recover to its prior glory,” the bank added. Production could continue to erode, even with the return of shut-in production. The U.S. rig count fell by another 10 last week, pushing oil rigs down to a new low of 189, a decline of roughly three quarters since March.
The supply hit is not only concentrated in shale. “[W]e see global capex down to $240bn in 2020 compared to a total spend of $322bn in 2019, and we do not expect much of a recovery in 2021,” Bank of America said.
Meanwhile, the investment bank pointed to the sharp rebound in oil demand in China as a reason for bullishness, although it noted that jet fuel demand could suffer more sustained damage. Ultimately, if OPEC+ sticks with its cuts and demand continues to rebound, Brent could rise to $60 per barrel next year, the bank concluded.
“You can see demand ramping up every week,” Marco Dunand, co-founder Mercuria Energy Group Ltd., told Bloomberg.
However, there are several pitfalls that could derail the oil price rally. The first and most obvious is the second wave of coronavirus infections (in some places, the first wave never ended). Positive cases are on the rise globally, and rising quickly in parts of the U.S. and Brazil, in particular. But cases are also rising in India, Mexico, and several other countries in Latin America. Meanwhile, although small, there are new cases in places once thought to have brought the virus under control, including in Beijing, South Korea, and Germany.
On Sunday, the world saw the largest single-day increase in positive cases to date, a jump of more than 183,000 new cases, according to the World Health Organization.
Very few governments are planning on going into tight lockdowns again, but the more the virus spreads, the longer it could take for global oil demand to rebound.
Another negative for oil is the fact that refiners are seeing weak signals. Poor margins for processing have forced refiners to cut back in Europe and China. A slowdown from refiners translates into less buying of crude, which could drag down prices. “Margins are not at the bottoms but they’re very bad – that’s not going to help demand. We see these potential spikes in COVID-19, which are also not going to help matters,” an oil trader told Reuters. “The market was overdone and is going to need to retrace to reflect the realities now.”
Hedge funds and other money managers sold off some of their bullish bets with oil at $40 last week, a sign that markets are skeptical of a sustained rally above $40.
Some health-care workers may choose not to tell their patients their vaccine status because they value their privacy or have a medical condition that’s preventing them from getting vaccinated, and they don’t want to face stigma, a bioethicist told CBC.
The latest step allows for indoor dining, with capacity limits based on everyone being able to keep an acceptable distance.
Gyms, movie theatres and museums are able to reach a capacity of 50 per cent inside.
Larger general gathering limits have risen to 25 people inside and 100 people outside. Those limits are even higher for organized events, leading to the resumption of summer festivals and professional sports.
The federal government has announced fully vaccinated U.S. citizens and permanent residents living there would be able to visit Canada without having to quarantine starting Aug. 9, while tourists from all other countries would be allowed as of Sept. 7.
Health Canada recommends older adults and people with underlying medical conditions get help with errands.
Anyone with COVID-19 symptoms should self-isolate, as should those who’ve been ordered to do so by their public health unit. The length of self-isolation varies in Quebec and Ontario.
Check out this weeks <a href=”https://twitter.com/hashtag/COVID19Vaccine?src=hash&ref_src=twsrc%5Etfw”>#COVID19Vaccine</a> walk-in clinic schedule. These walk-in clinics are available to RCD residents 12 years of age and older! <a href=”https://twitter.com/hashtag/IGotTheShot?src=hash&ref_src=twsrc%5Etfw”>#IGotTheShot</a> <a href=”https://twitter.com/hashtag/VaccinesWork?src=hash&ref_src=twsrc%5Etfw”>#VaccinesWork</a><br><br>You can find this schedule by visiting our <a href=”https://twitter.com/hashtag/COVID19Vaccine?src=hash&ref_src=twsrc%5Etfw”>#COVID19Vaccine</a> Rollout Webpage here: <a href=”https://t.co/OhXjNC74WM”>https://t.co/OhXjNC74WM</a> <a href=”https://t.co/9G4mUIHqbT”>pic.twitter.com/9G4mUIHqbT</a>
Call 1-877-644-4545 with questions, including if walk-in testing is available nearby.
First Nations, Inuit and Métis:
First Nations, Inuit and Métis people, or someone travelling to work in a remote Indigenous community, are eligible for a test in Ontario.
Akwesasne has COVID-19 vaccine clinics, with information online or at 613-575-2341. Anyone in Tyendinaga who’s interested in a test can call 613-967-3603 and should watch the website for dedicated vaccine clinics.
Inuit in Ottawa can call the Akausivik Inuit Family Health Team at 613-740-0999 for service, including testing and vaccines, in Inuktitut or English on weekdays.
The last day for Ottawa’s Indigenous vaccination clinic is July 29.
The price of lumber rose at its fastest pace in more than a year on Thursday, after timber companies warned that wildfires in Western Canada are hurting their business.
The price of a lumber futures contract jumped by more than 10 per cent, triggering circuit breakers designed to halt trading. Late in the day on Thursday, a contract for 1,000 board-feet of lumber was going for $647 US, up by more than $60 from the previous day’s close.
Prices are spiking because lumber companies in B.C. and elsewhere are scaling back operations because of wildfires.
“Canadian rails will … face pressure from wildfires in British Columbia as volumes may take several more weeks to fully recover,” Bloomberg Intelligence railway analyst Adam Roszkowski said in a note to clients on Thursday.
That means it’s harder to move just about anything to market, so Canfor is going to take its foot off the gas.
Canfor’s anticipated production drop of 115 million board-feet of wood is less than 1 per cent of what the industry normally cranks out every quarter. But Bank of Montreal analyst Mark Wilde said he expects more companies will also have to reduce production in the next little while.
“We expect more announcements of reduced shifts/hours over the next two to three weeks,” he said in a note to clients Thursday.
Like many industries, the lumber business slowed down at the start of the pandemic as workers were sent home and facilities idled. But demand for lumber unexpectedly exploded, mainly due to booming demand for home renovations.
WATCH | Why high lumber prices are going to make everything more expensive:
The pandemic has disrupted supply chains so much that the price of lumber has gone through the roof. 1:58
But things changed in a hurry. Those astronomical prices caused demand to crater once again, leading to inventory piling up at lumber yards as people shelved their do-it-yourself construction plans. Big box retailers in the U.S. such as Home Depot have reported that demand for lumber is down by almost half since May.
“After a year of chasing inventory, the market is now struggling with bulging inventories at many mills in the U.S. and Canada,” Wilde said.
The see-saw went so far in the other direction that Wilde said a number of B.C. sawmills were likely recently selling lumber for less than the cost of production.
“At those levels, some B.C. mills may need a snorkel,” he said of when the price dipped as low as $435 US. “It would be crazy to simply return all that cash to the market by overproducing during a weak market.”
TD analyst Sean Steuart also thinks that more shutdowns in Western Canada’s lumber industry are coming.
“We believe that production curtailments in this region are inevitable, but they have been slow to arrive so far,” he said in a note to clients.
Several airlines, banks and technology websites were coming back online on Thursday afternoon after a brief outage, the third such widespread incident noted in just a span of two months, raising alarms across social media.
Websites of Delta Air Lines, Costco Wholesale Corp , American Express and Home Depot were down, displaying domain name system (DNS) service errors.
Some Canadian companies also said that their websites and services were fully operational again after they experienced technical difficulties or outages this afternoon.
Royal Bank of Canada, Bank of Montreal and PC Financial all told customers on Twitter that their websites are back up after earlier informing people that they were aware of technical issues and working to resolve them.
Monitoring website Down Detector showed a sharp increase in reported technical difficulties on the three companies’ websites after 12 p.m. Eastern time, along with Bank of Nova Scotia and Air Canada.
Cloud services provider Akamai Technologies had given an alert on its “Edge DNS” service incident, noting a “partial outage” on its website.
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