Russia is delivering a sobering lesson in patience and the limits of influence to OPEC kingpin Saudi Arabia as the cartel and its allies gather in Vienna for a two-day meeting kicking off Thursday to agree – or not – on how to respond to the spreading coronavirus outbreak.
In the weeks leading up to the gathering of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a grouping known as OPEC+, the Saudis have reportedly pushed for an extension of existing output curbs as well as additional cuts of more one million barrels per day (bpd).
So far though, Russia – OPEC’s most crucial ally – has remained cagey about its willingness to sign on to that strategy.
On Tuesday, the group’s technical panel recommended a cut of 600,000 bpd to one million bpd as well as an extension to the end of 2020 current 2.1 million bpd curbs.
“If the cartel surprises to the upside, we might see a bit of relief for oil producers,” Jim Krane, energy analyst at Rice University’s Baker Institute, told Al Jazeera. ” If the Saudis can’t bring Russia on board, expect the depredations to continue.”
Prices of benchmark Brent crude are down around 20 percent this year, as concerns mount over how the coronavirus could dent global energy demand and exacerbate an existing supply glut.
Earlier this week, Russian President Vladimir Putin indicated that he is open to extending current production curbs which OPEC agreed to in December and are set to end in March. But Putin also said Russia is in no rush and could withstand a drop in crude prices.
That is bound to frustrate the Saudis given that the International Monetary Fund reckons the kingdom needs oil to trade at $82 to balance its state budget. Meanwhile, Moscow needs crude to fetch around $42 a barrel to break even.
On Wednesday, Brent crude was trading at $52.08 a barrel.
Coronavirus fallout
Coronavirus has rattled global markets as fears of a recession in the US and international markets mount. The spread of COVID-19, as the disease is formally known, is slowing in China where the outbreak started late last year but is gaining momentum in other parts of Asia, Europe, the Middle East, and the Americas.
Coronavirus has spread to at least 80 countries with more than 93,000 confirmed cases – the majority of which are in China. The total death toll from the outbreak is more than 3,000.
The epidemic is having major impacts on economies- shuttering factories in China, disrupting global chain supplies, cancelling major conferences, and curtailing tourism and travel.
China is the world’s biggest oil importer of crude. Its refineries have slashed their intake of crude in recent weeks as the government locked down cities and implemented quarantine measures.
The International Energy Agency in February said that global oil demand in the first quarter of 2020 is expected to fall by 435,000 bpd from a year earlier – that would mark the first in-demand drop since 2009, when the globe was in the grips of a financial crisis.
Some analysts and traders fear that oil consumption may not grow at all this year. Should that happen, it would be only the fourth time in almost 40 years.
An underwhelming response
As forecasts are ratcheted down and expectations for a quick recovery evaporate, the Saudis have reportedly sounded the alarm with fellow oil producers.
“The Saudis were looking for a cut of 300,000 barrels a day. Now, they seem to be upping that to as much as a million,” said Krane. “Since traders are predicting a drop in demand of two-to-three million barrels a day, the Saudi proposal looks about right.”
In an unexpected move, the US Federal Reserve on Tuesday implemented its first, and biggest, surprise interest rate cut since 2008, as policymakers warned that the “coronavirus poses evolving risks to economic activity”.
The move came after global stock markets took a battering last week, with the Dow Jones Industrial Average experiencing its biggest weekly drop since the 2008 financial crisis.
OPEC can only do so much to mitigate the economic impact of the coronavirus…[it] will not be able to significantly offset the impact of sharp declines in Chinese growth.
Tarik Yousef, Director at Brookings Doha
While stocks and oil prices spiked on news of the rate cut, the euphoria quickly faded, injecting more volatility into an already jittery market.
“The US Federal Reserve cut interests rates to increase liquidity, and it did stabilize oil prices, but it also worried many traders because it revealed a greater concern about the impact of the virus on the overall global economy,” Tarik Yousef, director at Brookings Doha Center, told Al Jazeera.
Russia’s ‘holding position’
While many of OPEC’s 23 members struggle to balance their national budgets as oil prices slide, on Sunday President Vladimir Putin said that Russia could withstand a lower price in oil but was open to discussions with its partners.
Russia’s position is in line with its history of withholding cooperation with OPEC, only to agree to a last-minute cut.
Last week, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman expressed confidence that OPEC+ would agree to further production cuts.
The energy ministers of Saudi Arabia and Russia reportedly held bilaterals in Vienna on Wednesday on proposed output cuts [File: Leonhard Foeger/Reuters]
“Russian-Saudi price management has been cordial but not necessarily smooth,” Laura James, senior Middle East analyst at Oxford Analytica told Al Jazeera.
“Cooperation is likely to continue, but cautiously. Moscow and Riyadh are likely in the end to agree, and press partners to fall into line,” said James.
On Tuesday, the vice president of Russian oil giant Lukoil, Leonid Fedun, told Reuters that the proposal to cut one million bpd would be enough to prop up the oil market, adding, “We are ready to cut as much as we are told to. Better to sell less oil but at a higher price.”
Algeria’s energy minister and OPEC President Mohamed Arkab also gave a boost of confidence, telling state news agency APS that there was already “consensus between OPEC and non-OPEC, including Russia”.
Russia’s energy minister, Alexander Novak, met with his Saudi counterpart on Wednesday for bilateral talks as ministers arrived in Vienna to kick off the conference. There is no word yet on whether they found common ground.
But even if they do, analysts warn coronavirus could still prove a formidable challenge to oil producers.
“OPEC can only do so much to mitigate the economic impact of the coronavirus,” Yousef of Brookings Doha said.
“OPEC will not be able to significantly offset the impact of sharp declines in Chinese growth, the impact on Asian and US markets, which has its worst week since 2008, as well as the impact on the airline industry and global manufacturing.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
