PUBLISHED WED, NOV 22 2023 8:27 AM

U.S. crude prices fell more than 4% Wednesday after the Organization of Petroleum Exporting Countries delayed a pivotal meeting on production cuts that was scheduled for the weekend.

The West Texas Intermediate contract for January dropped $3.27, or 4.2%, to $74.50 a barrel, while the Brent contract for January fell $3.32, or 4.03%, to $79.13 a barrel.

OPEC said in a statement the meeting of energy ministers is delayed until next Thursday without providing a reason. The talks have run into trouble due to Saudi dissatisfaction with other members’ production levels, delegates told Bloomberg.

Compliance is a major challenge for OPEC and its allies, called OPEC+, because many countries have an incentive to not stick with their production quotas, said Tamas Varga, an analyst with PVM Oil Associates.

“Compliance will be weak going forward,” Varga said. He pointed to Russia in particular, which needs to finance its war in Ukraine.

There was growing anticipation among traders this week that OPEC+ might implement additional production cuts, as oil has fallen precipitously from September highs amid record non OPEC production and demand concerns in China.

OPEC+ has already taken 5.16 million barrels per day off the market since 2022, which includes 3.66 bpd from the group and 1.5 million bpd in voluntary cuts from Saudi Arabia and Russia.

Despite those deep cuts, Brent has fallen below $80 a barrel in recent weeks. Goldman Sachs believes OPEC will use its pricing power to keep Brent in a range of $80 to $100 a barrel.

Most analysts view OPEC+ extending the current cuts into 2024 as the most likely scenario, though they would not rule out the possibility of deeper cuts given current market conditions.

Israel and Hamas also agreed to a four-day ceasefire Wednesday to facilitate the release dozens of hostages held in Gaza. Oil spiked in October on worries that the war could spread throughout the Middle East, though traders increasingly view a regional conflict as unlikely.

Finance Minister Chrystia Freeland released a budget update that showed the Canadian government plans $20.8 billion in net new costs over six years focused on priorities including affordable housing and the clean energy transition. However, it will stretch that spending out over time to avoid growing this year’s $40 billion deficit. There is no plan to return to a balanced budget, with the deficit projected to fall to $18.4 billion in 2028-2029. 

KEY TAKEAWAYS:

• The deficit for this fiscal year is slightly lower than what was expected in the March budget, coming in at $40 billion instead of $40.1 billion. But projected shortfalls for the next four fiscal years are all higher. While a $14 billion gap was projected for 2027-2028, now it’s expected to be $23.8 billion, falling to $18.4 billion the following fiscal year.
• Freeland said in the document her government’s fiscal anchor is “reducing federal debt as a share of the economy over the medium term,” which she argued will preserve Canada’s AAA credit rating. The debt-to-gross domestic product ratio is, however, is forecast to rise to 42.7 per cent next fiscal year before falling to 39.1 per cent in 2028-2029.
• The government plans to issue $71 billion more in bonds and treasury bills than it had originally projected in its March budget.
• It announced several new measures to boost housing supply in coming years. Starting in 2025- 2026, it will provide an additional $1 billion over three years to build more than 7,000 new affordable homes.
• Also starting in 2025-2026, it will provide an extra $15 billion in new funding for the construction of more than 30,000 new rental homes across Canada.
• It announced a new Canadian mortgage charter, which sets out expectations for how financial institutions are to work with Canadians to provide tailored relief and ensure payments are reasonable for borrowers.
• The government said the Canada Growth Fund will be the main federal entity issuing carbon contracts for difference, which backstop the future price of carbon to provide certainty for businesses. The fund will allocate up to $7 billion of its current $15 billion in capital on these agreements, and it is already negotiating with a number of project proponents.
• It provided a timeline for previously announced clean investment tax credits, promising to introduce legislation this fall on tax credits for carbon capture, utilization and storage as well as for clean technology.

https://www2.deloitte.com/ca/en/pages/future-of-canada-center/articles/federal-budget.html

PUBLISHED FRI, NOV 17 20231:32 AM EST

Gold prices held steady on Friday but registered a big weekly gain as the dollar and Treasury yields weakened amid growing expectations that the U.S. Federal Reserve is done with its monetary policy tightening.

Spot gold was steady at $1,980.13 after rising to a two-week high earlier in the session. Prices were up about 2.3% this week.

U.S. gold futures settled down 0.1% at $1,984.70.

“There is a strong potential for gold to continue to rally a bit more but prices have to move a bit lower, before the next leg-up in the rally and perhaps test the $2,000 level at the same time,” said Everett Millman, chief market analyst at Gainesville Coins.

“Data that came out this week cemented the fact that the Fed is likely done with rate hikes, helping gold. Gold’s move will depend on incoming data and market response to the data.”

This week’s data revealed the U.S. consumer price index was unchanged in October and another set of data highlighted that the number of Americans filing new claims for unemployment benefits increased more than expected last week.

The market is now pricing in interest rate cuts as early as May next year after data pointed to slowing inflation.

Lower interest rates exert downward pressure on the dollar and bond yields, enhancing the appeal of non-yielding bullion.

The dollar was on track for a steep weekly drop, while the 10-year Treasury yield also fell.

On the physical front, Indian buyers brushed off record high local prices this week making gold purchases during the Diwali festival week in the country.

Spot silver fell 0.1% to $23.72 per ounce, while platinum rose 0.4% to $895.95. Both were up 6.7% so far this week.

Palladium gained 1.4% to $1,052.56 per ounce and headed for its best week in over a year.

Published: 11/21/2023 3:29 PM ET

Crude oil futures settled slightly lower on Tuesday after posting gains in the previous two sessions.

Traders are awaiting the upcoming meeting of OPEC+, scheduled to take place on Sunday (November 26).

The group, which has already pledged total oil output cuts of 5.16 million barrels per day, is widely expected to extend its production cuts.

West Texas Intermediate Crude oil futures for January ended down $0.06 at $77.77 a barrel.

Traders now await weekly crude oil reports from the American Petroleum Institute (API) and U.S. Energy Information Administration (EIA). The API report is due later today, while the EIA is scheduled to release its inventory data Wednesday morning.

Published: 11/21/2023 5:27 PM ET

After ending the previous session at a 2-month high, the Canadian market turned in a weak performance on Tuesday, despite data showing a drop in consumer price inflation. Losses in consumer, utilities and healthcare sectors weighed down the market.

The benchmark S&P/TSX Composite Index ended down 136.50 points or 0.67% at 20,109.97, near the day’s low. The index touched a high of 20,259.47 in early trades.

Data from Statistics Canada showed the annual inflation rate in Canada fell to 3.1% in October of 2023 from 3.8% in the previous month. The result was softer than the Bank of Canada’s forecast that inflation is likely to remain close to 3.5% through the middle of next year.

The core inflation rate fell slightly to 2.7%, while the closely-watched trimmed-mean core rate dropped to 3.5%, compared to expectations of 3.7%. From the previous month, consumer prices edged 0.1% higher.

Consumer discretionary stocks Park Lawn Corp (PLC.TO), Brp Inc (DOO.TO), Magna International (MG.TO), Pet Valu Holding (PET.TO), Linamar Corp (LNR.TO), Aritzia Inc (ATZ.TO), Mty Food Group (MTY.TO) and Canada Goose Holdings (GOOS.TO) lost 2 to 4.1%.

In the consumer staples section, Weston George (WN.TO) tumbled 5.6% after reporting a sharp drop in third quarter net earnings. Maple Leaf Foods (MFI.TO) drifted down 4.4%.

Healthcare stocks Sienna Senior Living (SIA.TO), Bausch Health Companies (BHC.TO) and Tilray Inc (TLRY.TO) lost 1.6 to 2%, while Chartwell Retirement Residences (CSH.UN.TO) ended 1.28% down.

Among the stocks in the Utilities index, Transalta Corp (TA.TO) and Capital Power Corp (CPX.TO) both ended down 6.4%. Innergex Renewable Energy (INE.TO) ended 2.35% down, and Atco Ltd (ACO.X.TO) drifted down 2.25%.

New home prices in Canada fell by 0.8% from the previous year in October, following a 1% drop in September and marking the seventh consecutive decrease since November 2019, data from Statistics Canada showed.

New home prices in Canada remained unchanged month-on-month in October 2023, following a 0.2% drop in September and in line with market forecasts.

Published: 11/17/2023 2:10 PM ET

Despite the dollar’s weakness amid easing concerns about interest rates, gold futures failed to hold early gains and settled lower on Friday.

The dollar index dropped to 103.95, losing nearly 0.4%, amid speculation the Federal Reserve might announce a rate cut in the first half of 2024.

Data showing softer than expected increase in inflation has reinforced investors’ expectations that the Federal Reserve will refrain from raising interest rates over the next several months before cutting rates in mid-2024.

The Fed’s next monetary policy meeting is scheduled for December 12-13, with CME Group’s FedWatch Tool currently indicating a 99.8% chance the central bank will leave rates unchanged.

Still, some economists are of the view that the central bank will maintain a somewhat hawkish tone to avoid the appearance of declaring victory over inflation too soon.

Gold futures for December ended down $2.60 at $1,984.70 an ounce, off the day’s high of $1,996.40. Gold futures gained more than 2% in the week, their first weekly gain in three weeks.

Silver futures for December ended lower by $0.081 at $23.852 an ounce, while Copper futures for December settled at $3.7385 per pound, gaining $0.0360.

In U.S. economic news today, a report from the Commerce Department said housing starts in the U.S. jumped by 1.9% to an annual rate of 1.372 million in October after surging by 3.1% to a downwardly revised rate of 1.346 million in September.

Economists had expected housing starts to dip to a rate of 1.350 million from the 1.358 million originally reported for the previous month.

The Commerce Department said building permits also shot up by 1.1% to an annual rate of 1.487 million in October after plunging by 4.5% to a revised rate of 1.471 million in September.

Building permits, an indicator of future housing demand, were expected to decrease to a rate of 1.450 million from the 1.475 million originally reported for the previous month.

Published: 11/17/2023 3:11 PM ET

Crude oil futures ended sharply higher on Friday, but the most active futures contract still posted its fourth straight weekly loss amid concerns about the outlook for near term energy demand.

West Texas Intermediate Crude oil futures for December ended higher by $2.99 or about 4.1% at $75.89 a barrel. WTI crude futures shed about 4% in the week.

Brent crude futures surged nearly 4% to 80.47 a barrel.

Crude oil saw some weak spells this week due to a sharp rise in U.S. crude stockpiles over the last couple of weeks, and concerns about the outlook for energy demand due to weak economic data from the U.S., Europe and Asia.

Meanwhile, a report released by Baker Hughes this afternoon showed the rig count in the U.S. rose by 6 to 500 this week.

The focus now is on the OPEC meeting, scheduled to take place on November 26. Traders are waiting to see if Saudi Arabia and Russia will consider rolling over their voluntary supply cuts into 2024.

Some reports indicate OPEC+ may deepen its production cuts to provide additional support to the market.

The Canadian dollar CADUSD +0.26%increase weakened against its U.S. counterpart on Thursday, giving back some recent gains, as oil prices tumbled and the rally in equity markets lost some momentum.

The loonie was trading 0.6 per cent lower at 1.3765 to the greenback, or 72.65 U.S. cents after moving in a range of 1.3678 to 1.3776. On Wednesday, it touched its strongest intraday level since Nov. 6 at 1.3652.

“The loonie is falling on weaker oil and a paring back on risk sentiment,” said Amo Sahota, director at Klarity FX in San Francisco. “The former is the key driver today.”

The price of oil, one of Canada’s major exports, dropped to its lowest level since July 7 as investors worried about global demand following weak data from the U.S. and Asia. U.S. crude oil futures settled 4.9 per cent lower at $72.90 a barrel.

Wall Street’s main indexes edged lower after some disappointing earnings forecasts and data showing U.S. weekly jobless claims rising more than expected, but a drop in U.S. Treasury yields kept the decline in stocks in check.

Domestic data showed that housing starts unexpectedly rose in October, climbing 1 per cent compared with the previous month.

Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year touched its lowest level since Sept. 14 at 3.662 per cent before recovering to 3.692 per cent, down 6 basis points on the day.

Monday November 20

Germany producer prices

(8:30 a.m. ET) Canadian construction investment for September.

(10 a.m. ET) U.S. leading indicator for October. Analysts on the Street are projecting a decline of 0.6 per cent from September.

Earnings include: Agilent Technologies Inc.

—

Tuesday November 21

(8:30 a.m. ET) Canada’s CPI for October. The Street is projecting an increase of 0.2 per cent from September and up 3.2 per cent year-over-year.

(8:30 a.m. ET) Canada’s new housing price index for October. Estimate is a decline of 0.2 per cent from September and a 1.0-per-cent drop year-over-year.

(10 a.m. ET) U.S. existing home sales for October. Consensus is an annualized rate decline of 1.5 per cent.

(2 p.m. ET) U.S. Fed minutes from Oct. 31- Nov. 1 meeting released

Also: Canada’s Federal Fall Economic Statement

Earnings include: Analog Devices Inc.; Autodesk Inc.; Dell Technologies Inc.; George Weston Ltd.; HP Inc.; Lowe’s Companies Inc.; Medtronic PLC; Nvidia Corp.; Zoom Video Communications Inc.

—

Wednesday November 22

Euro zone consumer confidence

(8:30 a.m. ET) U.S. initial jobless claims for week of Nov. 18. Estimate is 229,000, down 2,000 from the previous week.

(8:30 a.m. ET) U.S. durable and core goods orders for October.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for November.

(11:30 a.m. ET) Bank of Canada Governor Tiff Macklem speaks at the Saint John Region Chamber of Commerce in New Brunswick.

Earnings include: Deere & Co.

—

Thursday November 23

U.S. markets closed (Thanksgiving)

Japan’s markets closed

Euro zone PMI

(8:30 a.m. ET) Canada’s wholesale trade for October.

—

Friday November 24

U.S. markets close at 1 p.m. ET

Japan CPI and PMI

Germany GDP and business climate

(8:30 a.m. ET) Canadian retail sales for September. Consensus is flat month-over-month and down 0.3 per cent year-over-year.

(8:30 a.m. ET) Canada’s manufacturing sales for October.

(9:45 a.m. ET) U.S. S&P Global PMI for November.

Also: Ottawa’s budget balance for September.