Author: Consultant

Published: 4/28/2023 3:17 PM ET

Crude oil prices rose sharply on Friday as traders weighed crude supply and near-term energy demand prospects.

Data from the Energy Information Administration showed crude production in the U.S. fell in February to 12.5 million barrels per day, the lowest level since December 2022.

The EIA report also said fuel demand surged to nearly 20 million barrels per day, the highest level since November 2022.

West Texas Intermediate Crude oil futures for June ended higher by $2.02 or about 2.7% at $76.78 a barrel.

WTI crude futures shed about 1.4% in the week, but gained nearly 1% in April.

Brent crude futures were up $2.06 or 2.63% at $80.28 a barrel a little while ago.

Edward Moya, Senior Market Analyst at OANDA, who said the oil market sell0ff got out of control, added “the pulse of the U.S. economy is not too bad if you ask the Atlanta Fed. If the U.S. economy comes anywhere close to growing at 1.7% in the second quarter, oil prices will probably be much higher.”

According to BakerHughes, the number of rigs drilling for oil in the U.S. was unchanged this week at 591.

A report from Commerce Department said the annual rate of consumer price growth in the U.S. slowed to 4.2% in March from a revised 5.1% in February.

Economists had expected the rate of growth to slow to 4.6% from the 5% originally reported for the previous month.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slipped to 4.6% in March from a revised 4.7% in February. Economists had expected the rate of growth to slow to 4.5% from the 4.6% originally reported for the previous month.

Traders now look ahead to the Federal Reserve’s monetary policy meeting scheduled for next week.

Ahead of the meeting, CME Group’s FedWatch Tool is indicating an 85.4% chance the Fed will raise rates by another 25 basis points.

Published: 4/28/2023 5:59 PM ET

The Canadian market ended on a firm note on Friday, extending gains from the previous session, thanks largely to strong buying in the energy sector as oil prices rose sharply.

The benchmark S&P/TSX Composite Index ended with a gain of 113.90 points or 0.55% at 20,636.54. The index shed about 0.27% in the week.

On the economic front, data released by Statistics Canada showed the Canadian economic activity likely edged down by 0.1% month-over-month in March 2023. In February, the GDP edged up by 0.1%, following a 0.6% expansion in January.

Gfl Environmental (GFL.TO) surged 7.5% after reporting adjusted net income from continuing operations of $28.7 million in the first quarter. Tfi International (TFII.TO) climbed 5.7%. Tourmaline Oil Corp (TOU.TO), Paramount Resources (POU.TO), Docebo Inc (DCBO.TO) and Suncor Energy (SU.TO) gained 2.7 to 4.3%.

TC Energy Corporation (TRP.TO) gained about 2.1%. The company reported first-quarter net income of $1.3 billion or $1.29 per common share compared to $0.4 billion or $0.36 per common share in first quarter 2022.

Imperial Oil (IMO.TO) reported first-quarter net income of $1,248 million, compared with net income of $1,173 million in the year-ago quarter. The stock ended 0.6% down.

Cameco Corporation (CCO.TO) shares surged nearly 3% after the company reported a net income of $119 million for the quarter ended March 31, 2023, compared with net income of $40 million a year ago.

• California regulators on Friday voted to ban the sale of new diesel big rigs by 2036 and require all trucks to be zero-emissions by 2042, a decision that puts the state at the forefront of mitigating national tailpipe pollution.
• The California Air Resources Board unanimously approved the Advanced Clean Fleets rule, the state’s second zero-emissions trucks rule and first in the world to require new commercial trucks to be electric.
• The mandate is estimated to deliver $26.5 billion in public health benefits in California in avoided health impacts and deaths due to diesel pollution. 

https://www.cnbc.com/2023/04/28/california-bans-the-sale-of-new-diesel-trucks-by-2036.html

Exxon Mobil Corp on Friday reported a record first-quarter profit that was more than double a year ago and topped Wall Street estimates as rising oil and gas output overcame a pullback in energy prices from high levels.

“We delivered a first-quarter record despite the fact that energy prices and refining margins are softening a bit,” Chief Financial Officer Kathryn Mikells said in an interview.

The biggest contributor to the better-than-expected earnings came from strong production growth, she said. Exxon’s quarter was driven by new volumes of crude oil and fuels from the startup of new offshore developments and refining facilities.

Net profit rose to $11.43 billion, or $2.79 per share, compared to $5.48 billion a year ago that included a $3.4 billion after-tax writedown to exit Russia. Results beat consensus by 9%, according to REFINITIV data.

WASHINGTON – U.S. consumer spending was unchanged in March, while underlying inflation pressures remained strong, which could see the Federal Reserve raising interest rates again next month.

The unchanged reading in consumer spending last month, reported by the Commerce Department on Friday, followed a downwardly revised 0.1% gain in February. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have increased 0.2% in February. Economists polled by Reuters had forecast consumer spending dipping 0.1%.

The data was included in the advance gross domestic product report for the first quarter published on Thursday, which showed consumer spending surging at a 3.7% annualized rate that period after rising at a 1.0% pace in the October-December quarter.

https://www.foxbusiness.com/economy/us-consumer-spending-flat-march-core-inflation-still-strong

• Calgary-based Suncor Energy will acquire French TotalEnergies’ Canadian operations in a US$4.1-billion deal.
• Suncor says the deal will boost its per day production capacity by 135,000 barrels.
• The sale is expected to close in the third-quarter of this year.

Suncor In $4.1B Deal To Buy TotalEnergies’ Oilsands Operations | OilPrice.com

• OPEC Secretary General Haitham al-Ghais said finger-pointing and misrepresenting the actions of OPEC and OPEC+ was “counterproductive.”
• He added that the influential group of 23 oil-exporting exporting nations was not targeting oil prices but instead focusing on market fundamentals.
• OPEC said the comments came in response to fresh criticism from the IEA, without providing further details.

OPEC says IEA should be careful with calls to stop investing in oil (cnbc.com)

Canadian inflation excluding food and energy costs is expected to remain above 3 per cent until the fourth quarter of this year, the median forecast of seven economists recently surveyed by Reuters showed, which could dash hopes of an early Bank of Canada shift to cutting interest rates.

While Canadian inflation has cooled in recent months, much of the relief has come from lower energy prices, a volatile component that the BoC tends to exclude when making policy decisions.

The readings for core, or underlying, inflation, such as the widely-tracked Consumer Price Index excluding food and energy, are showing greater persistence than the headline rate after price pressures spread from goods into slower-moving items, such as wages and services.

“We suspect they (BoC) will only start trimming rates when they are convinced underlying inflation trends are set to move below 3 per cent,” said Doug Porter, chief economist at BMO Capital Markets.

A lengthy period of high rates could force an increasing share of highly-indebted Canadians to reset their mortgages at levels that squeeze their finances. Canadians added record amounts of mortgage debt during the COVID pandemic, while the mortgage cycle is relatively short – typically five years versus 30 years in the United States.

The BoC has made greater progress in slowing inflation than some major peers, including the Federal Reserve and European Central Bank.

It expects headline inflation to hit 3 per cent, the top of its 1 per cent-3 per cent target range, by the middle of this year, down from 4.3 per cent in March. The BoC’s ultimate destination for inflation is set at 2 per cent.

Still, the rise in inflation expectations could be another reason for the Canadian central bank to be cautious about easing rates.

“Even if inflation expectations come back to 2 per cent, they might not be anywhere near as anchored as they used to be,” said Stephen Brown, senior Canada economist at Capital Economics.

The BoC has played down the market’s pricing of interest rate cuts in 2023 and said it is prepared to tighten further if needed to restore price stability.

Investors appear to have taken note, betting on a continued period of steady rates followed by a possible easing in the fourth quarter of this year, rather than the shift to rate cuts in June that had been expected a few weeks ago.

Minutes from the BoC’s April policy meeting are due to be released on Wednesday. The central bank has left its benchmark interest rate on hold for two straight meetings after lifting it to a 15-year high of 4.50 per cent.

Those rate hikes have contributed to inflation, by driving up mortgage borrowing costs, but the main aim is to slow the economy.

“We really do need to see at least a further sharp slowdown in GDP growth, if not at least one quarter of negative growth, for the bank to have confidence that inflation won’t start rising again if it were to cut rates,” Brown said.

The Canada Energy Regulator said it was notified on Tuesday of a serious injury at a work site on the government-owned Trans Mountain oil pipeline expansion project near Chilliwack, British Columbia.

The regulator said work has been stopped at the job site, and inspection officers and the Royal Canadian Mounted Police are attending.

“Safety is always our top priority, including all workers and contractors on job sites,” the CER said in a statement posted to its website.

The Trans Mountain expansion will nearly triple the flow of crude from Alberta’s oil sands to the Pacific coast, but the project has been beset by years of delay and massive cost overruns.

Last month Trans Mountain Corp TRP-T -0.16%decrease said the cost had jumped 44 per cent from last year’s estimate to C$30.9-billion ($22.69-billion). The pipeline is expected to be in service by the first quarter of 2024.