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Oil falls 3%, pressured by surprise U.S. crude, gasoline build

Oil prices slid 3% on Wednesday, with losses accelerating after U.S. data showed crude and gasoline stockpiles unexpectedly surged last week after OPEC+ said it would raise its oil output target by just 100,000 barrels per day (bpd).

Brent crude futures were down $2.90, or 2.9%, at $97.61 a barrel by 12:17 p.m. ET (1617 GMT). West Texas Intermediate (WTI) crude futures fell $2.93, or 3.1%, to $91.49. Both contracts had seesawed previously.

The premium for front-month Brent futures over barrels loading in six months’ time <LCOc1-LCOc7> is at a three-month low, indicating waning concern about tight supply. The same premium for WTI futures <CLc1-CLc7> neared a four-month low.

U.S. crude oil inventories rose unexpectedly last week as exports fell and refiners lowered runs, while gasoline stocks also posted a surprise build as demand slowed, the Energy Information Administration nL1N2ZF1LG said.

Crude stocks rose 4.5 million barrels last week, compared with an analyst forecast for a draw of 600,000 barrels. Gasoline stocks gained 200,000 barrels, versus expectations for a 1.6 million-barrel drop.

“The crude oil number is well above expectations. Gasoline is a disappointment. You should never see a build in gasoline during summer. It’s a very bearish report,” said Bob Yawger, director of energy futures at Mizuho.

Ministers for the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, agreed to the small increase to the group’s output target, equal to about 0.1% of global oil demand.

Algerian oil production in September will rise to 1.57 million bpd, Energy Minister Mohamed Arkab told state television.

While the United States has asked the group to boost output, spare capacity is limited and Saudi Arabia may be reluctant to beef up output at the expense of Russia, hit by sanctions over the Ukraine conflict.

Ahead of the meeting, OPEC+ trimmed its forecast for the oil market surplus this year by 200,000 bpd to 800,000 bpd, three delegates told Reuters.

Also weighing on prices, top Iranian and U.S. officials said they were travelling to Vienna to resume indirect talks about Iran’s nuclear programme, reviving the all but vanished hopes of a removal of sanctions hampering Iranian oil exports.

Prices were also hurt when San Francisco Fed President Mary Daly warned of a 75 basis point interest rate hike if inflation continued. Richmond Fed President Thomas Barkin also said that the Federal Reserve was committed to getting inflation under control and returning it to the U.S. central bank’s 2% target.

The U.S. dollar index, which tracks the greenback against six major peers, also rose, pressuring demand by making oil more expensive for holders of other currencies.

Brookfield Infrastructure Partners Posts Strong Second Quarter Results

The Canadian Press – Canadian Press – Wed Aug 3, 9:16AM CDT

TORONTO — Brookfield Infrastructure Partners LP reported strong second quarter results as funds from operations (FFO) jumped 30 per cent compared with the same quarter last year.

Brookfield posted net income of US$176 million, or 13 cents per unit, for the three-month period ended June 30, compared to US$352 million, or 41 cents per unit, the prior year.

It says FFO for the second quarter was the highest in its partnership’s history totalling US$513 million.

Recent acquisitions, organic growth and gains on its foreign currency hedging program helped support the latest results, Brookfield says.

Brookfield says the transport segment continues to experience elevated demand as global supply chains remain constrained.

Meanwhile, its midstream segment generated US$170 million of FFO, nearly triple the prior year results.

This report by The Canadian Press was first published Aug.3, 2022.

China ratchets up military and economic pressure on Taiwan as Pelosi begins her visit

• House Speaker Nancy Pelosi landed in Taiwan’s capital of Taipei on Tuesday night for a controversial visit that has infuriated Beijing and strained the already tense U.S.-China relationship.
• After warning Pelosi for weeks not to come to the disputed territory China responded Tuesday by announcing new import bans on certain Taiwanese goods.
• The Chinese military has also flexed its muscle with recent live-fire exercises just 80 miles from Taiwan, and the deployment Tuesday of fighter jet to the Taiwan Strait

https://www.cnbc.com/2022/08/02/china-ratchets-up-military-and-economic-pressure-on-taiwan-as-pelosi-begins-her-visit-.html

American employers posted fewer job openings in June as the economy contends with raging inflation and rising interest rates.

Job openings fell to a still-high 10.7 million in June from 11.3 million in May, the Labor Department said Tuesday.

In its monthly Job Openings and Labor Turnover Survey, the Labor Department said that the number of Americans quitting their jobs fell slightly in June while layoffs fell.

The job market has been resilient so far this year: Employers have added an average of 457,000 a jobs a month in 2022; and unemployment is near a 50-year low. That is one reason many economists believe the economy is not yet in an recession even though gross domestic product, the broadest measure of economic output, has contracted for two quarters in a row — one rule of thumb for the onset of a downturn.

The Labor Department’s jobs report for July, out Friday, is expected to show that employers tacked on another 250,000 jobs last month, which would be a healthy number in normal times but would be the lowest since December 2020. Economists also expect that unemployment stayed at 3.6% for the fifth straight month, according to a survey by the data firm FactSet.

S&P/TSX Composite Down In Late-Morning Trading After Long Weekend

Canada’s main stock index was down in late-morning trading following the August long weekend, with the energy and base metals sectors driving it lower, while U.S. stock markets were mixed.

The S&P/TSX composite index was down 141.08 points at 19,551.84.

In New York, the Dow Jones industrial average was down 206.96 points at 32,591.44. The S&P 500 index was down 6.76 points at 4,111.87, while the Nasdaq composite was up 12.88 points at 12,381.86.

The Canadian dollar traded for 77.71 cents US compared with 77.98 cents US on Friday.

The September crude contract was up 30 cents at US$94.19 per barrel and the September natural gas contract was down 53 cents at US$7.76.

The October gold contract was up US$8.70 at US$1,777.70 an ounce and the September copper contract was down three cents at US$3.52 a pound.

This report by The Canadian Press was first published Aug. 2, 2022.

Molson Coors Q2 Profit Falls Amid Fifth Straight Quarter Of Net Sales Growth

Molson Coors Beverage Co. saw profit fall in the second quarter as it generated net sales growth for the fifth consecutive quarter for the first time in over a decade on a constant currency basis.

The Colorado and Montreal-based company, which reports in U.S. dollars, says it earned US$47.3 million, or US$0.22 per diluted share, compared with US$388.6 or US$1.79 per share a year earlier.

Underlying net income was US$260.1 million or US$1.19 cents per share, compared with US$343.8 million or US$1.58 per share in the second quarter of fiscal 2021.

Revenues for the three months ended June 30 were US$2.92 billion, a slight decrease from US$2.94 billion a year earlier.

Net sales in the Americas was down 2.3 per cent, as brand volumes declined 2.2 per cent as a result of softer industry performance and the impacts the Québec labour strike.

Molson Coors CEO Gavin Hattersley says the company has the right mix of brands to “compete and win across all segments” and navigate challenging economic times.

This report by The Canadian Press was first published Aug. 2, 2022.

Air Canada Reports Q2 Loss, Posts A Nearly Five-Fold Jump In Revenue

The Canadian Press – Canadian Press – Tue Aug 2, 6:06AM CDT

MONTREAL — Air Canada reported a second-quarter loss of $386 million compared with a loss of $1.17 billion a year earlier, and says it saw a nearly five-fold increase in revenue.

The airline says its loss for the three months ended June 30 totalled $1.60 per diluted share, compared with a loss of $3.31 per diluted share in the second quarter of 2021.

Revenue totalled $3.98 billion, compared with $837 million during the same time last year.

Air Canada says its second-quarter cost per available seat mile decreased to 20.8 cents from 49.3 cents a year earlier, while its adjusted cost per available seat mile was 13.1 cents, compared with 41.5 cents in the second quarter of 2022.

Air Canada CEO Michael Rousseau says while the global airline industry is facing “unprecedented conditions as it emerges from pandemic-related restrictions,” the situation is “particularly challenging in Canada.”

He also says that despite “meticulous planning and projecting,” there remains a significant amount of pressure in restarting, but says he is “encouraged by recent improvements.”

This report by The Canadian Press was first published Aug. 2, 2022.

OPEC+ sees slightly smaller oil market surplus this year, sources say

OPEC+ sees this year’s oil market as slightly less supplied than previously thought, a day ahead of a meeting at which the producer group is set to decide on its production policy for next month.

New data showed that the OPEC+ Joint Technical Committee (JTC), meeting on Tuesday, trimmed its forecast for a surplus in the oil market this year by 200,000 barrels per day (bpd) to 800,000 bpd, three OPEC+ delegates told Reuters.

The JTC is meeting ahead of a ministerial meeting of the Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, on Wednesday.

One of the sources said that the JTC, which advises the group on market fundamentals, did not discuss any output policy at its meeting.

OPEC+ sources told Reuters last week that the group will likely keep output unchanged in September, or raise it slightly.

Fox News reported on Monday that Saudi Arabia will push OPEC+ to increase oil production a on Wednesday, a Fox Business news reporter said on Monday.

TD to buy Cowen for US$1.3-billion, doubling down on ambitious U.S. expansion plans

Toronto-Dominion BankTD-T -0.87%decrease is acquiring New York-based investment bank Cowen Inc. for US$1.3-billion, aiming to round out TD’s capital markets business after years of effort to build it into a stronger cross-border competitor.

TD will pay the purchase price in cash, which amounts to US$39 per share of Cowen stock. That equates to a multiple of 1.7 times Cowen’s tangible book value, as of Mar. 31, and 8.1 times Cowen’s estimated 2023 earnings of US$156-million.

Cowen is an independent dealer with 1,700 staff and specializes in U.S. equities, which was a weakness for TD south of the border. After adding Cowen’s $2-billion in annual revenue to TD Securities, the combined company will have global revenue of about $6.8-billion, with more than 40 per cent of that coming from the U.S., TD said.

For years, TD has tried to build up TD Securities in the U.S., where it has lagged rivals in several product categories and service areas. Most notably, TD’s U.S. investment bank did not have a significant business in equity capital markets or equity sales and trading, which is a gap that Cowen helps fill. Riaz Ahmed, the CEO of TD Securities, said he expects the deal to accelerate TD’s plan “easily by five if not 10 years,” on a conference call with analysts on Tuesday.

With this deal, “I think we will have all the tools and capabilities that we will need,” Mr. Ahmed said.

The acquisition also doubles down on TD’s ambitious plans for U.S. expansion, months after the bank made the largest deal in its history. In February, TD agreed to buy First Horizon Corp., a retail and commercial-focused bank based in Memphis, Tenn., for US$13.4-billion. That deal has yet to close, pending regulatory approvals.

TD’s share price has been weighed down by investors’ concerns about regulatory risks related to the First Horizon deal, according to banking analysts. But TD chief executive officer Bharat Masrani said he is confident the bank can close the Cowen transaction “without any impact” on the First Horizon deal.

“Our aspiration is to be a top dealer and make sure we have all the capabilities our clients require,” Mr. Masrani told analysts on the conference call.

TD’s share price was down about 1.1 per cent to $82.27 in early trading on the Toronto Stock Exchange on Tuesday.

To raise the funds TD needs to buy Cowen, TD sold 28.4 million shares it owned in The Charles Schwab Corp. for US$1.9-billion. TD owned 13.4 per cent of Charles Schwab after it sold its stake in TD Ameritrade Holding Corp. to the rival company in 2020. TD now owns 12 per cent of Charles Schwab and Mr. Masrani said the bank has no current plans to sell more of the stock, and has maintained its voting rights.

As the discount brokerage business changes rapidly, under pressure from online rivals, the sale allows TD to redirect some of its investment to U.S. investment banking, which has been identified as a high priority.

The price TD is paying for Cowen is “attractive, a reflection of the current market backdrop,” said Gabriel Dechaine, an analyst at National Bank Financial Inc., in a note to clients.

Mr. Ahmed and TD’s head of corporate and investment banking, Robbie Pryde, first approached Cowen early this year, Mr. Ahmed said. In addition to special expertise in equities, TD was also attracted to Cowen’s advisory capabilities and research expertise, which includes environmental, social and governance research.

For Cowen, the approach came at an opportune moment when the investment bank was looking for ways to fund its expansion, which has happened partly through acquisitions.

“This is the first time – probably in the history of Cowen, at least over the last decade – where we’ve felt constrained by the size of our balance sheet,” said Jeffrey Solomon, Cowen’s chair and CEO, on Tuesday’s conference call. “When Riaz and team approached our team with this idea, it made logical sense because it was very much in tune with the strategy that we were looking to pursue anyway.”

Should the deal close, Mr. Solomon will join TD Securities and report to Mr. Ahmed, along with Cowen co-presidents Dan Charney and Larry Wieseneck. Parts of the combined business, led by Mr. Solomon, will be known as TD Cowen.

In the first three years, TD expects to reap what it calls “revenue synergies” of US$300-million to US$350-million. The bank also expects the costs of retaining Cowen employees and merging the two businesses to add up to US$450-million over the same span, with US$200-million of that sum earmarked to persuade key Cowen employees to stay on.

“A primary risk is related to integration, which is notoriously difficult when involving investment banking operations with different cultures,” Mr. Dechaine said.

Based on those estimates, TD expects the acquisition will modestly add to its profits in 2023.

The bank also expects the effect on its capital levels to be neutral. But because of heightened risks in the global economy and uncertainty around interest rates, it has instituted a hedge for accounting purposes to protect its capital levels when it closes the First Horizon transaction. The bank expects its common equity Tier 1 ratio – a common measure of capital strength and financial resilience – to remain above 11 per cent even after both deals close, which would be higher than regulatory minimums.

The deal is expected to close in the first three months of 2023, subject to approvals from Cowen shareholders and regulators.