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Wholesale inflation rose 11% in April as producer prices keep accelerating
OPEC cuts 2022 world oil demand forecast again due to impact of war in Ukraine, rising inflation
OPEC on Thursday cut its forecast for growth in world oil demand in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation and the resurgence of the Omicron coronavirus variant in China.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said world demand would rise by 3.36 million barrels per day (bpd) in 2022, down 310,000 bpd from its previous forecast.
The Ukraine war sent oil prices briefly above $139 a barrel in March, the highest since 2008, worsening inflationary pressures. OPEC has cited suggestions that China, with strict COVID lockdowns, is facing its biggest demand shock since 2020 when oil use plunged.
“Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions,” OPEC said in the report.
Nonetheless, OPEC still expects world consumption to surpass the 100 million bpd mark in the third quarter, and for the 2022 annual average to just exceed the pre-pandemic 2019 rate.
OPEC cited rising inflation and continued monetary tightening, and lowered this year’s economic growth forecast to 3.5 per cent from 3.9 per cent, adding upside potential was “quite limited.”
“It may come from a solution to the Russia and Ukraine situation, fiscal stimulus where possible, and a fading pandemic, in combination with a strong rise in service sector activity,” OPEC said.
Oil extended an earlier decline after the report was released, trading further below $106.
OPEC and its allies which include Russia, known as OPEC+, are unwinding record output cuts put in place during the worst of the pandemic in 2020 and have rebuffed Western pressure to raise output at a faster pace.
At its last meeting, OPEC+ swerved the Ukraine crisis and stuck to a previously agreed plan to boost its monthly output target by 432,000 bpd in June.
OPEC+ has been undershooting the increases due to underinvestment in oil fields in some OPEC members and, more recently, losses in Russian output as a result of sanctions and buyer avoidance.
The report showed OPEC output in April rose by 153,000 bpd to 28.65 million bpd, lagging the 254,000 bpd rise that OPEC is allowed under the OPEC+ deal.
The growth forecast for non-OPEC supply in 2022 was reduced by 300,000 bpd to 2.4 million bpd. OPEC cut its forecast for Russian output by 360,000 bpd and left its U.S. output growth estimate largely unchanged.
OPEC expects U.S. tight oil supply to rise by 880,000 bpd in 2022, unchanged from last month, although it said there was potential for further expansion later in the year.
SNC-Lavalin gets a deferred prosecution agreement – a first in Canada
Quebec prosecutors have received court approval for a deferred prosecution agreement with Canadian engineering giant SNC-Lavalin Group Inc., the first such deal since the new legal mechanism became law in 2018.
Judge Éric Downs of the Quebec Superior Court sanctioned the agreement in a verbal decision on Wednesday afternoon, thereby settling criminal charges against the company related to a bridge contract in Montreal two decades ago. The judge said he would publish a detailed written decision later.
“We’ve reached a point now where this company has an integrity program that’s exemplary,” prosecutor Francis Pilotte said. “There really was no reason not to offer them an agreement. [The law] was made for cases like this.”
SNC-Lavalin struck the remediation agreement with Quebec’s office of criminal prosecutions, known as the Directeur des poursuites criminelles et pénales (DPCP), to resolve charges laid last fall against two company entities. The pact required court approval.
Such deals, better known as deferred prosecution agreements, allow companies to acknowledge responsibility and avoid a trial in exchange for paying a fine and agreeing to outside independent oversight. Already present in several other countries, such as the United States and the U.K., the legal mechanism was introduced by the federal government in 2018 as part of an effort to widen its options in fighting corruption and other white-collar crime.
As part of a three-year agreement, SNC-Lavalin will pay a penalty of $29.6-million. It will also undergo third-party monitoring of its ethics and compliance systems by an outside law firm for three years.
“This agreement is in the public interest,” said François Fontaine, a lawyer with Norton Rose representing SNC-Lavalin. “SNC is getting a deal here because it is an important company and there is no reason to punish all of its stakeholders for the actions of a few individuals.”
Quebec prosecutors last September charged two of the company’s business entities – SNC-Lavalin Inc. and SNC-Lavalin International Inc. – and former SNC vice-presidents Normand Morin and Kamal Francis in connection with a long-standing RCMP investigation into bribes paid on a $128-million contract to refurbish Montreal’s Jacques Cartier bridge in 2002.
Michel Fournier, the former head of the Federal Bridge Corp., pleaded guilty in 2017 to fraud-related charges for accepting more than $2.3-million in kickbacks from SNC in the Jacques Cartier bridge case and laundering the funds. He was sentenced to 51/2 years, and has since received full parole. The police probe then focused on who arranged the bribes.
The SNC units and the two former executives were charged with forgery, conspiracy to commit forgery, fraud, conspiracy to commit fraud, fraud against the government and conspiracy to commit fraud against the government, the RCMP say. The two men are both over 70.
Mr. Morin’s lawyer said in court on Tuesday that his client contests the bulk of the statement of facts SNC-Lavalin and prosecutors agreed to, and said they should not be made public. He urged the judge to be “the guardian of fairness of this process.” Arguments on this will be heard on Thursday.
Lawyers and other legal experts in Canada are watching SNC’s case closely to see how prosecutors apply the law and how the court manages the proceedings, including how it will balance the rights of the two men still to face trial. Other companies are expected to seek similar deals.
What the Quebec Superior Court decides in this case will affect future agreements submitted for approval, said Jennifer Quaid, an associate professor of law at the University of Ottawa. “The debate in court today highlights the tension between transparency and public accountability on the one hand and the inevitable compromises prosecutors have to make to reach settlements with business organizations,” she said.
Quebec prosecutors have said SNC co-operated with authorities during police searches and voluntarily provided relevant information afterward, which contributed to the decision to extend an offer to negotiate a deal. The two former managers cannot benefit from a deferred prosecution agreement because such arrangements do not apply to individuals.
SNC was denied a deferred prosecution agreement two years ago in a separate case in which it was charged with violating Canada’s Corruption of Foreign Public Officials Act and fraud related to its business dealings in Libya when Moammar Gadhafi was in power. Kathleen Roussel, director of federal prosecutions, told The Globe and Mail in 2020 that a deferred prosecution agreement in that case was inappropriate because of the “severity and breadth” of the offence.
SNC undertook an intense lobbying campaign with the federal government to get a deferred prosecution agreement in the Libya case. Allegations that Prime Minister Justin Trudeau and other members of his government improperly pressed then-justice minister and attorney-general Jody Wilson-Raybould to order a settlement engulfed the government in crisis for weeks.
SNC struck a deal with prosecutors in December, 2019, in which the company’s construction division pleaded guilty to a single charge of fraud and the potentially more damaging corruption charge was dropped. The company agreed to pay a $280-million fine and received a three-year probation order, which includes oversight by an independent monitor. The Quebec judge who approved the agreement called it “reasonable” and said that, without such plea deals, Canada’s justice system “would collapse under its own weight.”
The Jacques Cartier bridge investigation, dubbed Project Agrafe (staple), has long been a legal risk for SNC. The company has acknowledged the probe in corporate filings, adding that other investigations into its past business dealings may be continuing, including in Algeria.
Sun Life beats first-quarter core profit estimates but falls from year ago on U.S., Asia declines
Sun Life Financial on Wednesday beat analyst estimates for first-quarter core profit, which fell from a year earlier because of higher claims in its U.S. business and the impact of COVID-19 restrictions on some Asian markets.
Underlying profit was $843-million, or $1.44 a share, in the three months ended March 31, from $850-million, or $1.45, a year earlier. Analysts had expected $1.41 a share.
Reported net income declined to $858-million, or $1.46, from $937-million, or $1.59, a year earlier.
Manulife misses estimates for first-quarter core profit
Manulife Financial on Wednesday missed estimates for first-quarter core profit, which fell from a year earlier as COVID-19 disrupted new business activities in multiple markets across Asia.
Canada’s largest insurer reported core earnings of $1.5-billion, or 77 cents a share, in the three months ended March 31, compared with $1.6-billion, or 82 cents a share, a year earlier.
Analysts on average had expected the company to report earnings of 82 US cents a share, according to IBES data from Refinitiv.
Net income attributable to shareholders rose to $2.97-billion, or 1.50 cents a share, from $783-million, or 38 cents a share, a year earlier.
Crescent Point Energy reports $1.18-billion first-quarter profit, raises dividend
Crescent Point Energy Corp. CPG-T -2.31%decrease raised its quarterly dividend as it reported first-quarter net income of $1.18-billion, boosted by a reversal of a non-cash impairment charge related to the rise in energy prices.
The company said it will increase its quarterly dividend to 6.5 cents per share, up from 4.5 cents per share.
The increased payment to shareholders came as Crescent Point said it earned $2.03 per diluted share for the quarter ended March 31, up from a profit of $21.7-million or four cents per diluted share a year ago.
Crescent Point said its adjusted earnings from operations amounted to 41 cents per diluted share for the quarter, up from 28 cents per diluted share a year earlier.
Oil and gas revenue for the quarter totalled $978.4-million, up from $547.5-million in the same quarter last year.
Average daily production was 132,788 barrels of oil equivalent per day, up from 119,384 boe/d in the same quarter last year, while the company’s average selling price was $91.43 per barrel of oil equivalent, up from $58.65 a year ago.
Finland’s President Sauli Niinisto and Prime Minister Sanna Marin said Thursday that the country should apply to join NATO “without delay.”
Thursday’s announcement is the strongest sign yet that Finland will make a formal application to join NATO. Membership would be historic for the Nordic country, which has had a decades-long policy of military neutrality.
“Finland must apply for NATO membership without delay.” the leaders said in a joint statement, adding that they hoped that “the national steps still needed to make this decision will be taken rapidly within the next few days.”
“NATO membership would strengthen Finland’s security” and that Finland’s membership would in turn “strengthen the entire defence alliance.”
The government will debate the issue over the weekend and the Finnish parliament is expected to give its final approval to the application as early as Monday.
President Navasto said Russia’s invasion of Ukraine had changed Finland’s security situation although there was no immediate threat.WATCH NOWVIDEO07:18How NATO is defending Eastern Europe
There is a risk the move from Helsinki could spark aggression from Russia, where President Vladimir Putin has expressed his opposition against NATO’s enlargement.
Finland shares a 830-mile border with Russia; if it joins the military alliance, the land border that Russia shares with NATO territories would roughly double (Russia has land borders with 14 countries and five of them are NATO members: Latvia, Estonia, Lithuania, Poland and Norway).https://datawrapper.dwcdn.net/yYX5y/9/
Finland has been reviewing its security policy in the wake of Russia’s invasion of Ukraine, which showed the Kremlin is willing attack a neighboring nation. Finland has been invaded in the past — in 1939, the Soviet Union attacked Finland in what became known as the Winter War.
NATO — or the North Atlantic Treaty Organization — was founded in 1949 by the U.S., Canada, and several Western European nations to provide collective security against modern Russia’s forebear, the Soviet Union.
Ever since its foundation, the alliance has had a thorny relationship with the Soviet Union throughout the Cold War, and following its collapse in 1991, the Russian Federation.
Stock futures decline as Wall Street struggles for rebound after hot inflation report
Stock futures traded lower early Thursday morning after the latest CPI data showed inflation is still running hot.
Futures tied to the Dow Jones Industrial Average shed 64 points, or 0.2%. S&P 500 futures and Nasdaq 100 futures declined 0.2% and 0.28%, respectively.
Shares of Bumble and Rivian jumped 10.38% and 5.58%, respectively, in extended trading on upbeat results for the most recent quarter. Meanwhile, Disney shares fell more than 3% after hours despite strong earnings for its most recent quarter. The company said Covid is still weighing on its theme parks in Asia.
In regular trading Wednesday, the Dow fell 326 points, or 1.02%. The S&P 500 slipped 1.65% and the Nasdaq Composite dropped 3.18%.
The moves came as investors assessed the latest inflation data, which showed consumer prices in April jumped 8.3%, which was higher than expected and still running close to their 40-year high of 8.5%. Analysts are mixed on whether the data suggests inflation has hit a peak.
While the market briefly turned positive at one point in the session, the S&P 500 at one point touched a new 52-week low and eventually closed at its lowest level of the year. The S&P 500 is more than 18% off its high and down more than 17% since the start of the year.
Still, market bull Tom Lee of Fundstrat remains bullish on stocks. He said if the market finds its footing “we’re in a world of double digit expected returns.”
“This week is interesting because the stock market declines have accelerated downwards, so the waterfall is accelerating but things that normally would corroborate a waterfall decline like yields or the VIX have not been,” Lee told CNBC’s “Closing Bell: Overtime.” “The bond market’s actually been pretty stable even in the face of a hot CPI and the VIX actually has been falling.”
He noted that of the 16 times since 1940 that the market has declined 16% in a four-month period, it was higher six months later in 12 of those events.
SoftBank is set to report earnings on Thursday morning before the bell. Affirm, Poshmark and Toast are on deck after the bell.
In economic data, investors will be looking out for the latest on jobless claims, which will be released at 8:30. They’re also looking forward to fresh data on the producer price index, which measures prices at the wholesale level.
