Prices for sour crude oil have climbed globally this month after top exporter Saudi Arabia hiked prices and expanded production cuts of higher-sulfur oil in the first sign its efforts to prop up global prices is having an impact.

The de facto leader of the Organization of the Petroleum Exporting Countries (OPEC) this month deepened its production cuts to 1 million barrels per day in response to benchmark prices that fell to below $72 a barrel this summer.

“The kingdom’s curbs have had an outsized impact on the supply of medium-and heavy-sour barrels,” Mark Rossano, a partner at energy data provider Primary Vision Network, said.

The increases – seen among North Sea, U.S. and Canadian sour crude grades – have jumped as oil refiners in China, Europe and the U.S. bid up dwindling supplies from sanctions on Russia and Saudi Arabia’s cutbacks, according to traders and brokers.

Also pushing up sour crudes are U.S. government purchases to restock its emergency reserves, production outages from Canadian wildfires, and worries about potential for Atlantic hurricane season to cut production of U.S. sour crude.

Most of Saudi Arabia’s crude oils, such as Arab Light, Medium and Heavy, are sour grades, a type that requires more complex refining and typically trades at a discount to sweet crude, which has lower sulfur content.

But sour prices are no longer cheap. Norway’s medium sour Johan Sverdrup crude climbed on Friday to a record $3.50 per barrel premium to dated Brent, according to traders, compared with a more than $6 discount in December.

U.S. Mars sour crude prices on Thursday of last week also traded at a $2 per barrel premium to U.S. crude futures at Cushing hub, its highest in three years. It traded at a premium to light, sweet WTI Midland at East Houston terminal, something rarely seen before.

Mars also traded at a $3.70 premium to Middle East crude benchmark Dubai, significantly higher than spot Middle Eastern crude.

Western Canadian Select heavy crude, another widely discounted sour grade, traded at the U.S. Gulf Coast on Monday at a $2.30 per barrel discount, compared with a more than $8 per barrel discount as recently as March, according to brokerage CalRock.

Saudi Arabia’s price hike to Asia, the second month in a row, has pushed some Chinese refiners to seek cheaper sour crude alternatives from the spot market, traders and brokers said. This has lifted prices for other sour crudes.

U.S. Gulf Coast refiners, which are mostly configured to run sour crude, likely will purchase more Latin American barrels, said Rohit Rathod, an analyst at energy data provider Vortexa.

“OPEC+ players are pulling back supplies and we are already in a tight market at least for sour crudes.”

Oil benchmark Brent futures breached $80 a barrel for the first time since May on Wednesday after U.S. inflation data suggested the interest rate hike cycle in the world’s biggest economy is set to finally cool.

Data released on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.

Markets expect one more interest rate rise, but that the U.S. rate-hiking cycle has likely peaked. Higher rates can slow economic growth and reduce oil demand.

“This is the lowest number since the pandemic … but it is important to keep in mind that this is still a transitory situation. But overall, traders are cheering this event,” said Naeem Aslam, chief investment officer at Zaye Capital Markets, describing the inflation figures.

Brent futures were last up 47 cents at $79.87 a barrel, having risen as high as $80.05 earlier. U.S. West Texas Intermediate (WTI) crude was up 56 cents at $75.39 a barrel.

A weaker dollar, optimism surrounding Chinese stimulus and U.S. stockpile data were also supporting the positive sentiment, said Fiona Cincotta, senior financial markets analyst at City Index.

Meanwhile, forecasts from the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA) point to the market tightening into 2024.

The IEA expects the oil market to stay tight in the second half of 2023, citing strong demand from China and developing countries combined with supply cuts from leading producers. New forecasts from the IEA are expected this week.

“The oil balance gets tighter either when supply is downgraded, or demand is revised up. If both happens at the same time the change can be seismic,” said PVM analyst Tamas Varga referring to the EIA’s outlook.

“Clearly, it is not worried about inflation-induced recession that could potentially dent global oil consumption.”

Top producer Saudi Arabia pledged last week to extend a production cut of 1 million bpd in August, while Russia will cut exports by 500,000 bpd.

Gold rallied Wednesday after new data showed inflation in the United States was cooling, suggesting the Federal Reserve may only hike interest rates one more time this year.

Spot gold last gained 0.79% to $1,947.39 per ounce, while U.S. gold futures added 0.81% to $1,952.70.

The consumer price index rose just 0.2% in June, compared with forecasts for a gain of 0.3%. On an annual basis, U.S. CPI advanced 4.8%, lower than market expectations for a 5% increase.

Friday’s slower than expected jobs report wasn’t a game changer, but helped shift the mindset of investors, with many now expecting July to mark the end of the current hiking cycle, Evangelista added.

The end to Fed’s current monetary policy tightening cycle is getting close, several U.S. central bank officials also said on Monday. That helps bullion as it does not yield any interest.

Harshal Barot, senior consultant at Metals Focus, said that while a July rate hike is largely priced in, “if we see core inflation still being higher than expected, then I think the expectations of another rate hike coming September will start gaining traction.”

• The consumer price index rose 0.2% in June and was up 3% from a year ago, the lowest level since March 2021.
• Excluding food and energy, core CPI increased 0.2% and 4.8%, respectively.
• Soft gains in food prices and declines in used vehicle and airline prices helped keep inflation down, while shelter prices continued to rise.
• Worker wages adjusted for inflation increased 1.2% from a year ago.

CPI June 2023: Inflation rose just 0.2%, less than expected as consumers get a break (cnbc.com)

Laurentian Bank of Canada LB-T +0.45%increase is up for sale, with larger rivals now circling the country’s ninth-largest lender in pursuit of a deal that would continue a trend toward consolidation in financial services, sources say.

Laurentian Bank confirmed in a press release that it is “conducting a review of strategic options” after The Globe and Mail revealed the lender is exploring a sale.

Laurentian’s board of directors recently hired financial and legal advisers to quietly shop the Montreal-based bank to potential buyers, according to four sources with knowledge of the process. Two of those sources said Laurentian is believed to have received a bid from an undisclosed rival bank that helped spur the sale process.

The Globe and Mail is not naming the sources because they are not permitted to discuss the confidential sale process.

Laurentian Bank is in the midst of a turnaround plan after its profitability and stock price significantly underperformed those of rival banks for several years. The bank has made some headway at revamping its fortunes under chief executive officer Rania Llewellyn. But it faces headwinds as growth in its loan book is expected to slow, profit margins are starting to come under pressure and Canada’s banking regulator is asking financial institutions to hold more capital.

Since late June, Laurentian has been in talks with several suitors, according to the four sources. Laurentian has hired JPMorgan Chase & Co., which ran last year’s sale of HSBC Canada for its British parent, three of the sources said. The bank has also hired Osler, Hoskin & Harcourt LLP as legal advisers, one source said.

Laurentian declined a request for comment beyond the contents of the press release. In its statement, the bank said that while the review is under way, its management team is continuing to pursue its strategy and priorities “with the full support and confidence of the board.”

JPMorgan Chase & Co. declined to comment.

Founded in 1846, Laurentian has 57 branches and $51-billion of assets, and its core business is commercial loans to clients in Quebec, Ontario and the United States.

Based on recent transactions, including the proposed sale of 130-branch HSBC Canada to Royal Bank of Canada RY-T +0.46%increase, a Laurentian takeover could cost between $2-billion and $2.8-billion. The bank’s book value is approximately $2.8-billion, and the market value of the company’s shares was $1.45-billion as of late Tuesday, which is a steep discount to its book value.

One potential suitor is Bank of Nova Scotia BNS-T +0.44%increase because its executives have repeatedly said in recent years that it is a priority to expand its operations in Quebec and British Columbia, where the Toronto-based bank thinks it is underrepresented, especially in commercial banking.

Large Quebec-based financial institutions National Bank of Canada NA-T +0.38%increase and Desjardins Group could be considered natural contenders, but National Bank has signalled that it is more focused on expanding existing operations outside of Quebec. Bank of Montreal BMO-T +0.39%increase and Canadian Imperial Bank of Commerce CM-T unchno change could also consider bids. But BMO recently closed its US$16.3-billion takeover of California-based Bank of the West, and CIBC has said its first focus is on expanding its existing business as it looks to build up its capital reserves.

The country’s two largest banks – Royal Bank of Canada and Toronto-Dominion Bank TD-T +0.53%increase – are not expected to bid for Laurentian, the sources said. Royal Bank still needs approval for its proposed $13.5-billion takeover of HSBC Canada, the country’s seventh-largest lender. TD is focused on expansion in the U.S. market.

Spokespeople for Scotiabank and CIBC declined to comment. Spokespeople for the other four largest banks could not immediately be reached for comment.

Laurentian’s decision to look for a buyer follows the bank’s board conclusion that shareholders would be better served by owning a portion of a larger platform, rather than trying to compete against far larger rivals. According to one source, Laurentian’s board and Ms. Llewellyn were frustrated by losing out this year in the bidding war for mortgage lender Home Capital Group Inc., purchased in April by entrepreneur Stephen Smith for $1.7-billion.

Laurentian Bank is only slightly more than half way through a three-year turnaround plan that sought to reframe the lender as a nimble alternative to the country’s largest banks, and to move on from costly missteps in the preceding years.

In 2020, the bank abruptly changed CEOs, parting ways with François Desjardins midyear and hiring Ms. Llewellyn from Bank of Nova Scotia a few months later – a non-francophone who became the first woman to run a major Canadian-owned bank. At the time, Laurentian was suffering from a string of weak results and had slashed its dividend.

An ambitious plan to modernize the bank under Mr. Desjardins, which included overhauling digital banking systems and closing nearly half its branches, was ultimately scrapped as costs mounted and revenue stalled. Instead, Ms. Llewellyn mapped out a turnaround plan after a year-long review that would simplify the bank, focus more on specialized niches such as commercial equipment financing, and rely on outside partnerships to revamp its digital banking experience.

It wasn’t until late 2021 that Laurentian introduced a mobile banking app for smartphones, relying on technology from a partnership with a credit union.

Ms. Llewellyn acknowledged at the outset that the turnaround would take time. In a report published in June, analyst Darko Mihelic at RBC Capital Markets said Laurentian’s loan growth is slowing as interest rates rise, and this will reduce future profitability.

In 2021, Laurentian decertified what had been the only unionized work force at a Canadian bank. Analysts said the move made the bank a more attractive takeover target.

Laurentian has 3,100 employees and made a $226.6-million profit last year. The bank is a fraction of the size of rivals – Scotiabank has 91,000 employees, nearly 2,400 branches and made $10.7-billion last year.

As part of the sale process, Laurentian has set up a data room, where potential buyers can view confidential financial information, two of the sources said.

The federal banking regulator and federal Finance Minister would need to approve a takeover of Laurentian. If the bank is sold, with government approval, it would continue a trend of the six largest banks expanding by snapping up rival lenders, wealth managers and trust companies. TD Bank, for example, vaulted to the top ranks by size when it acquired Canada Trust 23 years ago.

A Laurentian takeover could also put pressure on other small rivals, such as Edmonton-based Canadian Western Bank, to consider selling themselves.

Published: 7/11/2023 2:16 PM ET

Gold prices climbed higher on Tuesday, lifting the most active futures contract to a near three-week closing high.

A weak dollar and lower Treasury yields contributed to the bullion’s uptick.

The dollar index, which dropped to 101.67, recovered to 101.97 around late morning, but retreated again and slid to 101.71.

The dollar fell, weighed down by comments from several Fed officials that higher interest rates are needed to reach the 2% inflation target, but the end to the current monetary policy tightening cycle is getting close.

Gold futures for August ended higher by $6.10 or about 0.3% at $1,937.10 an ounce, the highest close since June 21.

Silver futures for September ended down $0.064 at $23.281 an ounce, while Copper futures for September settled at $3.7660 per pound, down $0.0185 from the previous close.

Following last week’s mixed monthly jobs report, traders now await U.S. consumer and producer price inflation data this week for additional clarity on the rate outlook.

The annual rate of growth by core consumer prices, which exclude food and energy prices, is expected to slow to 5% from 5.3%.

Ahead of the inflation data, CME Group’s FedWatch Tool is indicating a 92.4% chance of another quarter point rate hike at the next Fed meeting later this month.

Published: 7/11/2023 3:19 PM ET

Crude oil futures settled higher on Tuesday, lifted by the Energy Information Administration’s forecast of a drop in oil production and the International Energy Agency’s forecast about increased demand from China.

A weak dollar contributed as well to the rise in oil prices. The dollar dropped to a 2-month low after comments from several Fed officials suggested the U.S. central bank is nearing the end of its rate-hiking cycle.

West Texas Intermediate Crude oil futures for August ended higher by $1.84 or about 2.52% at $74.83 a barrel.

Brent crude futures were up $1.78 or 2.29% at $79.47 a barrel a little while ago.

The EIA has cut its forecast for U.S. oil production by 50,000 barrels per day this year following the OPEC+ extending output cuts through 2024.

In its Short Term Energy Outlook, the EIA said oil production will likely rise by 670,000 barrels per day this year.

The EIA also said that it expects Brent crude spot prices will average $78 a barrel this month.

Meanwhile, the IEA expects oil market to remain tight in the second half of this year due to strong demand from China and other major consumers, and due to additional supply cuts announced by Russia and Saudi Arabia.

Traders now await weekly oil reports from the American Petroleum Institute (API) and EIA. The API’s data is due later today, while the EIA will release its crude inventory data Wednesday morning.

The Canadian market ended modestly higher on Tuesday, aided by gains in energy shares.

Movements were somewhat lackluster with investors largely staying cautious ahead of the Bank of Canada’s interest rate decision tomorrow, and U.S. consumer and producer prices data, due later in the week.

The Bank of Canada is widely expected to raise interest rate by 25 basis points.

The benchmark S&P/TSX Composite Index ended with a gain of 56.11 points or 0.28% at 19,878.56.

TransAlta Renewables (RNW.TO) soared 18.4%. Dye & Durham (DND.TO) climbed 6.5%. Precision Drilling Corp (PD.TO), Linamar Co (LNR.TO), Colliers International (CIGI.TO), BRP Inc (DOO.TO) and goeasy (GSY.TO) gained 1 to 3%.

MTY Food Group (MTY.TO) gained 4.3%. The company reported second quarter net income of C$30.4 million, or C$1.24 per share, compared to C$28.6 million, or C$1.17 per share, a year ago. Normalized adjusted EBITDA increased 57% to C$74.6 million. Revenue increased to C$305.22 million from C$162.52 million, last year.

Quebecor Inc (QBR.TO) ended more then 6.5% down. GFL Environmental Inc (GFL.TO), TFI International (TFII.TO), Dollarama (DOL.TO), George Weston (WN) and Thomson Reuters (TRI.TO) also ended notably lower.

| Published: 7/10/2023 5:34 PM ET

Canadian stocks turned in a mixed performance on Monday as investors largely stayed cautious ahead some key U.S. economic data, including a report on consumer price inflation.

Healthcare and materials shares moved higher, while communications and utilities shares lost ground. Stocks from rest of the sectors closed mixed.

The benchmark S&P/TSX Composite Index ended with a loss of 8.59 points or 0.04% at 19,822.45 after moving between 19,798.79 and 19,863.30.

Healthcare stocks Tilray Inc (TLRY.TO) and Bausch Health Companies (BHC.TO) surged 6% and 4.7%, respectively.

In the materials sector, K92 Mining Inc (KNT.TO) soared nearly 12%. Lithium Americas Corp (LAC.TO), Kinross Gold Corp (K.TO), Oceanagold Corp (OGC.TO), Centerra Gold Inc (CG.TO), Novagold (NG.TO), Equinox Gold Corp (EQX.TO), Eldorado Gold (ELD.TO), First Majestic Silver Corp (FR.TO), Iamgold (IMG.TO) and Alamos Gold Inc (AGI.TO) gained 3 to 5%.

Quebecor Inc (QBR.B.TO), down 4.25%, was the biggest loser in the communications sector. Cogeco Communications (CCA.TO) and Rogers Communications (RCI.B.TO) lost 2.6% and 2.4%, respectively.

Utilities shares Transalta Corp (TA.TO), Algonquin Power & Utilities Corp (AQN.TO), Brookfield Infra Partners (BIP.UN.TO), Northland Power (NPI.TO), Fortis Inc (FTS.TO) and Emera Inc (EMA.TO) ended lower by 1.5 to 2.1%.

On the economic front, data from Statistics Canada showed the total monthly value of building permits in Canada increased by 10.5% to C$ 10.5 billion in May 2023, partially reversing a revised 21% decline in the previous month. Comparing year-on-year figures, the value of building permits declined by 13.5% in May.