Category: Uncategorized

 Published: 8/21/2024 3:18 PM ET | 

Despite data showing a big drop in U.S. crude inventories in the week ended August 16th, oil prices fell to a seven-month low on Wednesday amid concerns about the outlook for demand.

Data from the Labor Department saying the U.S. economy added far fewer jobs than originally reported in the year through March presumably hurt investor sentiment.

Concerns about economic slowdown in China and weak outlook for demand from the nation also weighed on oil prices.

West Texas Intermediate Crude oil futures for October ended down $1.24 or about 1.7% at $71.93 a barrel.

Brent crude futures dropped to $76.05 a barrel, down $1.15 or about 1.49% from the previous close.

Data from the Energy Information Administration (EIA) showed crude inventories in the U.S. fell by 4.6 million barrels last week, after rising by 1.4 million barrels a week earlier. Oil inventories were expected to drop by 2.8 million barrels.

At 426.0 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year, the EIA added.

The report said motor gasoline inventories also fell by 1.6 million barrels last week and are about 3% below the five-year average for this time of year.

Distillate fuel inventories, which include heating oil and diesel, also slumped by 3.3 million barrels last week and are about 10% below the five-year average for this time of year.

Meanwhile, on the geopolitical front, the United States is pushing for a “decisive moment” for ceasefire negotiations between Israel and Hamas, but a breakthrough appears elusive.

U.S. crude stocks, gasoline and distillate inventories all fell by more than expected in the week ending August 16 as demand and exports rose, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories fell by 4.6 million barrels to 426 million barrels in the week ended August 16, the EIA said, compared with analysts’ expectations in a Reuters poll for a 2.7 million-barrel draw.

Oil prices rose to session highs following the larger-than-anticipated decline in inventories, but eased shortly after on weaker U.S. economic data.

Brent futures were up about 5 cents to $77.22 a barrel at 11:05 a.m. EDT (1505 GMT), while U.S. futures were at $73.09 a barrel, down roughly 7 cents.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 560,000 barrels.

Net U.S. crude imports rose last week by 78,000 barrels per day, while exports rose by 289,000 bpd to 4.05 million bpd, EIA said.

“A tick higher in both refinery runs and exports has encouraged a draw to crude inventories, while buoyant implied demand for gasoline and distillates has helped to round out a trio of draws as we fast approach the finale of summer driving season,” said Matt Smith, an analyst for ship tracking firm Kpler.

Refinery crude runs rose by 222,000 barrels per day in the week ended August 16, and utilization rates rose by 0.8 percentage points in the week to 92.3 per cent, the EIA said.

U.S. gasoline stocks fell by 1.6 million barrels in the week to 220.6 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 933,000 barrel draw.

Product supplied for gasoline, a proxy for demand, was up 148,000 bpd week-over-week to 9.19 million bpd.

Gasoline stocks on the U.S. Gulf Coast are now at their lowest seasonal level since 2019.

Distillate stockpiles, which include diesel and heating oil, fell by 3.3 million barrels in the week to 122.8 million barrels, versus expectations for a 215,000 barrel drop, the EIA data showed.

Both U.S. gasoline and heating oil futures were up following bigger than expected draws in stockpiles. Gasoline futures turned negative along with U.S. crude in the hour following the report.

A gold rush is here. The precious metal hit an all time high this week.

The spot price for gold closed Tuesday above $2,514, according to data from FactSet. That’s the highest closing price recorded for the commodity to date. Here’s what you need to know.

What is the price of gold today?

The spot price of gold closed Tuesday at just over $2,514 per Troy ounce — the standard for measuring precious metals, which is equivalent to 31 grams. That would make a gold bar or brick weighing 400 Troy ounces worth more than $1 million today.

This week’s record high means that the price of gold has climbed hundreds of dollars per Troy ounce over the last year. Tuesday’s price is up nearly $620 from this time in 2023.

Why is the price of gold going up?

There are a few factors behind the recent gains.

Interest in buying gold often comes at times of uncertainty — with potential concerns around inflation and the strength of the U.S. dollar, for example, causing some to look for alternative places to park their money. Gold also saw a surge in the early days of the COVID-19 pandemic.

Giovanni Staunovo, a commodity analyst at UBS Global Wealth Management, said the main drivers of recent gold gains have been the weaker U.S. dollar and expectations that the Federal Reserve will cut its benchmark interest rate next month. With particular concern focused on the health of the job market, all eyes will be on a Friday speech from Fed Chair Jerome Powell in Jackson Hole, Wyoming.

Another factor is strong demand from central banks — which is currently well-above the five year average, notes Joe Cavatoni, senior market strategist at the World Gold Council. Cavatoni says this “reflects heightened concern with inflation and economic stability.” He also pointed to ongoing geopolitical tensions, among other factors, that have caused some to buy more gold recently.

The wars in Ukraine and Gaza have notably fueled uncertainty around the world. And numerous countries, including the United States, are also in the midst of a tumultuous election year — which could prove crucial to future economic policy.

Is gold worth the investment?

Advocates of investing in gold call it a “safe haven,” arguing the commodity can serve to diversify and balance your investment portfolio, as well as mitigate possible risks down the road. Some also take comfort in buying something tangible that has the potential to increase in value over time.

Staunovo’s team at UBS forecasts the price of gold will reach $2,600 by this year’s end — and $2,700 by mid-2025. UBS sees lower U.S. interest rates and the weaker dollar supporting inflows into gold ETFs, or exchange traded funds, consequently boosting investment demand.

Still, future gains are never promised and not everyone agrees gold is a good investment. Critics say gold isn’t always the inflation hedge many say it is — and that there are more efficient ways to protect against potential loss of capital, such as through derivative-based investments.

The Commodity Futures Trade Commission has also previously warned people to be wary of investing in gold. Precious metals can be highly volatile, the commission said, and prices rise as demand goes up — meaning “when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers.”

If you do choose to invest in gold, the commission adds, it’s important to educate yourself on safe trading practices and be cautious of potential scams and counterfeits on the market.

U.S. job growth during much of the past year was significantly weaker than previously reported, according to new data published Wednesday.

The Bureau of Labor Statistics revised down its total tally of jobs created in March by 818,000 as part of its preliminary annual benchmark review of payroll data.

It marks the largest downward revision since 2009, and suggests the labor market began losing steam earlier than initially thought.

“The labor market appears weaker than originally reported,” said Jeffrey Roach, chief economist at LPL Financial. “A deteriorating labor market will allow the Fed to highlight both sides of the dual mandate and investors should expect the Fed to prepare markets for a cut at the September meeting.”

The revised data is mostly derived from state unemployment tax records that employers are required to file. The figure may be updated when the government releases the final figure in February 2025.

https://www.cnbc.com/2024/08/21/nonfarm-payroll-growth-revised-down-by-818000-labor-department-says.html

Canada’s annual inflation rate fell to 2.5 per cent in July, largely driven by lower prices for travel tours, passenger vehicles and electricity.

It was the lowest inflation rate since March, 2021, and matched analyst expectations. It also brings consumer price growth even closer to the Bank of Canada’s 2-per-cent target.

The next Bank of Canada interest rate announcement is on Sept. 4.

Gold prices traded lower on Monday but held about $2.500 per ounce amid optimism that cooling U.S. inflation would kick off a cycle of interest rate cuts.

A weaker dollar, heightened Middle East tensions and lingering concerns over China’s property market helped limit bullion’s losses to some extent.

Spot gold dipped 0.3 percent to $2,501.06 per ounce while U.S. gold futures were marginally higher at $2,539.50

The dollar began the week on a weak note after a couple of Fed officials said its time to adjust borrowing costs.

In an interview with the Financial Times published on Sunday, San Francisco Federal Reserve Bank President Mary Daly noted that it is time to consider adjusting borrowing costs.

Separately, Chicago Fed President Austan Goolsbee stated in a CBS interview that maintaining high rates for too long might create a problem on the employment side of the Fed’s mandate.

Investors now look ahead to the release of minutes from the Fed’s most recent meeting on Wednesday and Federal Reserve Chair Jerome Powell’s Jackson Hole, Wyoming, speech on Friday, for more clarity on the possibility of easing in September.

On the geopolitical front, the U.S. is pushing for a deal between Israel and Hamas to end the war on Gaza, calling it ‘maybe the last opportunity to get the hostages home’.

Oil prices fell on Monday to extend losses from the previous session amid concerns about the outlook for oil demand from China and U.S.-led efforts to secure a cease-fire in the 10-month-old Middle East conflict.

Brent crude futures fell 0.8 percent to $79.08 a barrel, while WTI crude futures were down 1 percent at $74.81.

China’s economic activity data released last week proved to be a mixed bag. Also, data showed China’s oil refinery output declined for the fourth consecutive month in July, reflecting a slowdown in fuel demand.

Investors also kept a close eye on the developments in the Middle East as the U.S. pushed for a deal between Israel and Hamas to end the war on Gaza, calling it ‘maybe the last opportunity to get the hostages home’.

Israel has expanded its ground invasion of Gaza as U.S. Secretary of State Antony J. Blinken warned against attempts to derail the Gaza ceasefire process.

Blinken met with officials in Israel today at what he called “a decisive moment” for diplomatic negotiations aimed at reaching a cease-fire in Gaza and securing the release of hostages.

For the first time, Canada’s two main railway companies – Canadian National Railway and Canadian Pacific Kansas City – are on the verge of a simultaneous labour stoppage that could inflict billions of dollars’ worth of economic damage.

Why are both companies poised to stop?

Contract talks between the Teamsters union and the companies usually take place a year apart, but in 2022, after the federal government introduced new rules on fatigue, CN requested a year-long extension to its existing deal rather than negotiate a new one.

This meant both companies’ labour agreements expired at the end of 2023 and talks have been ongoing since. As a result, for the first time, the failure of negotiations would halt the vast majority of the Canadian freight rail system.

The Teamsters represent around 10,000 members who work as locomotive engineers, conductors, train and yard workers and rail traffic controllers at the two companies in Canada.

What is likely to happen next?

The companies say they will start locking out workers in the early hours of Thursday if they cannot reach a deal, while the union says it is ready to call a strike for that day. CPKC has already given formal notice of a lockout.

CPKC, created in 2023 through a merger of Canadian Pacific and Kansas City Southern, has a U.S. and Mexican network which it says will operate normally. CN also says trains on its U.S. network will run.

That said, a strike will still lead to shipment disruptions south of the border. Both rail operators and some of their U.S. competitors have begun to refuse certain cross-border cargoes that would rely on the CN and CPKC networks.

CPKC has said it would halt new rail shipments originating in Canada, and new U.S. shipments destined for Canada starting Aug. 20, if talks with the Teamsters union in Canada fail to progress.

The railways move grain, autos, coal and potash, among other shipments.

What are the sides arguing about?

The union says CPKC wants “to gut the collective agreement of all safety-critical fatigue provisions,” meaning crews will be forced to stay awake longer, boosting the risk of accidents.

CPKC says its offer maintains the status quo for all work rules, “fully complies with new regulatory requirements for rest and does not in any way compromise safety.”

The Teamsters say CN wants to implement a forced relocation provision, which would see workers ordered to move across Canada for months at a time to fill labour shortages.

CN says it has made four offers this year on wages, rest, and labour availability while remaining fully compliant with government-mandated rules overseeing duty and rest periods.

What can the federal government do?

Under article 107 of the federal labour code, Labour Minister Steven MacKinnon has broad powers and can order the sides to enter binding arbitration. In 2023, his predecessor, Seamus O’Regan, issued such an order to end a dockworkers strike in British Columbia. In that case, unlike the current rail dispute, the sides had largely agreed on the outlines of a deal.

MacKinnon rejected a request last week by CN for binding arbitration, urging the sides instead to put in more effort at the negotiating table.

What happens if the union strikes?

If the Teamsters call a strike, the government can introduce back-to-work legislation forcing them to resume work. The previous federal Conservative government did that in 2012 to end a walkout by Canadian Pacific workers.

The current Liberal government though, has shown little interest in such a move in past disputes, preferring the sides to focus on negotiations. A complicating factor is that Prime Minister Justin Trudeau’s government is being kept in power by the left-leaning New Democrats, who have traditionally enjoyed strong union support.

The Canadian market ended slightly up on Friday, moving up for a seventh straight session, with gains in the materials sector contributing to the positive close.

Easing concerns about U.S. economic growth and continued optimism about interest rate cuts from the Federal Reserve helped underpin sentiment.

The benchmark S&P/TSX Composite Index ended up by 21.89 points or 0.1% at 23,054.61. The index moved in a tight band between 22,984.44 and 23,070.60. The index gained about 3.3% in the week.

Agnico Eagle Mines (AEM.TO), Sprott Inc (SII.TO), Wheaton Precious Metals (WPM.TO), Canadian Imperial Bank of Commerce (CM.TO), Franco-Nevada Corporation (FNV.TO), Morguard Corporation (MRC.TO) and Canadian Tire Corporation gained 1 to 2.2%.

Celestica Inc (CLS.TO), Cogeco Communications (CCA.TO), West Fraser Timber (WFG.TO), Toromont Industries (TIH.TO), Precision Drilling Corporation (PD.TO), Stella-Jones (SJ.TO), TerraVest Industries (TVK.TO), EQB Inc (EQB.TO), FFI International (TIF.TO), Cargojet Inc (CJT.TO) and Waste Connections (WCN.TO) ended weak by 1 – 2.6%.

On the economic front, data from Canada Mortgage And Housing Corporation said housing starts in Canada surged by 16% over a month to 279,500 units in July, the highest since June 2023.

A report from Statistics Canada showed manufacturing sales declined 2.1% month-over-month in June 2024, compared to the preliminary estimate of a 2.6% fall, following a downwardly revised 0.2% rise in the previous month.