Oil company earnings underwhelm despite crude price flirting with US$85 a barrel
BNN Bloomberg
Oil prices rose this week as tightening supply conditions and ongoing tensions in the Middle East contributed to push prices higher.
West Texas Intermediate crude (WTI) is flirting with the US$85 a barrel level, having gained almost 3 per cent since last Friday. This surge comes amidst a backdrop of decreasing U.S. crude inventories and key time spreads in the market showing signs of tightening.
Escalating tensions between Israel and Iran and supply curbs enacted by OPEC+ are also supporting the upward momentum in oil prices. These tensions pushed WTI prices above $86 a barrel earlier in the month, with Israel now intensifying preparations for a possible comprehensive war with Hezbollah.
But according to Vikas Dwivedi, global energy strategist at Macquarie Group, that upward momentum could evaporate as the year progresses. “We think it will just start to go away," he said of the risk premium that war has priced in. "And then … actual supply-demand fundamentals will start to exert themselves via surpluses in a bearish manner."
Manufacturing sales fell 2.1 per cent to $69.9 billion in March as sales of petroleum and coal products and motor vehicles fell, Statistics Canada said Wednesday. Olivia Cross, North America economist at Capital Economics, said the result was not as bad as the early estimate that pointed to a drop of 2.8 per cent, but it still means sales fell 0.9 per cent over the first quarter. "The weakness of manufacturing sales in March suggests that the economy lost momentum heading into the second quarter, matching the message from the earlier preliminary estimates for retail sales and GDP," Cross said in a note. Last month, Statistics Canada released a pair of preliminary estimates for real gross domestic product and retail sales for March that both suggested the data points were essentially unchanged for the month. Driving the manufacturing sales numbers for March was an 8.0 per cent drop in sales of petroleum and coal products to $8.0 billion as volumes fell 6.1 per cent. Sales of motor vehicles fell 7.9 per cent to $4.6 billion in March as sales of motor vehicle parts lost 2.8 per cent. Statistics Canada says retoolings at several major auto assembly plants in Ontario continued to impact auto manufacturing and contributed to the lower sales for the month. Meanwhile, sales of machinery rose 2.9 per cent to $4.5 billion in March. The increase came as sales in all seven machinery industry groups climbed higher, led by commercial and service industry machinery which gained 41.6 per cent. Overall manufacturing sales in constant dollars fell 2.0 per cent in March. Total inventories for the month were largely unchanged at $121.0 billion in March, while unfilled orders fell 0.8 per cent to $104.8 billion. This report by The Canadian Press was first published May 15, 2024.