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Here's What Oil at $70 Means for the World Economy

Rising oil prices are a double-edged sword for the world economy.

With the price of crude up 14 percent this year and now trading at the highest since 2014, exporters of the fuel get to enjoy a windfall while consuming nations get hurt.
 
Much ultimately depends on the reason why prices are pushing higher. An oil shock on the back of constrained supply is a negative though higher prices due to robust demand may just reflect solid global growth.

Either way, there are winners and losers, especially among emerging economies. Countries who rely on imported energy will be squeezed as costs go up, balances of payments become strained and inflation accelerates. For exporters, government coffers will get a fillip.

U.S. President Donald Trump’s plan to withdraw from the 2015 accord to curb Iran’s nuclear program poses fresh uncertainty although Bloomberg Economics reckons that and similar supply shocks account for half of oil’s recent rise.

1. What does it mean for global growth?

The world economy is enjoying its broadest upswing since 2011 and higher oil prices would drag on household incomes and consumer spending, but the impact will vary. Europe is vulnerable given that growth and industrial activity already are moderating and many of the region’s countries are oil importers. China is the world’s biggest importer of oil and could expect an uptick in inflation -- prices already are tipped to increase 2.3 percent in 2018 from 1.6 percent in 2017. For a sustained hit to global growth, economists say oil would need to push higher and hold those levels. Seasonal effects mean energy costs often increase during the first half of the year before easing. Consumers can also switch energy sources to keep costs down, such as biofuels or natural gas.

2. How will Iran impact the the market?

Oil prices have risen 14 percent this year -- half of this increase reflectsstronger global demand, a Bloomberg Economics model suggests. The rest is likely due to heightened tensions with Iran and other supply shocks. The return of U.S. sanctions could crimp Iranian oil exports, but the global supply shock might be mitigated by increased pumping elsewhere, according to the analysis. Here’s a chart.

3. Who wins from higher oil prices?

Most of the biggest oil-producing nations are emerging economies. Saudi Arabia leads the way with a net oil production that’s almost 21 percent of gross domestic product as of 2016 -- more than twice that of Russia, which is the next among 15 major emerging markets ranked by Bloomberg Economics.

Other winners could include Nigeria and Colombia. The increase in revenues will help to repair budgets and current account deficits, allowing governments to increase spending that will spur investment.

4. Who loses?

India, China, Taiwan, Chile, Turkey, Egypt and Ukraine are among those on the worry list. Paying more for oil will pressure current accounts and make economies more vulnerable to rising U.S. interest rates. Bloomberg Economics has ranked major emerging markets based on vulnerability to shifts in oil prices, U.S. rates and protectionism.

Analysts at RBC Capital Markets created an “oil sensitivity index” to judge the economies most exposed in Asia. They warn that Malaysia, Thailand, China and Indonesia could face the most volatility from an oil-price spike.

5. What does it mean for the U.S. economy, the world’s biggest?

A run-up in oil prices poses a lot less of a risk to the U.S. economy than it used to, thanks to the boom in shale oil production. The old rule of thumb among economists was that a sustained $10 per barrel rise in oil prices would shave about 0.3 percent off of U.S. GDP the following year. Now, says Mark Zandi, chief economist at Moody’s Analytics, the hit is around 0.1 percent. And that all but dissipates in subsequent years as shale oil production is ramped up in response to the higher prices. The Baker Hughes U.S. rig count already is at a three-year high.

As the U.S. nears the tipping point between net oil importer and exporter, some forecasts are less upbeat. Gregory Daco, the U.S. chief for Oxford Economics, estimates that if WTI crude prices average $70 a barrel this year, U.S. growth will lose half the 0.7 percentage point gain it would otherwise earn from tax cuts passed earlier in 2018.

Oil-producing states such as North Dakota, Texas and Wyoming should benefit from higher extraction activity, though Daco warns that productivity enhancements could limit that upside. Poorer households have the most to lose. They spend about 8 percent of their pre-tax income on gasoline, compared to about one percent for the top fifth of earners.

6. Will it lead to higher inflation around the world?

While the influence of energy prices in overall consumer price baskets varies widely by economy, the category claims a double-digit share in economies such as Indonesia, Malaysia and New Zealand, according to RBC Capital Markets tallies.

Energy prices often carry a heavy weight in consumer price gauges, prompting policy makers including those at the Fed to focus simultaneously on core indexes that remove volatile food and energy costs. But a substantial run-up in oil prices could provide a more durable uptick for overall inflation as the costs filter through to transportation and utilities and other associated industries.

What Our Economists Say:

“Pass-through from oil prices to inflation is less than it used to be. At a country level, the oil share in the energy mix, degree of slack in the economy, and use of price controls and subsidies all modulate the impact.”
-- Tom Orlik and Justin Jimenez, Bloomberg Economics

7. What does it mean for central banks?

If stronger oil prices substantially boost inflation, central bankers on balance will have one less (big) reason to keep monetary policy on hold while the Fed moves ahead in its tightening cycle.

Among the most-exposed economies, central bankers in India could have a big headache from a surge in crude oil prices. Alongside sharp weakness in the rupee, economists already are pushing forward their forecasts for the Reserve Bank of India’s interest-rate increases as India’s biggest import item gets more expensive.

Greater overall price pressures also could prompt faster monetary policy tightening in economies such as Thailand and Indonesia, which otherwise have used benign inflation as among reasons to stay patient on interest rates.

— With assistance by Jessica Summers, and Dan Murtaugh

SOURCE: BLOOMBERG

Canadian dollar hits 7-week low as oil falls, greenback climbs

TORONTO (Reuters) - The Canadian dollar weakened to a nearly seven-week low against its U.S. counterpart on Tuesday, with the currency breaking out of its recent holding pattern as oil prices fell and the greenback broadly gained.

At 4 p.m. EST (2000 GMT), the Canadian dollar CAD=D4 was trading 0.5 percent lower at C$1.2952 to the greenback, or 77.21 U.S. cents.

“It’s a big dollar move,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “We had resistance right around 1.2900. When we broke that we nearly got to 1.3000.”

The currency hit its weakest level since March 21 at C$1.2998, while the U.S. dollar .DXY surged to a 2018 high against a basket of major currencies.

The price of oil, one of Canada’s major exports, recouped some losses after U.S. President Donald Trump confirmed the U.S. will withdraw from the Iran nuclear deal, in a volatile session in which prices slumped as much as 4 percent earlier in the day.

U.S. crude oil futures CLc1 settled $1.67 lower at $69.06 a barrel.

Canadian, Mexican and U.S. officials hailed progress on revamping NAFTA as efforts focused on crafting new rules for the auto sector, but there was no sign of a major breakthrough.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR dipped 3.5 Canadian cents to yield 1.934 percent and the 10-year CA10YT=RR declined 18 Canadian cents to yield 2.348 percent.

Canadian housing starts declined in April to a seasonally adjusted annual rate of 214,379 units as builders responded to slowing sales in Toronto, Canada’s largest city, data from the Canada Mortgage and Housing Corporation showed on Tuesday.

Canada’s jobs report for April is due on Friday.

Reporting by Fergal Smith; Editing by Sandra Maler

SOURCE: REUTERS

Shell to Exit Canadian Natural Resources for $3.3 Billion

Royal Dutch Shell Plc has agreed to sell out of oil-sands producer Canadian Natural Resources Ltd. The Anglo-Dutch company’s Shell Gas BV unit will divest all its shares in Canadian Natural for total pretax proceeds of $3.3 billion, The Hague-based Shell said Monday. The sale serves the dual purpose of shedding one of its dirtiest assets, while reducing debt accumulated after the $50 billion purchase of BG Group Plc. The shares are being offered at $34.10 apiece, according to a person familiar with the matter. That’s a 2.9 percent discount to Canadian Natural’s close on Monday in New York. The stock fell 3.8 percent to $33.78 at 9:36 a.m. in New York on Tuesday. Shell had accounted for the money from the sale in its divestment program when the deal was originally announced last year and it doesn’t bring the company closer to its $30 billion target. At the end of the first quarter, Shell had completed $26 billion of that program. Beyond short-term debt reduction, the sale also has longer-term benefits. Chief Executive Officer Ben van Beurden has said he’s keen to demonstrate how an oil major can navigate a world focused on cutting emissions. He has repositioned Shell to focus on cleaner natural gas, shedding carbon-intensive assets such as oil sands. The Canadian Natural sale was initially flagged last year, when oil prices were about $20 a barrel lower. Shell said at the time it would sell almost all its production assets in Canada’s oil sands in a $7.25 billion deal. As part of that accord, Canadian Natural agreed to issue about C$4 billion ($3.1 billion) of its shares to Shell in payment for various assets.Shell Gas has entered into an underwriting agreement with Goldman Sachs & Co., RBC Capital Markets, Scotiabank and TD Securities for the sale of the stake. Canadian Natural shares closed at $35.11 on Monday.

Canadian Natural Resources to limit output during oil transport crunch

(Reuters) - Canadian Natural Resources Ltd (CNRL) (CNQ.TO), one of Canada’s biggest oil and gas producers, will produce less than expected this spring, it said on Thursday, as transport bottlenecks pressure prices of Canadian heavy crude.

Tight capacity on pipelines and rail lines from the province of Alberta early this year led to the biggest discount in four years on Canadian heavy crude compared to U.S. benchmark light oil. The space crunch has since abated, shrinking the discount closer to normal levels.

It has, however, hampered shipments to U.S. Gulf of Mexico refiners that depend on heavy crude instead of the U.S. light oil being produced in abundance from shale rock.

Calgary-based CNRL forecast production in the current second quarter of 1.054 million barrels of oil equivalent per day, missing analysts’ average estimate of 1.134 million, investment bank Tudor, Pickering, Holt & Co said in a note. Forecast output would still exceed that of a year earlier.

“We are in a very strong, enviable position to be able to curtail natural gas and heavy oil volumes when pricing anomalies arise due to Western Canada’s pipeline constraints,” said CNRL President Tim McKay on a conference call.

Canadian Natural shares fell 3.9 percent in Toronto to C$44.68.

Canadian crude production is expanding even though production costs exceed those in U.S. shale oil basins, but capital spending has declined sharply.

Suncor Energy Inc (SU.TO) Chief Executive Officer Steve Williams said on Wednesday that company would not make further major investments in Alberta’s oil sands until market access improves.

Kinder Morgan Canada (KML.TO) has paused work on its Trans Mountain pipeline expansion, citing opposition in British Columbia, and said it would decide by May 31 whether to proceed.

Fellow producer Cenovus Energy Inc (CVE.TO), also struggling with transport constraints, has operated at lower capacity this year.

Production limits are also due to downtime at the Horizon mine, where CNRL is carrying out debottlenecking work to raise capacity, Eight Capital said in a note.

The company’s first-quarter profit beat forecasts, boosted by higher overall oil production.

CNRL, which operates in Western Canada, the North Sea and offshore West Africa, said overall production rose to 1.12 million barrels of oil equivalent per day (boepd) in the first quarter from 876,907 boepd a year earlier.

Net income rose to C$583 million, or 47 Canadian cents per share, from C$245 million, or 22 Canadian cents, a year earlier.

 

Excluding items, the company earned 71 Canadian cents per share, beating the average forecast of 66 Canadian cents, according to Thomson Reuters I/B/E/S.

Reporting by Rod Nickel in Winnipeg, Manitoba and Karan Nagarkatti in Bengaluru; Editing by Amrutha Gayathri and David Gregorio

SOURCE: REUTERS

Alberta to hold talks on crude transport with producers, railways: minister

CALGARY, Alberta (Reuters) - Alberta will hold talks with rail operators and oil producers aimed at smoothing the path to get more crude moving by rail amid a transportation bottleneck in the Western Canadian province, Alberta’s energy minister said on Wednesday.

The first session on Friday will include senior executives from Canada’s top oil producers and the two main railways, Canadian Pacific Railway and Canadian National Railway, the minister, Margaret McCuaig-Boyd, told reporters at a Calgary conference.

“We’re hearing there’s constraints and there’s gaps between the rail companies and producers, so what are those gaps and how can we address them,” she said.

Railways, who added crude by rail capacity earlier this decade only to have the market vanish as pipeline space opened up, have been slow to move back in the oil transport business, asking producers to sign longer-term deals. But oil producers want flexibility to switch to pipeline, which is far cheaper, if capacity becomes available.

“A pipeline isn’t going to be built overnight. So we need to have strategies for all market access,” said McCuaig-Boyd.

Canada’s energy producers are struggling as increased oil sands output has run up against a lack of new export pipelines and tight rail capacity, sending the differential between Canadian oil prices and the U.S. crude benchmark to multi-year highs.

Adding to the crunch, Kinder Morgan Canada paused work last month on its Trans Mountain pipeline expansion, citing opposition in British Columbia, and said it would decide by May 31 on whether to go ahead with the build or not.

Both Alberta and Canada’s federal government have pledged financial support to the project, which would nearly triple capacity on an existing line from Alberta to a B.C. port.

When asked about Alberta’s financial pledge, McCuaig-Boyd said the government was open to “all options,” though she declined to clarify if the province was considering an ownership stake in just the project or the entire pipeline or company.

Reporting by Julie Gordon in Calgary; Editing by Phil Berlowitz and Grant McCool

SOURCE: REUTERS

Oil Rebound Helps Halt Decline in Canadian Consumer Sentiment

Stronger oil prices and brighter prospects for a Nafta deal have put the brakes on a three-month slide in Canadian consumer confidence.

Prices for oil -- a key Canadian export -- jumped to their highest in three years this month, helping the Canadian dollar rebound from its recent slump. Also bolstering confidence have been the steady progress toward a renewed North American Free Trade Agreement, signals from the Bank of Canada it’s in no rush to raise interest rates further and indications the country’s biggest housing markets are stabilizing.

“Many Canadians are transfixed by both the Nafta talks and the price of oil,” said Nik Nanos, chairman of Nanos Research Group. “Consumer confidence has followed a roller coaster ride along both of those fronts.”

The Bloomberg Nanos Canadian Confidence Index -- a composite gauge based on telephone surveys -- recorded its first monthly gain of 2018 in April, after falling to the worst reading in more than a year in March. While sentiment remains below average, the data suggest the unease households reported to start the year is at the very least not deepening.

Consumer confidence suffered a sharp drop off between January and March from near record highs at the end of last year as the nation’s economy was battered by headwinds including higher interest rates and concern about the housing market. It was one of the largest reversals for the confidence index since Nanos began weekly tracking in 2013, and came as a surprise given the strength of the nation’s labor market over the past year.

Yet, despite strong job gains, the economy has entered a slow patch. The Bank of Canada estimated growth in the first quarter was 1.3 percent, the slowest since 2016 and the third-straight quarter of sub-2 percent growth.

Most economists expect the economy to return to above-2 percent growth for the rest of the year, a process that should be helped by higher income from rising energy prices and a pick up in investment.

Oil prices in April surged to levels last seen in 2014 and is up almost 10 percent over the past two months, while negotiations to come up with a Nafta deal -- which have been a drag on business spending plans -- are intensifying and an agreement in principle could be reached as early as next month.

The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone responses to questions about personal finances, job security, the outlook for the economy and real estate prices. The survey has a margin of error of 3.1 percentage points.

The index ended April at 57.9, up from 56.8 in March but still below the average of the past 12 months. It touched 62.2 at the end of December, close to a record. When compared to year-earlier levels, the index has declined for three straight months -- something that hasn’t happened since early 2016.

Yet, sentiment appears to be stabilizing. The percentage of Canadians giving the most pessimistic responses fell to 18 percent, down from 19.1 percent in March. While still up from 14.2 percent at the end of 2017, it’s closer to historical averages. The share of Canadians giving the most optimistic responses was up slightly to 32.5 percent, from 32 percent in March. It reached a record 37.4 percent in December.

Regionally, Alberta and other prairie provinces recorded the biggest increases in sentiment, reflecting the improved outlook for oil. Quebec continues to post the highest confidence levels in the country.

SOURCE: BLOOMBERG

Canadian dollar recovers from three-week low, slips 0.4 percent for week

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday but still declined 0.4 percent for the week as recent comments from the Bank of Canada weighed on the currency and higher U.S. Treasury yields boosted the greenback.

At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2831 to the greenback, or 77.94 U.S. cents. It touched its weakest since April 3 at C$1.2900.

“We had over the last few days some dovish statements coming out of the Bank of Canada,” said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

“They became a bit more concerned about the strength of the Canadian economy, so that took away some expected rate hikes out of the curve and that pushed the Canadian dollar weaker.”

The loonie has declined more than two percent since the Bank of Canada last week held its benchmark interest rate steady at 1.25 percent and said it did not know when or how aggressive it would need to be to keep inflation in check.

The central bank has worried about uncertainties that could hurt the economy, including a shift toward protectionist global trade policies.

Negotiators trying to hammer out a quick deal to revamp the North American Free Trade Agreement said they will take a break until May 7, allowing time for consultations with the auto industry in Mexico and for U.S. Trade Representative Robert Lighthizer to visit China.

Speculators have trimmed bearish bets on the Canadian dollar for the third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of April 24, net short positions had fallen to 25,144 contracts from 30,324 a week earlier.

U.S. crude oil futures settled 0.1 percent lower at $68.10 a barrel. Oil is one of Canada’s major exports.

The U.S. dollar held steady despite a government report showing slower U.S. first-quarter economic growth, with the currency on track to end its strongest week since November 2016.

 

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as investors worried about the strength of the global economy.

The two-year rose 3.5 Canadian cents to yield 1.896 percent and the 10-year climbed 27 Canadian cents to yield 2.321 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and James Dalgleish

SOURCE: REUTERS

TransCanada profit beats, Keystone running near normal throughput

(Reuters) - TransCanada Corp (TRP.TO) on Friday beat profit estimates and said it does not expect major changes in throughput on its Keystone pipeline once pressure restrictions related to a leak in South Dakota are removed.

Net income rose to C$734 million, or 83 Canadian cents per share, in the first quarter from C$643 million, or 74 Canadian cents per share, for the same period in 2017. (bit.ly/2r4qjZn)

Excluding items, TransCanada earned 98 Canadian cents per share, beating analysts’ average estimate by 14 cents, according to Thomson Reuters I/B/E/S.

Pressure has been restricted on the 590,000 barrel per day Keystone pipeline since late last year, after the line leaked some 9,700 barrels of oil in South Dakota.

The restrictions “really did have a minor impact on our throughput and so consequently, I don’t anticipate seeing a tremendous increase in our throughput once it’s lifted, based on some of the changes we’ve made already,” said TransCanada’s head of liquids Paul Miller on a conference call.

Miller also said the company was continuing to work towards starting construction on the Keystone XL expansion in 2019 and that $8 billion remains “a good number” for capital costs.

The long-delayed Keystone XL project has pitted environmentalists, who worry about spills, against industry, who say the project will shore up discounted Canadian oil prices and attract investment to Canada’s energy sector.

The company also said the LNG Canada liquefied natural gas export project was looking positive following news the company had selected a contractor to lead construction.

TransCanada, which is building the pipeline that would connects the export terminal to Canadian gas fields, said the bulk of its capital spending will be in 2021 and 2022, assuming the project goes ahead.

The company expects to invest C$21 billion in the near term, down from the C$23 billion it had earmarked earlier.

TransCanada said earnings from its oil pipelines, of which Keystone is the biggest contributor, rose 50 percent to C$341 million ($264.90 million) in the first quarter .

TransCanada said earnings from its Canadian natural gas pipelines fell 10.2 percent to C$253 million in the reported quarter.

Revenue rose marginally to C$3.42 billion from C$3.41 billion.

Reporting by Yashaswini Swamynathan and Anirban Paul in Bengaluru and Julie Gordon in Toronto; Editing by Saumyadeb Chakrabarty and Cynthia Osterman

SOURCE: REUTERS

 

CANADA FX DEBT-C$ hits 11-day low as rate hike bets slip on inflation miss

* Canadian dollar at C$1.2756, or 78.39 U.S. cents
* Loonie touches its weakest since April 9 at C$1.2756
* Currency falls 1.1 percent for the week
* Bond prices mixed across steeper yield curve
By Fergal Smith
TORONTO, April 20 (Reuters) - The Canadian dollar weakened to an 11-day low against its U.S. counterpart on Friday after data showing domestic inflation rose at a slower-than-forecast pace further reduced expectations for an interest rate hike next month from the Bank of Canada. Canada's annual inflation rate in March edged up to 2.3 percent from 2.2 percent in February, the highest level in more than three years, Statistics Canada said. Analysts had forecast a 2.4 percent annual inflation rise. The increase was "a little less than expected, so the currency sold off on that," said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management. The data indicated that the Bank of Canada can raise interest rates at a slightly slower pace, Marjaee said. The Bank of Canada left its benchmark interest rate on hold at 1.25 percent on Wednesday and said it did not know when or how aggressive it would need to be to keep inflation in check. Chances of an interest rate hike in May have fallen to 27 percent from about 40 percent before the rate announcement . In separate data, Canadian retail sales grew by 0.4 percent in February. At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.7 percent lower at C$1.2756 to the greenback, or 78.39 U.S. cents, its weakest level since April 9. For the week, the loonie fell 1.1 percent. Declines for the loonie came even as Canada and Mexico said good progress had been made in talks with the United States to modernize the North American Free Trade Agreement (NAFTA). Canada's trade dependent economy could benefit if a NAFTA deal is reached. Speculators have trimmed bearish bets on the Canadian dollar for the second straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of April 17, net short positions had fallen to 30,324 contracts from 31,672 a week earlier. The price of oil, one of Canada's major exports, recovered after an earlier slide driven by U.S. President Donald Trump's criticism of OPEC's role in pushing up global oil prices. U.S. crude oil futures settled 0.1 percent higher at $68.38 a barrel. Canadian government bond prices were mixed across a steeper yield curve, with the 10-year falling 10 Canadian cents to yield 2.333 percent. The gap between Canada's 10-year yield and its U.S. counterpart widened by 2.6 basis points to a spread of -62.0 basis points. (Reporting by Fergal Smith, editing by G Crosse)

SOURCE: REUTERS

Vermilion to Buy Spartan Energy for $860 Million in Stock

  • Deal comes amid pipeline bottlenecks, low domestic oil prices
  • ‘The company clearly sees good value in Canada’ analyst says

    Vermilion Energy Inc. agreed to buy Spartan Energy Corp. for about C$1.08 billion ($860 million) in stock, adding to its production and acreage in southeast Saskatchewan in the largest oil and gas company takeover in Canada this year.

    Spartan holders will get 0.1476 of a Vermilion share for each Spartan share, Vermilion said in statement Monday. That represents a premium of 5 percent, based on Friday’s closing prices. Vermilion also will assume about C$175 million of debt. The company expects the transaction to close on or about June 15.
     
    The deal is the latest in a series of moves by Vermilion to boost its position in Saskatchewan, an area the company prefers for profitability and a favorable regulatory environment as Canadian oil companies struggle with pipeline bottlenecks and prices that have trailed the global rebound. Vermilion entered the region in 2014 with the purchase of Elkhorn Resources Inc. and added acreage there in 2017 and 2018.
     
    "At first glance this looks like a very good deal for Vermilion,” Dave Popowich, an analyst at CIBC World Markets said in a note to clients. “We have seen Vermilion as a natural acquirer of assets in the ongoing industry downturn, and the company clearly sees good value in Canada at current asset prices.”

    Energy Deals

    Vermilion’s takeover of Spartan comes amid a moribund environment for deals in Canada’s energy patch, with the value of mergers and acquisitions falling to $5.2 billion through April 16 from $34.2 billion for the same period last year.

    Investors have shied from Canadian oil stocks with pipeline and political frustrations reaching new heights, while analysts see the potential for deals providing a potential catalyst. “While the equity markets may penalize acquirers in the short-term, we think well-priced acquisitions of quality assets can generate significant value for shareholders over time,” BMO Capital Markets told clients earlier this month.

    Canada’s S&P/TSX Composite Energy index has slumped 10 percent over the past 12 months compared with a gain of 4.3 percent for their U.S. peers, though Western Canadian Select, a benchmark for oil sands producers, has rebounded recently to trade $15 below WTI futures, the smallest gap since November.

    Pipeline Politics

    Canadian pipeline politics have grabbed global attention as Kinder Morgan Inc. seeks to push its Trans Mountain pipeline project ahead amid objections from the province of British Columbia. Unable to dissuade British Columbia in its fight against the C$7.4 billion pipeline which exits on the west coast, Prime Minister Justin Trudeau has said his government will start talks with Kinder to backstop the pipeline.

    Spartan has annual production of about 23,000 barrels and covers about 480,000 acres, according to the statement. The output is 91 percent oil.

    As a result of the deal, Vermilion raised its 2018 production forecast to a range of 86,000 barrels of oil equivalent per day to 90,000 a day, up from 75,000 to 77,500 a day. It raised the capital budget about 32 percent to C$430 million from C$325 million.

    TD Securities Inc. acted as Spartan’s financial adviser, while GMP FirstEnergy and Peters & Co. Limited are acting as strategic advisers to Spartan. No adviser was listed for Vermilion.

    — With assistance by Scott Deveau

    SOURCE: BLOOMBERG

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