C$ strengthens ahead of NAFTA talks as wholesale trade rises

* Canadian dollar at C$1.2459, or 80.26 U.S. cents * Canadian wholesale trade rises 0.7 percent in November * Bond prices little changed across the yield curve TORONTO, Jan 22 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday, gravitating toward the middle of this year's range ahead of the resumption of talks to renegotiate NAFTA and as investors weighed domestic data showing an increase in wholesale trade. The value of Canadian wholesale trade rose for the second month in a row in November on broad gains across sectors, data from Statistics Canada showed. The 0.7 percent increase was shy of economists' forecasts for a 1 percent gain, while volumes rose 0.5 percent. The sixth and penultimate round of talks on renegotiating the North American Free Trade Agreement is due to take place in Montreal from Jan. 23-29. The future of NAFTA was the most significant downside risk the economy faced, the Bank of Canada said last week as it raised its benchmark interest rate, as expected, but tempered expectations for additional increases over the coming months. Separately, the member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP), also known as TPP 11, gathered in Japan for two days of talks to try to forge a trade pact. Canada is holding out to secure protection of its cultural industries, like movies, TV, and music, and has said it will not be rushed into signing a deal that other members hope to conclude by March. At 9:20 a.m. EST (1420 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2459 to the greenback, or 80.26 U.S. cents. The currency traded in a range of C$1.2457 to C$1.252. Since the start of the year, the range has been C$1.2355 to C$1.2590. Speculators have raised bullish bets on the Canadian dollar for the second straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Jan. 16, net long positions had edged up to 17,556 contracts from 17,461 a week earlier. The U.S. dollar dipped against a basket of major currencies, pressured by a U.S. government shutdown and strengthening economic growth in Europe that encouraged large investors to boost their expectations on the euro. Canadian government bond prices little changed across the yield curve, with 10-year rising 5 Canadian cents to yield 2.237 percent. The 10-year yield touched its highest intraday since September 2014 at 2.246 percent. U.S. crude prices were up 0.1 percent at $63.44 a barrel. Oil is one of Canada's major exports. (Reporting by Fergal Smith; Editing by Frances Kerry)

 

SOURCE: REUTERS

Canadian city to argue Trans Mountain oil pipeline route harmful

VANCOUVER, Jan 23 (Reuters) - The proposed route of Kinder Morgan Canada’s Trans Mountain pipeline expansion through the west coast Canadian city of Burnaby will damage parks, harm sensitive ecosystems and impact critical infrastructure, the city will argue on Tuesday.

The Vancouver suburb will present its case over three days to the Canadian energy regulator, National Energy Board (NEB), at hearings to help determine the exact route of the 1,147 kilometer (712 mile) oil pipeline. The project was approved by the Canadian government in 2016.

Burnaby, a fierce opponent of the C$7.4 billion ($5.9 billion) project, has been sparring with Kinder Morgan for years over construction of a second pipeline largely along the route of the existing one. The proposed “twinning” of the line would nearly triple capacity to 890,000 barrels per day. The pipeline carries oil from Alberta’s energy heartland to a marine terminal in Burnaby, British Colombia.

Late last year, the NEB ruled that Kinder Morgan could sidestep certain municipal permits that the company said it was unable to obtain from the city, allowing some early construction work to move ahead.

Despite the win, Kinder Morgan last week further delayed the start-up of the expanded line to December 2020, adding another three months to a previous nine month delay it blamed on the permitting difficulty.

The route hearings are a separate part of the regulatory process and are required before major construction can start. The current round will run until January 31, with more to come in communities all along the pipeline’s path.

The Trans Mountain expansion is backed by Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, and who are desperate for access to international markets.

But the project faces opposition from certain municipalities along its route, the province of British Columbia, some Aboriginal groups and environmental activists, who worry about spills and are against the expansion of the Alberta oil sands. ($1 = 1.2466 Canadian dollars) (Reporting by Julie Gordon; Editing by Andrew Hay)

SOURCE: REUTERS

Canadian dollar slips ahead of NAFTA talks as oil prices fall

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as lower oil prices offset domestic data showing the biggest increase in factory sales in 2-1/2 years, while investors prepared for another round of NAFTA talks next week.

At 4 p.m. EST (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2507 to the greenback, or 79.96 U.S. cents, down 0.7 percent.

The currency traded in a range of C$1.2400 to C$1.2508. For the week, it fell 0.4 percent.

“The market is really going to have to price in a negative risk premium on the Canadian dollar, driven primarily on the breakup risks of NAFTA,” said Mark McCormick, North American head of FX strategy at TD Securities.

On Wednesday, the Bank of Canada raised its benchmark interest rate by 25 basis points to 1.25 percent, its highest since January 2009.

But expectations for additional rate hikes over the coming months were tempered after the central bank said the future of the North American Free Trade Agreement was the most significant downside risk the economy faced. Canada sends about 75 percent of its exports to the United States.

The sixth round of talks on renegotiating the North American Free Trade Agreement, or NAFTA, is due to take place in Montreal from Jan. 23-29.

Speculators have raised bullish 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 Jan. 16, net long positions had edged up to 17,556 contracts from 17,461 a week earlier.

Canadian manufacturing sales jumped 3.4 percent in November on strength in transportation equipment and petroleum and coal products, Statistics Canada said. Analysts in a Reuters poll had forecast a 2.0 percent gain.

U.S. crude CLc1 prices settled 0.9 percent lower at $63.37 a barrel as investors sold positions on re-emerging U.S. production concerns.

 

Foreign investment in Canadian securities, particularly bonds, remained strong in November and was on track to hit an annual record, separate data showed.

Canadian government bond prices were mixed across a steeper yield curve. The two-year CA2YT=RR rose 1.5 Canadian cents to yield 1.804 percent, while the 10-year CA10YT=RR fell 15 Canadian cents to yield 2.242 percent, its highest since September 2014.

Reporting by Fergal Smith; Editing by Phil Berlowitz and Lisa Shumaker

SOURCE: REUTERS

Kinder Morgan further delays Canada Trans Mountain oil pipeline

(Reuters) - Kinder Morgan Canada said on Wednesday that the start-up of its Canadian Trans Mountain oil pipeline expansion would be delayed by three months to December 2020, marking the latest setback to a project facing fierce local opposition.

Trans Mountain originally had an operational date of December 2019, but the company in October pushed that back to September 2020 because of difficulty in obtaining permits.

The company is focusing on gaining permit approvals, and is holding off on starting full construction of the C$7.4 billion ($5.95 billion) project, Chief Executive Steve Kean said.

“What we’re doing here is all the right things,” Kean said on a conference call with analysts about quarterly results. “We are being careful stewards of our capital and we’re doing everything we can to get the clarity we need to proceed.”

The proposed pipeline expansion from Canada’s oil-rich Alberta province to the British Columbia coast would nearly triple its capacity to 890,000 barrels per day.

Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, say they need additional pipeline capacity to fetch better prices.

But Trans Mountain faces opposition from some municipalities along the pipeline’s route, certain aboriginal groups and environmental activists. Concerns range from potential spills to providing an outlet for Alberta’s oil sands, which some consider a dirtier form of extracting oil than conventional means.

Last month, Canada’s energy regulator ruled in favor of the company’s appeal to sidestep some municipal permits for the pipeline.

Kinder Morgan Canada was spun off from Houston-based Kinder Morgan Inc last May.

 The company also said that its net income more than doubled to C$46.4 million ($37.3 million) in the fourth quarter, from a year earlier.

Kinder Morgan Canada shares closed up 0.2 percent, or 4 Canadian cents, at C$16.75 in Toronto.

Reporting by John Benny in Bengaluru and Rod Nickel in Calgary, Alberta; Editing by Maju Samuel and Peter Cooney

SOURCE: REUTERS

Oil hovers near three-year high despite rising U.S. output

CALGARY, Alberta (Reuters) - Oil hovered near a three-year high above $70 a barrel on Monday on signs that production cuts by OPEC and Russia are tightening supplies, although analysts warned of a “red flag” due to surging U.S. production.

International benchmark Brent crude futures LCOc1 last traded 29 cents higher at $70.16 by 1937 GMT, having risen to a high of $70.37 a barrel earlier in the session.

U.S. West Texas Intermediate (WTI) crude futures CLc1 gained 51 cents at $64.81 a barrel. Both benchmarks hit levels not seen since December 2014, although trading was thin due to a holiday in the United States.

A production-cutting pact between the Organization of the Petroleum Exporting Countries, Russia and other producers has given a strong tailwind to oil prices.

Growing signs of a tightening market after a three-year rout have bolstered confidence among traders and analysts.

“It’s catching a lot of people by surprise and I think (prices) are sustainable,” said Phil Flynn, an analyst at Price Futures Group. “We’re seeing the reality of strong demand and declining supplies.”

 

Bank of America Merrill Lynch on Monday raised its 2018 Brent price forecast to $64 a barrel from $56, forecasting a deficit of 430,000 barrels per day (bpd) in oil production compared to demand this year.

“OPEC and non-OPEC producers remain committed to production cuts at the same time world oil demand continues to increase,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

“As we go through 2018, the market is also going to continue to look at geopolitical supply disruptions that could occur in Libya, Nigeria and Venezuela.”

RED FLAG

Still, some analysts have warned that the 13 percent rally since the start of the year could peter out due to global refinery maintenance and rising North American production.

U.S. energy companies added 10 oil rigs in the week to Jan. 12, taking the number to 752, energy service firm Baker Hughes (GE.N) said on Friday.

That was the biggest increase since June 2017.

In Canada, energy firms almost doubled the number of rigs drilling for oil last week to 185, the highest level in 10 months.

Vienna-based consultancy JBC Energy expects U.S. production to grow by 600,000 bpd in the first quarter of 2018 compared to a year earlier.

 

“From a fundamental perspective, the surge in U.S. managed money raises a clear red flag for us. We see the U.S. complex as decidedly bearish over the next two months.”

But Flynn said a fast climb in U.S. output is not so clear.

“The realities of the shale market are starting to sink in. Shale producers have to add a lot of rigs, frack crews and add a lot of investment. It takes time to raise that production.”

Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Louise Heavens and Bill Trott

SOURCE: REUTERS

Oil mostly flat as rising U.S. output offsets OPEC worries

NEW YORK (Reuters) - Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production.

“Oil prices are finely balanced in today’s trading session. Ongoing protests in Iran, together with recent detention of several princes in Saudi Arabia, have reinvigorated geopolitical concerns,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

”However, prospects for further increases in U.S. oil production amid recent improvements seen in oil prices continue to promote bearish sentiment,” Kumar said.

Brent futures LCOc1 gained 16 cents, or 0.2 percent, to settle at $67.78 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 29 cents, or 0.5 percent, to settle at $61.73

Last week, both contracts rose to their highest since May 2015 with Brent at $68.27 and WTI at $62.21.

U.S. production C-OUT-T-EIA is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers, according to federal energy data. [EIA/M]

Only Russia and Saudi Arabia produce more.

“The U.S. oil price is now into a range that is anticipated to attract increased shale oil production,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Traders may decide that discretion is the better part of valor while markets wait on evidence of what happens to the rig count and production levels over the next couple of months,” Spooner said.

U.S. drillers reduced the number of oil rigs operating by five in the week to Jan. 5, the first decline in three weeks, according to a report by energy services firm Baker Hughes on Friday. [RIG/U]

Rising U.S. production is the main factor countering output cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries and by Russia, which began in January 2017 and are set to last through 2018.

 A senior OPEC source from a major Middle Eastern oil producer said OPEC was monitoring unrest in Iran, as well as Venezuela’s economic crisis, but will boost output only if there are significant and sustained production disruptions from those countries.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore, said “the OPEC versus shale debate will rage” this year, being a key price-driving factor.

However, Innes added that Middle East turmoil would remain a key focus for oil markets and had the potential to “send oil prices rocketing higher.”

Additional reporting by Dmitry Zhdannikov in London, Henning Gloystein and Florence Tan in Singapore; editing by Marguerita Choy and Diane Craft

SOURCE: REUTERS

C$ climbs against U.S. dollar; oil near 2-1/2-year peak

TORONTO (Reuters) - The Canadian dollar strengthened to a 10-week high against its U.S. counterpart on Tuesday, the first trading day of 2018, as the greenback broadly fell and the price of oil held near its highest in 2-1/2 years.

 

At 4 p.m. EST (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2507 to the greenback, or 79.96 U.S. cents, up 0.6 percent from Friday’s close. It traded between C$1.2500, its strongest level since Oct. 20, and C$1.2557 during the session.

The currency rose nearly 7 percent in 2017.

The loonie, as the Canadian currency is colloquially known, has gained steadily versus the greenback since mid-December as part of a broader U.S. dollar retreat, which one corporate trader said may be prompting Canadian exporters to trim their targets to the high C$1.20s from the low C$1.30s previously.

It’s put “a significant seed of doubt in the minds of Canadian exporters,” said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.

He said Friday’s Canadian employment report for December will be a key piece of data to help the Bank of Canada decide whether to hike rates in January or to wait for later in the year. Bets are slightly in favor of a hold-steady decision.

The U.S. dollar .DXY retreated against a basket of major currencies as data showing a faster pace of euro zone manufacturing activity boosted the euro.

The price of oil, one of Canada’s major exports, touched its highest intraday since mid-2015 amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia, before settling slightly lower.

Still, speculators have cut bullish bets on the Canadian dollar to the lowest since July, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Dec. 26, net long positions had fallen to 17,346 contracts from 45,901 a week earlier.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3 Canadian cents to yield 1.703 percent and the benchmark 10-year CA10YT=RR falling 30 Canadian cents to yield 2.079 percent.

 

SOURCE: REUTERS

Canadian dollar near flat vs weaker greenback ahead of domestic data

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Monday, with the loonie trading in a narrow range ahead of domestic data later in the week that could help guide expectations for the interest rate outlook. 

At 9:21 a.m. ET (1421 GMT), the Canadian dollar CAD=D4 was nearly unchanged at C$1.2871 to the greenback, or 77.69 U.S. cents. The currency traded in a range of C$1.2843 to C$1.2881.

 

The loonie dipped 0.1 percent last week after being pressured on Friday by weaker-than-expected domestic manufacturing data.

The currency also fluctuated last week on remarks by Bank of Canada Governor Stephen Poloz.

Poloz worried about the potential to slip into a “deflationary scenario” if interest rates are raised too fast to deal with financial imbalances, in an interview with The Globe and Mail that was published on Saturday.

Still, the central bank is leaving the door open to further rate hikes in early 2018, making it clear that a number of uncertainties that could derail the economy, such as North America Free Trade Agreement (NAFTA) renegotiation, are a reason for caution but not inaction.

NAFTA negotiators made some progress on less controversial issues last week but left untouched the thorniest subjects of autos, dispute settlement and an expiry clause to be tackled at pivotal talks in January in Montreal.

Foreign investment in Canadian securities accelerated in October, driven by a record purchase of bonds, data from Statistics Canada showed.

Canada’s inflation report for November and October retail sales data are due on Thursday, while gross domestic product data for October is due on Friday.

The price of oil, one of Canada’s major exports, was supported by a North Sea pipeline outage and a Nigerian oil worker strike.

U.S. crude CLc1 prices were up 0.6 percent at $57.65 a barrel.

The U.S. dollar .DXY dipped against a basket of major currencies amid doubt whether a proposed U.S. tax overhaul program would have a major impact on economic growth, after the bill moved another step closer to ratification over the weekend.

Speculators have trimmed bullish bets on the Canadian dollar for eight of the last nine weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3.5 Canadian cents to yield 1.569 percent and the 10-year CA10YT=RR falling 12 Canadian cents to yield 1.85 percent.

Reporting by Fergal Smith; Editing by Jonathan Oatis

SOURCE: REUTERS

Canada oil producers exhaust options as pipelines, railroads fill

By Nia Williams and Catherine Ngai

CALGARY, Alberta/NEW YORK, Dec 18 (Reuters) - Canadian oil producers are running out of options to get crude to market as pipeline and rail capacity fills up, driving prices to four-year lows and increasing the risk of firms having to sell cheaply until at least late 2019.

This will drive down the profit margins for the oil sands industry, already struggling to compete with cheaper and abundant supplies from U.S. shale. A number of foreign oil majors have left Canada’s oil sands to invest in more profitable U.S. shale plays, selling over $23 billion in Canadian assets this year alone.

Canada’s oil sands output is still growing - but only as projects under construction are completed and smaller expansions come online. Oil firms are not commissioning large new projects because they cannot build them profitably with oil in the $50s a barrel.

The deeper discount on crude means next year could be just as tough for Canadian producers from a price perspective as 2017, even though international crude prices have strengthened.

“We have a build-up of supply and that’s only going to get worse next year. We are adding more and more pressure into a constrained export system,” said Wood Mackenzie analyst Mark Oberstoetter.

The volume of crude in storage has hit record levels in western Canada and heavy crude is trading near its widest discount to U.S. crude since December 2013, driven by increased supply and a leak on TransCanada Corp’s Keystone export pipeline last month.

The discount on Canadian heavy crude blew out to as much as $28 a barrel below the West Texas Intermediate benchmark, pushing the outright price of Canadian barrels to less than $30.

Many traders and analysts expect the discount to be wider in 2018 than the negative $12 a barrel year-to-date average as oil supply rises.

SOURCE: REUTERS

Canada to create overseas mining watchdog early in 2018

(Reuters) - Ottawa plans early next year to create an independent office to oversee Canadian mining, oil and gas companies’ activities abroad, a government spokesman said on Tuesday, a move that environmental and human rights groups have long demanded.

The office would have both an “advisory and robust investigative mandate,” a spokesman for Canadian Trade Minister Francois-Philippe Champagne said in an email.

The move would fulfill a 2015 campaign promise by Canadian Prime Minister Justin Trudeau’s Liberal Party to appoint an extractive industries’ watchdog.

Nearly two-thirds of the world’s public mining companies are listed in Canada, while Canadian mining and exploration companies were present in 102 foreign countries in 2015, according to Canadian government data.

Non-government groups have called for years for greater oversight of Canadian mining companies abroad following a number of environmental incidents and accusations of human rights abuses, including that of forced labor at Canadian miner Nevsun Resources’ mine in Eritrea. Nevsun has denied the allegations.

Trudeau’s predecessor, Conservative Stephen Harper, established a Corporate Social Responsibility Counselor in 2009, but critics have said it is toothless as the office focuses mainly on facilitating dialogue between companies and affected communities.

The Mining Association of Canada, which represents the industry, was not immediately available for comment after hours.

Reporting by Nicole Mordant in Vancouver; Editing by Peter Cooney

 

SOURCE: REUTERS

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