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Canada's trade surplus reaches a 15-month high on the back of soaring crude oil prices
Statistics Canada reported that the Iran War has increased the price of crude oil, which is a major factor in the increase in Canada's April goods trade surplus. Analysts surveyed by? Analysts polled by? Statscan reduced March's surplus to C$1.75 from C$1.78. The total exports rose 1.6% to a record C$75.16 Billion in April. Exports of energy goods increased 9.7% in April after a 23.4% increase in March. Statscan stated in a comment that "Both increases were primarily due to higher prices which continued to increase in April despite the uncertainty created by the conflict in Iran." Crude oil experts, up 7.0%, contributed the most to this gain. Canada is the world's largest oil producer. Exports of metals and non-metallic minerals, which were booming in February and march, fell by 17.5%. The fall was largely due to lower shipments of gold to Britain. Stuart Bergman is the chief economist of Export Development Canada. He said: "April was quite a tug-of-war between gold and oil. 1.6% growth, in light of everything going on around us, is something we are certainly happy with." In a telephone interview, he stated that the May data should show continued growth in energy exports due to global supply shortages. Imports increased by 0.3%, reaching a record C$72.44 Billion, due largely to an increase of 16.9% in imports?of basic and industrial chemicals, plastics and rubber products. Analysts believe that the positive data will lead to a positive GDP growth in April after two consecutive quarters of negative growth. Ariane Curtis is a senior North America economist with Capital Economics. She said that Canada's improved?terms-of-trade since the Iran War suggests the trade surplus will continue to rise in the months ahead. The United States still dominates Canadian exports, despite Ottawa's efforts to diversify away from it amid a trade war between the two nations. Exports to the United States increased by 4.8%, reaching C$51.98 Billion, which represents 69.2%, the highest share of trade since September 2025. Imports increased 1.6%, to $42.50 billion. As a result, Canada's surplus with the U.S. grew to C$9.48billion, the highest since February 2025. Exports to other countries fell by 4.8% in April after reaching a new record in March. Exports to China reached a new record of $3.84 billion.
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Oil falls ahead of inflation data, gold gains as dollar weakens
Gold rose on Tuesday, rebounding from its two-month low. A weaker dollar, falling oil prices, and investors evaluating Middle East peace prospects before key inflation data, all contributed to the rise. As of 9:05 am, spot gold was up 0.2% at $4,338.69 an ounce. ET (1305 GMT). It fell to its lowest levels since March 23 during the previous session. U.S. Gold Futures for August Delivery remained at $4,363.90. Dollars are now cheaper for those who hold other currencies. Fawad Rasaqzada is a market analyst at Forex.com. He said: "We have seen some weakness in the oil price... While gold has pulledback recently, it appears that the uptick was largely driven?by short-covering." The Middle East is showing signs of a possible deal. Oil prices dropped after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald Trump. Lower oil prices may ease inflation concerns, allowing central banks to cut interest rates and increasing the appeal of non-yielding metals. The focus this week has shifted from the strong jobs numbers of last week to the key inflation data, such as the U.S. Consumer Price Index 'print for May on Wednesday, and the Producer Price Index'readout on Thursday. The outlook for monetary policy. If the U.S. Inflation data for May surprise to the upside again on Wednesday, then the gold price will likely fall even further. The?potential of a recovery in the second half of the year is also increased if, as expected, the Fed does not raise interest rates. According to CME FedWatch, traders are "pricing" in a 70% chance of a Fed rate increase in December. Silver spot rose by 0.7%, to $68.61 an ounce. Platinum rose 1.4%, to $1778.98. Palladium rose 3.8%, to $1251.05. (Reporting by Anushree Mukherjee in Bengaluru; Editing by Shilpi Majumdar)
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Russian Urals oil is discounted as Asian demand declines, say sources
Four trade sources said that the price of Russian Urals crude had flipped from a premium to a discount against dated Brent in Indian and Chinese ports due to a drop in demand by Asian refiners. Since March, Urals, Russia’s “flagship” oil grade, has traded at a higher price than Brent in India, China and other major markets. This is because the Middle East conflict disrupted oil supplies globally and increased demand for cheaper alternatives. Sources said that the demand for 'Russian crude' has fallen now, but Asian refiners had 'drawn down their inventories, found alternative alternatives, and in some cases, cut back on runs. Sources said that urals cargoes for delivery to India between July and August were traded this month at discounts of $2 and $3 per barrel compared to Brent dated, as opposed to a premium of $7 to $8 per barrel in April and may. Urals oil prices fell by $7 to $8 per barrel during the winter months in the northern hemisphere when U.S. sanctions were tightened and reduced Russian oil production. From June to August of last year, discounts were around $1 to $3 per barrel. China's reduced purchases have a wider impact on all grades, even though the Chinese and Indian markets are closely linked. It purchases less Urals crude than India but more lighter Russian grades, such as?ESPO blend, Arctic and Sakhalin crude. One source reported that in some cases Chinese buyers refused to accept Russian oil cargoes for delivery in June, making sellers vulnerable during price negotiations. Teapots, or'small independent refiners' in China, have reduced production due to lower crude oil prices and weaker margins. Reporting in Moscow by Nidhi Verm, New Delhi by Siyi LIu, Singapore by Siyi Liu, editing by Barbara Lewis.
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McGeever: The $500 billion T-bill fix by ROI-Treasury is not a problem yet.
The U.S. Treasury issues more than half a billion dollars in T-bills each?week. For now, this spike in short-term funding is not a concern, but it could be if U.S. lending costs continue to rise. Trump's administration has a good reason for favoring the short end of the curve. The term premium has been pushed up by persistently large?budgets deficits, and high inflation that has exceeded the Federal Reserve's target of 2% for over five years. This is what investors are paying for long-term bonds. It makes short-term loans more appealing. The problem of rolling over $500 billion in bills each week is not an urgent one. Cash-like instruments are a huge market, and they're essential for overnight and short term collateral and liquidity management. The Fed and money market funds in the US have a combined balance of $8 trillion dollars, which is enough to absorb the new issuance. Even the demand for high-quality collateral can't last forever. Eventually, flooding will reach a level where it's impossible to absorb without a dangerous increase in money market interest rates. Treasury's interest bill may present a more immediate problem. Bills are affected by the impact of rolling notes and bonds over at higher interest rates in a matter of months, not years. The fiscal impact is already being felt, as the federal interest bill is on track to exceed $1 trillion in this fiscal year. Fed rate hike expectations are also increasing. 25% THRESHOLD Are we approaching the tipping point of too many bills issued? The current share of bills in the outstanding federal debt is just under 22.4%. This is slightly below the historical norm of 22.4% but well above the range of 15% to 20% recommended by the Treasury Borrowing Advisory Committee. The trend appears to be towards 25%, which is a threshold that many analysts believe should be watched. Lou Crandall is the chief economist of Wrightson ICAP. She said that it's difficult to pinpoint a specific tipping point, but once you reach a level of 25% of a growing?net borrowing requirement, the Treasury must look at more likely sources of demand. It's not a line that, when crossed, will instantly reduce demand for bills. In recent years, however, the share of bills in government debt was only 25% or higher during financial crises and economic recessions. And so, borrowing policies seen only in the pandemic of 2020 and the financial crisis of 2008 could become the norm. It is not known how the market will react to this over time. 1 TRILLION BARRIERS Treasury is currently facing record interest costs, both in nominal terms as well as when viewed by the percentage of GDP and revenue. The federal government's cumulative interest costs in the first four months of the year totaled $616 billion. This is an increase of more than $100 billion compared to the period January-April two years ago. According to the Congressional Budget Office (CBO), total interest payments will surpass $1 trillion in this fiscal year. They are expected to reach 3.3% of GDP, and 18.6% revenue, both records. This bill is expected to grow, particularly if the Fed decides to raise interest rates from their current range of 3,50-3.75% in the next few months. Rate hikes would not only increase short-term borrowing costs, but they could also threaten economic growth. Treasury would be in a weaker position, as it already borrows at the low end of the curve, and pays high interest rates. This could reduce investor interest and drive yields higher even if Fed policy was loosened to promote growth. Martin Tobias is the U.S. Rates Strategist at Morgan Stanley. Recession doesn't seem to be on the horizon anytime soon. A stock market correction or economic slowdown is not ruled out by a rise in borrowing costs. The $500 billion T-bills that are renewed every week will be scrutinized if this happens. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Gold gains as oil prices fall and US interest rate hike fears cap gains
Gold prices rose on Tuesday, aided by lower oil costs as tensions in the Middle East?easened?. However, concerns over U.S. rate hikes before this week's key inflation data capped gains. As of 1156 GMT, spot gold was up by 0.3% to $4,340.31 an ounce. In the previous session, gold fell to its lowest since March 23. U.S. Gold Futures for August Delivery?were unchanged, at $4.364.90. "Gold prices stabilised following a two-day decline that saw them break below the key technical support... "However, the rising expectations of more U.S. interest rate increases continue to create a difficult backdrop for bullion," Saxo Bank's Ole Hansen said. Oil prices dropped after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald?Trump. The rise in crude oil prices increases the risk of inflation and higher interest rates. Gold is often viewed as a hedge to inflation but in an environment of high interest rates, gold tends not to be so attractive. Investors are now awaiting the May U.S. Consumer Price Index data (CPI) on Wednesday and Producer Price Index data (PPI), on Thursday, for clues about the Federal Reserve's future moves. A robust jobs report released last week boosted bets that a rate -hike would happen this year. Hansen stated that "tomorrow's U.S. CPI is expected to surpass 4% for almost three years and the 17th?June FOMC Meeting remains crucial as the market looks for comments and intentions from the new fed chair." According to the CME FedWatch tool, traders are now pricing a 68% probability of a Fed interest rate hike in December. Since October 2023, spot gold has traded below the 200-day moving average. Citi analysts said that the breakout below the 200-dMA was viewed as a negative technical signal. This indicates further downside potential in near term. Silver spot rose 0.6%, to $68.56 an ounce. Platinum gained 0.9%, to $1,769.83. Palladium increased 2.9%, to $1,238.66. (Reporting and editing by Janane Vekatraman, Jonathan Ananda, and Noel John from Bengaluru)
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Indonesia's Trade Ministry faces a barrage of questions about new export control plans
On Tuesday, officials from Indonesia's trade ministry were bombarded with questions from?exporters? of coal, ferroalloys and palm oil who were concerned?about the impact of a controversial export control plan that aims to maximize profits from Indonesia's natural resources. Businesses expressed concerns about the implementation of the new rules in an online forum hosted by the government. This was despite the fact that the detailed rules were published earlier this week. Last month, President Prabowo revealed a plan that would channel all exports of Indonesia's key commodities through a state-owned firm. The goal was to increase government revenue and tighten controls on the sale of Indonesia's natural resources. The government released 11 pages of regulations earlier this month that outlined the implementation schedule for new controls. The?trade ministry released this week more detailed guidelines on three of the strategic products that are subject to the new rules which came into effect on June 1st. In the first phase of this new law, exporters will be required to report their entire export activity to Danantara Sumberdaya Indonesia. Exporters expressed concerns during an online awareness campaign held by the Trade Ministry about the integrity long-term contracts and the commercial mechanism of exporting products that are affected by the new regulations. Producers also don't know who pays for their product if all exports go through the government. "Starting January 1, we will be selling through DSI... Is the sale to DSI recognised as an export (paid in) U.S. dollar, or as a sale locally with payments made in Indonesian rupiah?" One company representative asked about currency risks associated with U.S. Dollar loans. He asked if the payment for the goods would be made by the customer or before the goods are exported. This is a crucial issue for a business's cash flow. Ministry officials deferred the majority of questions to DSI. DSI did not attend 'the event and merely'said that contracts would be executed on a business-tobusiness basis. Several participants asked how to contact DSI. At the time Prabowo announced his announcement, DSI had only one employee - its CEO. Indonesia's sovereign fund Danantara stated that its new unit would initially be backed by civil servants of several ministries. However, DSI will hire and develop the technologies for export monitoring. A participant asked who would be responsible for negotiating the prices with end buyers during the transition period and up until December 31, 2026. Danantara has said that it will examine the prices of existing export contracts in order to ensure they do not fall below market level. Prabowo stated last month that the under-priced commodities have cost the country almost a trillion dollars in the last 34 year.
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Oil slips as stocks rally, investors return to tech
Investors rushed to purchase the latest dips in tech stocks on Tuesday, while oil prices fell after Israel and Iran agreed to?halt their attacks against each other for the time being. In Europe, ASML and Infineon led the way with a 0.7% rise in the 'STOXX 600. U.S. Stock Futures rose between 0.5% and 0.8% as Meta, Eli Lilly, Goldman Sachs and other shares grew in pre-market trade. OpenAI, the maker of ChatGPT, filed a confidential U.S. IPO on Monday, just days before SpaceX made its highly anticipated debut in the market this week. Wall Street CEOs and bankers are ecstatic about these mega-cap listing. Kathleen Brooks, XTB's research director, said that on the street "there is some caution" setting in. "Although the SpaceX IPO is expected to be a success, it is not the most interesting event. What is more interesting is the future earnings reports of SpaceX, which must be impressive to justify a valuation of 56 times forward earnings." Oracle's results on Wednesday will be the next major test for technology. Borrowing Costs Investors are also concerned about the rising risks of borrowing costs. U.S. Treasury 10-year yields are over 4.5%, and 30-year yields spent more 'days north of 5% in this year than any other year since 2007, according LSEG data. The Middle East is a hotbed of tensions. And maritime traffic in the Strait of Hormuz is well below the normal level. This keeps oil prices at $90 per barrel. Bank of America analysts said that "Inflation is still sticky enough to cause 46 of 68 central banks around the world to exceed their targets. This helps explain why bonds are being repriced for a tighter policy and why long-duration investments, private credit and some EM currencies struggle." Our Global Breadth Rule indicates that nearly half of the equity markets are already overbought. Leading the way is Korea, Taiwan, and Finland. Bonds have been hit by the prospect that the Federal Reserve will raise rates to combat inflation. The dollar has gained 2% over the past four weeks. The May payrolls report released on Friday helped to cement the idea that at least one rate hike is possible this year. The U.S. Consumer Price Report, which is due on Wednesday, will likely show that energy prices continued to drive headline inflation up in May. Futures prices indicate that a Fed rate hike could happen as early as October. A quarter-point increase is also almost fully priced in for December. The markets are fully priced in for the European Central Bank to raise the rate by a quarter point, from 2.25%, when they meet on Thursday. They also see the key interest rate at 2.5% or even 2.75%. The dollar remained stable at 160.2 yen, well above the 160 yen mark that many believed could lead to more Japanese buying. Satsuki Katayama, the Finance Minister, said on Tuesday that officials were "always ready to take decisive actions." The euro last rose 0.3% to $1.157. This was just above the nine-week low at $1.15. Meanwhile, the pound climbed nearly 0.5%, reaching nearly $1.34 after a three-week low. Brent crude futures fell 2.1% to $92.3 on the commodity markets. Oil prices have fallen from the four-year highs of late April, but they are still 30% higher than in late February. Futures for delivery of crude oil in six months time is 21% above these levels.
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Since May, a cholera outbreak in Nigeria’s Borno has killed 74 people and infected thousands.
Medecins Sans Frontieres, an aid group, said that a cholera outbreak in Nigeria's Borno state, which began in early May, has caused the death of at least 74 individuals and infected over 7,000 others, overwhelming local health facilities. MSF reported 7,850 suspected cases across 14 local governments areas by June 7, citing data from the state health ministry. Infections were increasing 'dramatically each day,' according to MSF. The outbreak strains an already fragile healthcare system in a area at the center of a 17 year Islamist insurgency. There are also problems with water and sanitation and mass displacement. MSF has, in collaboration with the Ministry of Health, set up a cholera-treatment centre in Maiduguri, the capital, to help support the response. Bienfait Tombola is the MSF medical coordinator of the surge response for Maiduguri. MSF reported that it had treated 7,439 patients on average, with 230 admissions a day. More than 500 cases were recorded just on June 5, the most since the response started. The 'waterborne disease' cholera thrives in places without clean water or sanitation. MSF reported that authorities are planning a vaccination program, as the aid group continues to increase treatment, hygiene, and surveillance in order to contain the outbreak. (Reporting from Adewale Klawole, Maiduguri. Writing by Elisha B. Gbogbo. Editing by Alex Richardson.)
US oil and gas production program signs of flattening: Kemp
U.S. oil and gas production are finally revealing signs of flattening out as drilling rigs and well conclusion teams have been idled in action to the retreat in rates considering that the middle of 2022.
Across the country crude and condensates production was performing at practically 13.2 million barrels per day (b/d) in March 2024 according to the most recent data from the U.S. Energy Details Administration (EIA).
Nevertheless, there had been no net development given that October 2023, showing the surge in production after completion of the coronavirus pandemic and Russia's invasion of Ukraine had ended.
Production from the Lower 48 states excluding federal waters in the Gulf of Mexico was up by less than 0.5 million b/d in March compared with the very same month a year previously.
Growth had actually slowed from 0.9 million or 1.0 million b/d in the second half of 2023 as the incentive from the previous high costs in 2022 faded.
Chartbook: U.S. oil and gas production
Inflation-adjusted front-month U.S. futures rates pulled back to around $81 per barrel by December 2022 (50th percentile for all months since the start of the century) from a high of $124. in June 2022 (83rd percentile).
Production started to stabilise or pull back about 10-12. months later, in line with the historical relationship between. price and output changes.
Clear proof that U.S. oil production was turning over was. masked by uncommon weather in December 2023 and January 2024. distorting year on year comparisons.
However with the return of more typical weather in March 2024 the. lack of net growth over the last six months has actually become apparent.
OIL STABILISATION?
U.S. futures costs have balanced $73-78 per barrel in May. and June 2024, putting them in the 45-50th percentiles in real. terms for all months considering that 2000.
At these rates, there is no strong signal to increase or. decrease production.
The variety of rigs drilling for oil fell to an average of. just 497 in May 2024 from a cyclical peak of 623 in December. 2022.
If futures rates stay around existing levels, U.S. production is likely to remain essentially flat for the rest of. 2024 through at least the middle of 2025.
Lower costs and limited development in U.S. output would produce. area for Saudi Arabia and its OPEC? allies to reverse some of. their own production cuts later on this year and into 2025.
U.S. GAS PRODUCTION
The decrease in gas costs since the middle of 2022 has been. even more extreme and has actually brought all growth in production to a. halt.
Dry gas production balanced 102.6 billion cubic feet each day. ( bcf/d) in March 2024 compared with 102.9 bcf/d in March 2023.
Dry gas production appears to have peaked at the end of 2023. and has considering that been trending gently but steadily lower.
Inflation-adjusted futures costs collapsed to approximately. $ 1.75 per million British thermal systems in March 2024, the. most affordable for more than three years, slumping from more than $9. in August 2022.
In effect, the number of rigs drilling for gas had. fallen to an average of just 115 in March 2024 from a cyclical. high of 162 in September 2022, according to oilfield services. company Baker Hughes.
The number of active rigs has actually considering that fallen even further to. an average of just 101 in May 2024 as significant manufacturers have. scaled back drilling programmes in response to ultra-low rates.
Unless there is an unanticipated rebound in prices, production. is likely to remain broadly flat throughout the rest of 2024 and. 2025, helping rebalance the market.
Flat or falling output, combined with strong gas combustion. by generators this summer, colder weather next winter, and an. boost in LNG exports, need to remove surplus inventories. before the end of winter 2024/25.
Related columns:
- U.S. gas surplus will be eliminated before end of winter. 2024/25 (May 8, 2024)
- U.S. oil and gas production rebounds after winter season. storm( May 1, 2024)
- U.S. oil and gas output was seriously hit by winter season storm. ( April 3, 2024)
- Record U.S. oil and gas production keeps costs under. pressure( March 1, 2024)
John Kemp is a market expert. The views revealed. are his own. Follow his commentary on X https://twitter.com/JKempEnergy.
(source: Reuters)