Oil prices are surging this morning as traders weigh a myriad of questions after this weekend’s attack on Aramco that knocked out half the energy giant’s average daily production, representing ~five per cent of global output. At one point, Brent crude oil prices were up 19.5 per cent and WTI was up 15.5 per cent before pulling back. U.S. President Donald Trump says he’ll tap America’s Strategic Petroleum Reserve if necessary, and warned his country is “locked and loaded” on the “culprit” after his secretary of state earlier pointed the finger at Iran. Meanwhile, Bloomberg has sources saying it will take weeks for Aramco to fully restore production.
This morning we’ll address the profound geopolitical consequences, the race to restore output, implications for Aramco’s eventual IPO, and the broader questions about securing oil facilities. Lastly, will flag that analysts at Credit Suisse have named Canadian Natural, Cenovus, Baytex and MEG as potentially being the biggest Canadian beneficiaries of the price spike.
ENERGY NAMES PUNTED FROM TSX
In a sign of the times, eight energy names are being booted from the S&P TSX Composite Index. See the full list here. The rebalancing was announced an hour after the TSX closed at a new record high Friday, with little thanks to the energy sector, which is the worst-performing subgroup so far this year. Good time to point out we’re expecting to speak with Alberta Premier Jason Kenney later this morning from New York, where he’s attempting to rally investor confidence in his province.
ELECTION CAMPAIGN
We’ll watch out for the release of the full Green Party platform later this morning. Meanwhile, Conservative Party leader Andrew Scheer yesterday announced he’d gradually reduce taxes on the lowest income bracket to 13.75 per cent from 15 per cent. We’ll continue tracking policy announcements that matter most to Canadians’ finances, and Jon Erlichman will get an update on the campaign from pollster Nik Nanos at 10:10 a.m. ET.
U.S. GM STRIKE
GM shares are down ~ two per cent in pre-market trading after unionized U.S. workers walked off the job yesterday. Similar to what Unifor workers experienced in Oshawa, Ont., there’s unease about the plants that will soon run out of allocated production. The UAW said its strike boils down to a fight for, among other things, fair wages and job security. Our Bloomberg partners are pointing to an analyst who estimates the strike could cost GM US$50 million per day in lost EBIT.
OTHER NOTABLE STORIES
-Newmont Goldcorp has suspended operations at its Penasquito mine in Mexcio due to what the company calls an illegal blockade amid a dispute with a trucking contractor and a local community.
-Blackstone is buying Dream Global REIT for a little more than $3 billion in cash. Including debt, the deal value balloons to $6.2 billion.
-If you missed it, late Friday the OSC announced its first fraud allegations against a cannabis company. Read all about it here.
-Purdue Pharma has filed for bankruptcy protection in the United States as the Oxycontin maker grapples with thousands of lawsuits over the opioid abuse crisis. The filing shows Purdue has US$10 billion in assets.
-The U.S. has accused three JPMorgan traders (two current, one former) of a “massive multiyear scheme to manipulate the market for precious metals futures contracts”
-Some midstream M&A this morning in the energy sector with Energy Transfer agreeing to buy SemGroup for US$5 billion, including debt.
-TransAlta today announced a $2-billion plan to reduce its emissions, including converting some of its coal-fired facilities to natural gas.
-SNC-Lavalin today announced it’s been awarded a $52-million contract by a China National Petroleum-Abu Dhabi National Oil joint venture.
NOTABLE RELEASES/EVENTS
-9:20 a.m. ET: Liberal Party Leader Justin Trudeau makes announcement in Waterloo, Ont.
-9:30 a.m. ET: TransAlta holds investor day meeting
-10:00 a.m. ET: Green Party Leader Elizabeth May announces platform in Toronto
-10:00 a.m. ET: NDP Leader Jagmeet Singh makes announcement in Longueil, QC on “star candidate”
-11:45 a.m. ET: U.S. President Donald Trump holds credentialing ceremony in Oval Office for new ambassadors to D.C.
-12:00 p.m. ET: Conservative Party Leader Andrew Scheer makes announcement in Lake Country, B.C.
-2:00 p.m. ET: U.S. President Trump presents Presidential Media of Freedom
-3:00 p.m. ET: U.S. President Trump meets with Crown Price of Bahrain
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
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September 16, 2019 at 07:58PM
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