Briefing highlights
- Oil market in ‘bear trap’ as prices slip again
- Entertainment One rejects ITV bid
- Bombardier seals big British order
- Video: Use of social media in the office
‘Bear trap’
Oil prices are slipping again, but some analysts say the crude market is caught up in a “bear trap.”
Indeed, strategists at Royal Bank of Canada are telling investors that the biggest risks are either overdone or priced into the market, and that they should pay attention to the “distress” across the OPEC group, particularly Nigeria and Libya.
This analysis from Helima Croft, RBC’s global chief of commodity strategy, and her strategist colleagues Michael Tran and Christopher Louney came as prices initially tumbled early Wednesday.
Prices then perked up, only to sink again after the U.S. Energy Information Administration’s weekly report showing inventories rising.
And as The Globe and Mail’s Jeffrey Jones reports, it also comes ahead of an Organization of Petroleum Exporting Countries meeting scheduled for late September that is buoying hopes among some observers.
Ms. Croft, Mr. Tran and Mr. Louney believe that the market has been stuck “in something of a bear trap in recent weeks,” and that it’s going to change.
“This is despite the fact that the daily global supply overhang is on the precipice of turning, at which point inventories will begin to draw down,” they said in a report.
“Over the past month, while little has actually changed on the fundamental front, there has been a deluge of headlines suggesting that a tsunami of crude is set to hit the market.”
That, they added, is because of suggestions that certain troubled OPEC countries, such as Nigeria and Libya, are poised to flood the market with hundreds of thousands of barrels, while U.S. producers boost production.
“We maintain that while there are an overwhelming number of bearish red herrings spooking the market at the moment, many of the recent fears appear largely unfounded in our view,” they said.
“Hence, we maintain our conviction that: 1) oil prices will grind higher through the balance of this year and into next, barring a significant deterioration in the ‘macroverse;’ and 2) investors should remain cognizant of the distress remaining across much of OPEC and side-step the bear traps lurking in the market.”
The EIA report added to the speculation, as it showed the third week in a row of increasing inventories.
“This flies in the face of seasonal trends, which typically see inventories fall throughout U.S. driving season, only to pick up again in [the fourth quarter]’” said IG market analyst Joshua Mahony.
“Amid reports of rising Saudi Arabian output, coupled with the expectation that U.S. production will rise in 2017 to reflect increasing count, it is clear that unless OPEC pull something out of the bag next month, we could see crude prices tumble once more.”
Entertainment One rejects bid
The Peppa Pig website welcomes kids with this question: “What shall we do today?”
The answer, presumably: Let’s spurn a $1.3-billion offer for our parent company.
Entertainment One, the Canadian company that owns the TV brand along with a host of other properties, said in a statement that it rejected a takeover bid from ITV, which, besides some share action, has sparked some fun among analysts.
As in, Entertainment One has “snorted” at the bid.
But there’s something deeper going on here.
“Interestingly, this is a shift towards ITV attempting to build their own portfolio of marketable content due to dwindling terrestrial advertising revenues in the face of on-demand products,” said IG's Mr. Mahony.
“However, with the offer valuing the firm at just 236 pence [a share] vs. the 217 price at yesterday’s market close, it is clear that this will mostly likely represent an opening gambit rather than the final push.”
Bombardier seals deal
Bombardier Inc.’s rail division has clinched a $1.7-billion order for 660 cars, to be built at the company’s historic train works in Derby, England, in a deal described as “the biggest investment in the railways since the Victorian era.”
The British government’s Department of Transport said the contract for “state of the art” carriages from Bombardier is part of an effort to boost rail services for passengers across the region of East Anglia and one of the largest orders ever for British-built trains, The Globe and Mail's Bertrand Marotte reports.
“We are making the biggest investment in the railways since the Victorian era,” British Transport Secretary Chris Grayling said.