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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BofA Securities commodity strategist Francisco Blanch sees upside pressure on the oil price building, potentially leading to $100 crude sooner rather than later,

“As other energy prices like natural gas and coal keep pushing higher, upside risks to the oil market have started to build. For starters, there is an estimated 1.8mn b/d of available gas to oil switching at power plants capacity across Europe and Asia, even if only a fraction of this capacity is likely to be utilized … Further supporting oil prices, global demand is coming back and OECD oil inventories just dropped to the 10 year average … For Emerging Markets, consumption is coming back with a vengeance led by China and India … We continue to project that oil prices will remain range-bound in 2H21 and maintain our average Brent crude oil forecast of $70/bbl for this period (Exhibit 40), although we now target Brent to be at $75/bbl by year end … However, weather is quickly becoming the most important driver of energy markets. If the winter turns out to be much colder than normal, global oil demand could surge by 1 to 2mn b/d. Under this scenario, the oil market deficit this winter could easily exceed 2mn b/d and our $100/bbl oil target for the middle of next year could quickly be rolled forward six months.”

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“@SBarlow_ROB BofA’s Blanch: cold winter could push $100 forward six months” – (research excerpt) Twitter

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Morgan Stanley analyst Marius van Straaten’s Uranium Rediscovered report expresses some skepticism as to the sustainability of the rally,

“Uranium has woken up to the wider energy rally, with the weekly spot price at $39/lb, up >20% since mid-August and at the highest level since May-15. While coal and natural gas prices are driven up by actual market tightness, uranium’s underlying supply-demand fundamentals haven’t meaningfully changed over the last few months to warrant this price surge. It is not a secret that investors’ newfound interest in uranium, predominantly through Sprott’s physical uranium trust, is the driving force behind its resurgence. Although the current rally is likely to have further to run, we are not yet convinced that it can be sustained into next year, as investor demand could struggle to maintain the current momentum.”

“@SBarlow_ROB MS doesn’t trust the uranium rally’ – (research excerpt) Twitter

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TD economist Ksenia Bushmeneva parsed recent reports on Canadian household debt and sees little reason to worry despite increasing mortgage debt,

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“Canadian household wealth continued to rise at a good clip in the second quarter of the year. The value of household net worth edged up by 3.7% in Q2, and was 19% higher than a year ago. The pace of asset appreciation remained robust but moderated somewhat relative to the red-hot growth seen in Q1. This was mainly due to slower growth in the value of non-financial assets, where growth moderated to 2.6% (down from 8.2% in the prior quarter). The value of financial assets advanced by a stronger 4.6% on the quarter, thanks to strength in equity markets as well as renewed growth in currency and deposits … While asset appreciation has moderated, the liabilities side of the balance sheet grew at a brisk pace. Household debt rose by 2.5% (seasonally adjusted) - nearly double the pace seen in the prior two quarters. The main driver was once again mortgage credit, which advanced by 3.4% on the quarter and was up nearly 10% from the year ago level. This marked the record quarterly increase in mortgage credit since data tracking began in 1990… growth in household debt outpaced gains in disposable income last quarter, leading to an uptick in household leverage. The debt-to-income ratio edged up to 173.1% down from 172.6% in Q1. Key implications: Today’s report largely reaffirmed that household finances remained in good shape through the third wave of the pandemic. While gains in asset values have moderated, household wealth continued to rise at a good clip and was still significantly higher than it was a year ago.’

“Canadian Household Wealth and Debt” – TD Economics

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Diversion: “The Strangest Time for Nostalgia Is Now” – Wired

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