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

Scotiabank analyst Jason Bouvier highlighted flows beginning in the TMX pipeline and outlines the main eventual beneficiaries,

“The TMX pipeline is expected to add 590 mbbl/d of pipeline capacity starting in Q2/24. However, due to high tolls we expect the pipeline to only flow its committed volumes (379 mbbl/d of incremental barrels versus Q4/23 levels). In our view, up to 270 mbbl/d of this capacity will displace heavy oil imports into PADD 5 from LatAm/Middle East … Actual displacement will be dependent on how WCS is priced … TMX itself will not add incremental heavy oil volumes but rather make the transport of Western Cdn heavy oil barrels more efficient … Several new heavy oil refineries are set to come on-stream in 2023/2024, adding 900 mmbbl/d of global heavy oil refining capacity … Impact on Cdn heavy pricing to be material. Over the last 3 years (2021-2023) the heavy oil differential has averaged US$18/bbl. When TMX is online, Western Cda will be long pipeline capacity and not require crude by rail (CBR) to clear the market. We expect this to shift full-year heavy oil differentials to US$13-$15/bbl (down 22% from the past 3 years) … Who has the most exposure to heavy oil differentials? From our coverage universe, the companies with the most exposure to Cdn heavy oil prices include MEG, IMO, SCR, and IPCO, with CVE and CNQ also having meaningful exposure”

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RBC analyst Allison Enck is waiting for fundamental to support record gold prices,

“The rally continues with gold cresting new highs even as interest rates remain elevated in an absolute sense, the dollar remains strong in an absolute sense, equity markets continue to perform strongly, volatility remains subdued, etc… and with still only relatively brief inflows into gold-backed ETPs (and potentially more outflows if investors choose to realize gains at these record prices), we are still waiting for the price gains to have back-up. Yes, the Fed is set to cut rates this year, but gold continues to rally regardless like it is fulfilling some predetermined outcome. We had always thought these levels might come eventually within our forecast horizon, but questions remain about the near-term durability of these price gains. Coming inflation data may provide clues, but macro drivers, physical demand, and official sector interest pushing gold ever higher without taking a break this year seems, to us, a difficult prospect. Does a rising tide lift all gold?”

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CIBC economist Avery Shenfeld published The productivity malaise: a symptom but not the disease in CIBC’s weekly report,

“The impacts of soft productivity on living standards and inflation are serious, if not quite as dramatic as some make out … While our malaise may be partly a reflection of softer capital spending, that too is a symptom, not the underlying disease. It’s not helpful to berate CEOs for failing to spend on new equipment. If there were opportunities to save more on labour than the costs of adding equipment they would presumably do so … Firm-level data examined by Baldwin and others found that having more small firms was a major source of Canada’s lower level of labour productivity versus the US. There are large economies of scale for firms that spend on technology equipment and software, since up-front costs don’t differ much if these are accessed by 10,000 customers or 10 million. In general, larger firms will opt for a higher capital-labour ratio, and are rewarded with better output per labour hour … We haven’t even touched on the usual laundry list of motherhood issues: interprovincial trade barriers, our corporate tax system, training, and so on. They might be part of the story, but there’s a need for deeper research to know how much they matter. Statistics Canada has the firm-level data to take the lead in this, perhaps working with top-level academics. It’s time to take a fresh look at the facts, so that we can better tailor any cure to the underlying disease”

“The productivity malaise: a symptom, but not the disease” – CIBC Economics

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Diversion: “The Greatest App of All Time Day 28: Google Earth vs. Calculator” – Gizmodo

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