Canada’s changing economic picture with changing oil prices !

 

February 13, 2015

 

Weekly Statistics:

Today

Week Ago

Year Ago

13-Feb-15

06-Feb-15

14-Feb-14

S&P TSX

15,264

15,084

14,055

S&P 500

2,097

2,055

 1,839

DJIA

18,019

17,824

 16,154

OIL

$52.65

$52.00

 $91.48

USD vs CAD

0.8001

0.79837

0.9102

Gold

$1,227.90

$1,235.00

 $1,322.40

 

Last week both, US and Canadian, indices showed modest gains as the S&P 500 closed at an all time high of 2,097. A rally in oil prices, better-than-forecast economic growth in Europe, and better Canadian manufacturing sales for December attributed to this confidence and optimism. Canadian manufacturing sales rose at 1.7 percent, much better than 0.5 percent expected by economists. Lower oil prices and lower Canadian dollar will help Ontario and Quebec to strengthen their position in the national economy, as companies such as Linamar and General Motors make further investments (around $500 million each) in Ontario. Companies are becoming confident again about Ontario’s manufacturing economy and could create more jobs in the foreseeable future for the province. While recent jobs report showed Alberta still leading, we believe that this trend could change with Ontario and Quebec likely to lead job growth in Canada. Western Canada’s loss could be eastern Canada’s gain. Major oil companies like Husky, Suncor, and Canadian Oil Sands etc. have already cut their expenditures for 2015 and large job losses are expected along the way. The Canadian Association of Petroleum Producers has already forecasted a drop of 33 percent in spending by Oil and Gas companies. Though the prices of crude have tumbled by more than 50 percent from their recent highs in June 2014, the production has followed a reverse trend and has increased since. A US government report last week showed oil inventories at record levels which is creating a global oil supply glut. According to Citigroup, this oversupply could push the prices of oil to as low as $20 a barrel. However, a BMO research report shows that corporate budgets still reflect Crude at $61 a barrel. We believe that $61 is a very optimistic price, taking into account the global flooding of oil. Oil companies should brace themselves for a lower oil prices and more pain.

 

 

Source- Bloomberg, Zerohedge, Globe Investor Gold, CBC, Financial Post

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