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Oil tumbles nearly 20% from October high – but analysts expect a recovery

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Just a few weeks ago, there was talk about oil hitting $100 US a barrel after crude prices hit a four-year high in October.

That’s a feat that hasn’t been achieved since 2014 before the commodity market came crashing down.

But since then, oil prices have tumbled around the world — briefly falling into bear market territory this week.

That means benchmark West Texas Intermediate (WTI) oil in New York plunged more than 20 per cent at one point on Tuesday from last month’s peak of $76.90. On Wednesday, oil was trading around $61 US per barrel after prices fell for eight straight days. 

Reports Wednesday about plans from the influential Organization of Petroleum Exporting Countries (OPEC) to discuss cutting oil production next year in response to increasing global inventories also did little to boost prices.

Even with the month long decline, however, some analysts aren’t ready to write-off the significant recovery that’s been taking place in the oil market this year.

“I think the market is kind of getting ahead of itself now,” said Michael Loewen, commodity strategist at Scotiabank. “The narrative of an emerging recession and bear market played out. We saw what happened with the equity markets, and even in the rates [bonds] markets.”

“Both of those markets are starting to recover. Obviously, you’re going to take your risky assets [like crude oil] with you.”  Crude oil futures, like many commodities, are generally considered riskier assets for investors compared to bonds due to price volatility. 

Stock markets have been climbing higher since “Red October,” when investors suffered some of the biggest losses this year amid wild swings in equities.

Market ‘spooked’

But, oil prices haven’t followed suit because the prospect of U.S. sanctions on Iran’s oil exports led other big producers like Saudi Arabia, Russia and the U.S. to boost production in order to make up for any shortfall in global supply.

“There’s this misconception here that the market is completely swamped with excess supply … We think that’s a bit of a fallacy,” said Michael Tran, managing director of RBC’s Global Energy Strategy.

“Many people in this market are quite spooked by the idea that supply is coming in a large size, and demand growth is potentially slowing.”

Data from the Energy Information Administration (EIA) in the U.S on Wednesday showed that crude stockpiles grew more than forecast by 5.78 million barrels from the week before.

But, Tran said there is a disconnect between the physical and financial side of the oil market right now and that’s bringing down the price. 

“I think there’s a major difference between a market that is well-supplied, and one that is over-supplied, and right now we’re in the well-supplied camp,” he said. “In the physical market, barrels are selling with relative ease.”

Tran added that on a seasonal basis, generally in October and November, is when oil refiners shut down for planned maintenance.

“Right now what you’re seeing is a pretty heavy maintenance season playing out. So, there’s less buying happening in the market,” Tran said. “That’s a seasonal factor, and we do ultimately think that demand will pick up through the balance of this year to the next several quarters.”

Price rebound coming?

Tran expects to see oil prices back into the low $70 a barrel range by the end of this year. That’s a more than eight per cent jump from the current price. He’s calling for it to go even higher next year into the mid $70 range.

Not everyone is convinced that the hurdles in the oil market will clear so soon.

Karl Schamotta, chief market strategist at Cambridge Global Payments, said a combination of factors such as tightening global financial conditions like higher interest rates, deleveraging in China, which is reducing the country’s appetite for energy exports, and fears over trade tensions could weigh on the market a bit longer.

“Overall, although oil demand growth is likely to weaken in the longer term, my feeling is that oil prices could rebound into the end of the year,” Schamotta said.

What this means for Canada

In terms of how global oil prices will impact the Canadian energy market, analysts said the huge discount between Canada’s benchmark crude oil — Western Canadian Select (WCS) — and WTI could start to narrow next year.  

Currently, WCS is trading around $18 a barrel, while WTI is at $61. A supply glut caused by a lack infrastructure such as pipelines and rail capacity to transport crude exports to key markets like the U.S. has plagued the sector.

“I believe that rail is going to clear the market in by spring time … That’s when the market starts to get better,” said Loewen. “Then you have Enbridge Line 3 coming online in November 2019 … It adds 350,000 barrels per day and that has massive implications for WCS.”

Schamotta added that after the widest oil refinery shutdowns in the U.S. Midwest in at least a decade, a number of major refiners are due to restart production in the next couple of months.

“Canadian producers should begin to earn more revenue from each barrel shipped,” he said. 

But, Loewen warned that an increase in exports does not mean the Canadian market is “out of the woods.”

“We still need another pipeline. We need a Trans Mountain expansion project or a Keystone XL to really see the fruits,” Loewen said.

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Couple from Toronto buys dream home in Mushaboom

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MUSHABOOM – A couple who lived and raised a family in downtown Toronto developed a five-year plan in 2015 to purchase their dream home.

In September they moved into the home – located on Malagash Island in Mushaboom on Nova Scotia’s stunning Eastern Shore – that met and exceeded their best dreams for their retirement.

The Camerons, Bruce and Tanya, decided in 2019 they would explore the Maritimes to see what real estate was available to become their potential retirement home. In the spring of 2020, during a global pandemic, the real estate boom hit their city, and they were hearing the same for Nova Scotia. Our province was their first-choice for attaining their desire for an entirely different lifestyle – away from the busyness of the city.

“We had $300,000 to $350,000 as a home value in mind to buy. Our semi-detached located off Danforth in Toronto was priced at $850,000. We wanted to come out ahead, so we would be secure in retirement,” Tanya said.

Their century-old home had prime location near the subway and GO Transit Line for a great 13-minute commute downtown.

“We enjoyed our community,” explains Bruce “… we had great neighbours, young children around and street parties – lots of social activity.”

Bruce says, “Our agent suggested a starting quote of $899,000. We did not do any renovations and only some staging. Fifty couples went through and we received four significant offers. Six days later we sold – with zero conditions – and a price of over a million dollars. We just requested a closing of September 2020 to get the kids off to school – which we got.”

The couple got more than they had anticipated.

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Rabobank Announces Leadership Changes in U.S., Canadian Offices

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NEW YORK, Dec. 16, 2020 /PRNewswire/ — Rabobank, the leading global food and agribusiness bank, has appointed two of its top executives, Tamira Treffers-Herrera and Robert Sinescu, to become Co-Heads of North American Client Coverage, positioning the Bank for future growth in the region.

Treffers-Herrera has also assumed the role of Vice Chairperson and Head of the Atlanta office, where she additionally oversees Rabobank Mexico, which is led by Eduardo Palacios. Sinescu is the Head of the Chicago office, and also oversees Rabobank Canada, led by Marc Drouin, who was recently appointed as Canada’s General Manager.

Treffers-Herrera and Sinescu report to David Bassett, Head of Wholesale Banking North America, the Bank’s corporate and investment banking business for the region based in New York.

“Both Tamira and Robert have a demonstrated history of strong leadership, operational excellence and passion for our clients,” Bassett said. “Their broad experience and deep sector expertise will be invaluable in delivering dynamic results for clients while accelerating our growth trajectory in North America.”

Each office will have an even greater focus on key Food & Agribusiness sectors and clients: The Chicago office will drive growth in sectors including Dairy, Farm Inputs and Grains & Oilseeds, which are also key areas of focus for the Canada office. The Atlanta office will focus heavily on sectors such as Animal Protein, Beverages, Sugar, and Supply Chains, which are important sectors in Mexico as well.

“Rabobank is fully committed to our clients throughout North America, and we believe our new sector-focused coverage will improve our ability to provide knowledge-based, value-added solutions that benefit our clients,” Bassett said.

Treffers-Herrera was most recently based in London as CEO of Rabobank’s European Region from 2016-2020, where she took the organization through Brexit. Prior to that, she worked in the Atlanta office from 2002-2016. During her tenure in Atlanta, Treffers-Herrera served as Global Sector Head – Consumer Food & Beverages, and prior to that she was a senior banker for a portfolio of large beverage and consumer foods clients. She holds a Bachelor of Arts degree from the University of Kentucky, a Master of Arts from the Patterson School of Diplomacy and International Commerce and has studied at The University of Chicago Booth School of Business and Harvard Business School.

Sinescu has been with Rabobank for over 21 years and was previously General Manager of Rabobank Canada, where he oversaw all operations, business development, commercial strategy and relationships with regulators. In addition, he continues to serve as CEO of Rabo Securities Canada Inc. Prior to Canada, he was a senior banker, Head of Corporate Banking, European Sector Head for Sugar, and a member of the Management Team for Rabobank France. He holds a Bachelor of Science in Business from the Bucharest School of Business, a Master of Business Administration & Management and a Master of Science in Banking and Corporate Finance from Sorbonne University in Paris, and has studied at Brown University.

Drouin has worked with Rabobank’s Canadian team for more than nine years and most recently served as a senior banker, Head of Rabobank Canada’s AgVendor Program and a member of Rabobank Canada’s Management Team. He brings extensive wholesale banking experience within the Dairy, G&O, CPG and Supply Chain sectors. Drouin holds a Bachelor of Arts degree from McGill University and a Master of Business Administration in International Finance, Marketing and Management from the Schulich School of Business at York University.

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Real Estate

Greybrook Realty Partners & Marlin Spring Brand Jointly Owned Asset Manager – Greyspring Apartments

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TORONTO, Dec. 14, 2020 (GLOBE NEWSWIRE) — Greybrook Realty Partners and Marlin Spring are pleased to announce the new branding of their jointly owned investment and asset management firm, Greyspring Apartments. With a portfolio of more than 2,000 units and CAD$375 million in assets under management, Greyspring Apartments is focused on the acquisition and repositioning of multi-family assets throughout Canada.

The new name and branding is an important step in Greyspring’s evolution as an independent operating business. Formed in 2018 by long standing-partners Marlin Spring and Greybrook Realty Partners, Greyspring Apartments was established with the goal of building a leading asset management firm with a robust portfolio of residential rental real estate assets in primary and secondary markets across Canada.

Greyspring’s talented team of real estate, asset management and finance professionals is overseen and guided by the Management Board, whose members include Benjamin Bakst, CEO, Marlin Spring; Elliot Kazarnovksy, CFO, Marlin Spring; Sasha Cucuz, CEO, Greybrook Securities Inc.; Peter Politis, CEO, Greybrook Realty Partners; Chris Salapoutis, President & COO, Greybrook Realty Partners; Ashi Mathur, President, Marlin Spring; and Karl Brady. In addition to his role on the Management Board, Karl Brady leads Greyspring Apartments as its President. 

“We are pleased to announce the official name and branding of a business we formed with our partners at Marlin Spring a few years ago,” said Peter Politis, CEO, Greybrook Realty Partners. “Greyspring has been diligently focused on the execution of strategic value-add programs across its portfolio that are improving the quality of housing for tenants and overall asset values. For Greybrook investors, expanding from our core business in real estate development to the value-add space through Greyspring, has allowed us to provide our clients with investment opportunities that diversify their real estate investment portfolios.”

“Marlin Spring and Greybrook have partnered on many residential real estate projects in recent years,” said Benjamin Bakst, CEO and Cofounder, Marlin Spring. “To a great extent, Greyspring illustrates our approach to partnerships. We believe in, and strive for, responsible growth through deepening our relationships with our trusted partners. With Greyspring, we’ve formalized our focus on providing better and more affordable living experiences for Canadians. This vision aligns with our mission to deliver exceptional real estate value to all our stakeholders with an uncompromising adherence to our core values.”

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