‘That’s a Wrap’
By Rod Blake
It wasn’t obvious, but when one reviewed the market action from the end of last week it seemed to be signalling that the artificial intelligence (AI) led tech bull market was running out of steam and resources – especially crude oil – were finally gaining some traction.
The way I see it – Crude oil gained almost 5% last week to US$73.86 a barrel. And while $73 isn’t something to write home about it is still up some 10% from one month ago. Meanwhile, last week’s Baker Hughes rig count had the number of active U.S. rigs pegged at 680 – which was down by 72 or almost 10% fewer active rigs from this time one year ago.
Most of today’s U.S. oil production is a direct result of fracturing, or fracking, of the rock in tight shale formations that allows the oil to flow to the borehole. Fracking led to a resurrection of American oil production, which peaked in 2020 at 13-million barrels per day (bbls/d), before crashing to 11-million bbl/d during Covid. Post Covid, American oil production seems to have peaked again at about 12-million bbls/d. Fractured wells are a marvel of engineering but there is drawback with these tight shale formations in that they deplete quickly and require constant drilling to keep flow rates up. To me – the drop in rig counts indicates that crude oil at or near US$70 is cheap and doesn’t justify increased drilling or, that the number of good targets is diminishing – either of which could lead to higher crude oil prices to come.
The influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 5-rigs over the past week to 680, down by 81 from this time last year. In Canada – the number of active rigs increased by 12 to 187, down by 4 from a year ago.
This as the price of crude oil rose to a new 21/2-month high of US$77.28 a barrel.
Warren Buffet’s Berkshire Hathaway Energy ‘BRK.B-N’ goes deeper into liquefied natural gas by investing some US$3.3-billion to buy Dominion Energy Inc.’s ‘D-N’ 50% interest in the Cove Point liquefied natural gas (LNG) facility in Maryland’s Chesapeake Bay, giving Berkshire a 75% operating interest in the facility.
Meanwhile Cathedral Energy Services Ltd. ‘CET-T’ shares’ rose by $0.06 or 8.70% to $0.75 on word that the Calgary, AB based petroleum drilling service company was strengthening its U.S. presence with a US$41-million cash & securities purchase of Texas based Rime Downhole Technologies.
What goes around comes around – TransAlta Renewables Inc. ‘RNW-T’ was spun out of TransAlta Corporation ‘TA-T’ & ‘TAC-N’ a number of years ago as a standalone entity – to take advantage of the new and growing renewable energy sector. Now – with a move that caused RNW shares’ to rise by $2.03 or 18.47% to $13.02 – TA proposes to buy RNW back in a stock & cash deal valued at some $1.38-billion – in order for the companies to “simplify structure and enhance strategic position”.
i-80 Gold Corp. ‘IAU-T’ & ‘IAUX-N’ shares’ rose by $0.08 or 2.73% to $3.01 after the Reno, NV based mineral developer reported more encouraging underground diamond drill hole assays from the company’s McCoy-Cove Property in Nevada, including one intercept of 27.8 grams per tonne (g/t) of gold over 14.9 meters (m).
The price of Jaguar Mining Inc. ‘JAG-T’ stock plunged by $0.51 or 22.37% to $1.77 after the Toronto, ON based miner’s 2nd-quarter gold production fell well short of 1st-quarter values.
Azimut Exploration Inc. ‘AZM-V’ stock rose by $0.05 or 4.00% to $1.30 on word the Longueil, QC mineral explorer had signed $115.7-million in joint venture agreements with mining giant Rio Tinto Exploration Canada Inc. to help develop Azimut’s prized Corvet and Kaanaayaa lithium properties in the James Bay region of Quebec.
The price of Avalon Advanced Materials Inc. ‘AVL-T’ shares’ rose by $0.01 or 6.67% to $0.16 after the Toronto, ON based explorer announced the signing of a memorandum of understanding with Finland’s mineral processing company Metso Corporation to develop a lithium hydroxide production facility at Avalon’s site in Thunder Bay, Ontario.
Lumber rose to a new 5-month high of US$575 per 1,000 board feet (MBF).
“Undersea mining – not in my backyard” – as the Canadian government joined 16 other countries in declaring an “effective moratorium” on deep-sea mining in its domestic waters.
The TSX Venture Exchange climbed to a new 3-month high of 632.
Meanwhile the Dow Jones Average (DJI) rose to new 8-month high of 34,509 while he S&P 500 and NASDAQ rose to new 15-month respective highs of 4,510 and 14.139
The Canadian loonie rose to a new 10-month high of US$0.7627 while the U.S Dollar Index ‘DXY’ fell to new 14-month low of 99.80.
After a mid-week rally, the North American markets traded cautiously going into the weekend.
For the Week – the DJI gained 2.29% to 34,509 with the S&P 500 up by 2.41% to 4,505 and the NASDAQ ahead by 3.32% to 14,114. Up north – the TSX gained 2.17% to 20,262 and the TSX Venture rose by 2.11% to 628. The CBOE Volatility Index or VIX fell by 10.05% to 13.34.
With currencies – the Canadian dollar gained 0.44% to US$0.7566 as the U.S. dollar ‘DXY’ fell by 2.31% to 99.90.
With commodities – gold bullion gained 1.61% to US$1,956, with silver up by 7.63% to US$24.82, while copper rose by 3.98% to US$3.92, as lithium lost 1.19% to US$43,017. Crude oil gained 3.86% to US$76.71 with natural gas up by 1.17% to US$2.59, while uranium fell by 0.45% to US$55.40. With soft commodities – lumber gained 7.08% to US$575. Overall – the CRB Commodities Index was up by 2.72% at 302.
And Finally – If, like me, you get that overpowering sense that the size of government is growing more than the economy, you now have confirmation – as a recent Treasury Board of Canada report showed the number of people in the federal public service rose by 40% in the past 8-years to 357,247 employees.