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Pressure on Canadian Crude Prices; North Korean Summit Back On?
Published May 28, 2018
President Donald Trump appeared to confirm the summit with North Korean leader Kim Jong Un was back on, three days after it was abruptly called off. The US State department earlier confirmed reports that a US delegation would be prepared to meet with North Korean officials on June 12th. Global markets have been subdued by US and UK holidays today, as greenback has slipped against most major peers.
Oil slid this morning, with West Texas Intermediate sitting at $66.80 a barrel at time of writing. The Saudi energy minister said petroleum supply would likely rise in the second half of 2018. The matter is particularly sensitive because Russia and the Saudis are proposing raising production to make up for losses from other members, notably a worsening slump in Venezuelan supply and a potential drop in Iran as renewed US sanctions take effect.
The anti-establishment Five Star Movement has stated that it is considering proposing the impeachment of President Sergio Mattarella, while anti-immigrant League leader, Matteo Salvini, has proffered a call for fresh elections. Five Star leaders are discussing a possible attempt to seek Mattarella’s impeachment, invoking a constitutional clause which says the president is not responsible for the actions carried out as part of his office. The euro has briefly rallied against the dollar, the gains attributed to the rejection of the euro-skeptic finance minister.
Kinder Morgan has set a May 31 deadline to remove the political uncertainty around the embattled expansion of its pipeline to the west coast, or the company may walk away. As the situation continues to deteriorate, the most likely scenario would see the federal government buying Kinder Morgan Canada. The project’s fate will create political ripples in Ottawa, where Prime Minister Trudeau’s Liberals have promised the pipeline will be built one way or another. Building more pipelines was a cornerstone of Trudeau’s energy policy. If the Trans Mountain fails, it would be the third major Canadian export pipeline project to stall in two years, putting greater pressure on Canadian heavy crude prices.
Negotiations on revamping the North American Free Trade Agreement have continued to stall despite Prime Minister Trudeau’s efforts to maintain negotiations. Trudeau spoke with US President Donald Trump on Friday about bringing the negotiations to a timely conclusion. Canadian governmental summaries of the discussion stated that Trudeau mentioned “strong concerns” concerning the US threat of tariffs up to 25% on the Canadian auto industry. The effects of such US impositions would have widely negative effects on the two interconnected industries.