CANADA ECONOMICS

SOFTWOOD LUMBER

Natural Resources Canada. 2017-06-01. Government of Canada to Announce Action Plan for Softwood Lumber Industry

OTTAWA — Canada’s Minister of Natural Resources, the Honourable Jim Carr, the Minister of Foreign Affairs, the Honourable Chrystia Freeland, and the Minister of International Trade, the Honourable François-Philippe Champagne, will make an announcement regarding softwood lumber followed by an opportunity for media questions.

Following the announcement, there will be a technical briefing with officials from Natural Resources Canada, Global Affairs Canada, Employment and Social Development Canada, the Business Development Bank of Canada and Export Development Canada. The technical briefing is not for attribution, and cameras are not allowed.

The Globe and Mail. May 31, 2017. Ottawa to back softwood industry with $860-million aid package
STEVEN CHASE, BRENT JANG AND JUSTINE HUNTER

OTTAWA/VANCOUVER/VICTORIA — The Canadian government will unveil about $860-million in aid for the softwood-lumber industry Thursday in a bid to ease the pain caused by punitive duties imposed on Canada in a new timber trade dispute with the United States.

Ottawa will boost employment insurance support for workers who lose their jobs as a result of the dispute, and it will offer loan guarantees and assistance for forestry industry firms to help with innovation and marketing, a source familiar with the matter said. Not all of the money will be new cash.

Natural Resources Minister Jim Carr, along with Foreign Affairs Minister Chrystia Freeland and International Trade Minister François-Philippe Champagne, will announce the support package.

The Trudeau government will be careful to avoid characterizing the assistance as a bailout or subsidy because it does not want to give the American lumber lobby any fodder to lodge a new complaint with U.S. trade regulators.

This support arrives shortly after punitive U.S. duties began to bite into Canadian softwood producers’ bottom lines. Preliminary countervailing duties were applied effective April 28.

The Trudeau Liberals are moving faster and with greater support for Canadian producers than their predecessors initially did 15 years ago during the last Canada-U.S. softwood-lumber dispute. This haste suggests the federal government is paying close attention to the potential political fallout that could result from widespread job losses in the cross-border trade battle.

In the previous trade tussle, it was seven months before cabinet approved an aid package that was initially only $100-million.

Five Canadian forestry firms must pay preliminary countervailing duties ranging from 3.02 per cent to 24.12 per cent on lumber shipments, while the U.S. Department of Commerce slapped other lumber producers from Canada with a weighted-average duty of 19.88 per cent.

Duties paid by Canadian firms will be held in trust by the United States. Tariffs for new shipments will be collected by the United States during a four-month period for countervailing duties and a six-month period for anti-dumping, but additional duties will be suspended pending a final determination by the U.S. Department of Commerce.

The U.S. lumber lobby accuses Canadian provinces of subsidizing their softwood producers.

U.S. producers say that under their system, the cost of timber rights on private land is more expensive than the Canadian “stumpage” fees paid by forestry companies to cut trees down on provincially owned property. In British Columbia, for instance, Crown timber accounts for 95 per cent of the province’s forested lands.

The long-running trade war over softwood lumber dates back to the early 1980s. This latest clash marks Round 5 in the cross-border fight.

The U.S. lumber lobby’s ultimate goal is to reduce the amount of Canadian softwood – used for construction framing, for instance – entering the United States.

The dispute covers about $7-billion in annual exports.

It has been more than 19 months since a nine-year truce in the Canada-U.S. softwood conflict ended – with the Trudeau government and the U.S. administration unable to clinch a successor pact despite months of negotiations.

The dispute will require Canada to launch expensive litigation in the United States under the North American free-trade agreement and even at the World Trade Organization in Geneva, which referees global commerce between member countries.

About 230,000 Canadians work in forestry, and about 70 per cent of softwood-lumber exports go to the United States.

On the whole, Canada has been successful in winning legal challenges of past U.S. duties on Canadian softwood. But it could take four or five years to secure these rulings.

The Americans want to limit softwood shipments so the Canadian share of U.S. lumber consumption is capped at about 22 per cent. Canada’s market share in 2015 was 30 per cent.

British Columbia is Canada’s largest lumber exporter into the United States, followed by Quebec, Ontario, Alberta and New Brunswick.

Susan Yurkovich, president of the BC Lumber Trade Council, said the aid package has been in the works since February, when Mr. Carr launched a federal-provincial task force on softwood lumber.

“It’s been working its way through the system,” she said on Wednesday. “The federal government is looking for things they can do to support workers in communities for a period of time, while we are faced with duties. I expect you’ll see support for workers in communities, and more support for market diversification.”

She said Canada’s lumber producers are not yet feeling the pain of the new tariffs but by July, when some will have to pay retroactive duties, they will feel the impact. “Right now, markets continue to be pretty strong and lumber prices are mitigating the impact – it’s largely being passed through to U.S. consumers,” Ms. Yurkovich said.

The Conference Board of Canada warns about the potential for 2,200 forestry job cuts across Canada.

With the addition of anti-dumping duties of roughly 10 per cent expected to be announced on June 23, the board estimates that “Canada’s wood products manufacturers will see pretax profits shrink from $1.8-billion in 2016 to $1.4-billion this year and $1.1-billion in 2018, as the United States issues duties averaging 30 per cent on Canada’s softwood lumber.”

Duties could reach $1.7-billion a year, according to the board.

BLOOMBERG. 2017 M06 1. Canada Readies $642-Million in Lumber Aid Amid U.S. Trade Spat
by Josh Wingrove

• Trudeau to backstop softwood producers hit by fresh duties
• Cross-border dispute predates Trump’s pledge to overhaul Nafta

Canada is set to announce an aid package for its lumber sector after the U.S. imposed duties as part of an escalating trade dispute, according to a person with direct knowledge of the plans.

The government will detail the C$867 million ($642 million) plan Thursday in Ottawa, said the person, who spoke on condition of anonymity ahead of the 1 p.m. announcement. It’s expected to be given final approval when Prime Minister Justin Trudeau’s cabinet meets earlier in the day.

The funding will include approximately C$605 million in loans and loan guarantees and about C$160 million in transition funding for softwood companies, the person said, confirming an earlier report from broadcaster CTV News.

Alexandre Deslongchamps, a spokesman for Natural Resources Minister Jim Carr, declined to comment Thursday morning.

The aid comes after duties imposed in April on Canadian producers including West Fraser Timber Co., Canfor Corp., Interfor Corp. and Resolute Forest Products Inc. The duties are as high as 24.1 percent, but were lower than some had feared. A second round of duties is expected later this year.

Lumber disputes between Canada and the U.S. predate President Donald Trump’s administration and its pledge to overhaul the North American Free Trade Agreement. The previous deal expired in 2015, and a tariff-freeze expired a year later. Trudeau and former President Barack Obama were unable to reach an agreement on a new pact and this round of talks is known as “Lumber 5,” or the fifth dispute.

Canada argues the U.S. accusation of hidden subsidies for softwood has no merit, and points to past legal victories that helped resolve earlier skirmishes over the past several decades. “Independent trade panels have repeatedly found these claims to be baseless,” Carr said in April. “We have prevailed in the past, and we will do so again.”

Thursday’s aid funding, however, risks weakening Canada’s legal argument. After all, the core accusation by the U.S. is that Canada subsidizes its producers.

CANADA - US

DoS. June 1, 2017. U.S.-Canada High-Level Policy Review Group Meets in Ottawa

Washington, DC - Under Secretary of State for Political Affairs Thomas Shannon and Assistant Deputy Minister for International Security and Political Affairs Mark Gwozdecky co-chaired the tenth U.S.-Canada High-Level Policy Review Group on June 1 in Ottawa. The Review Group, which last met in December 2016, discussed a broad range of bilateral, regional, and global issues on which the United States and Canada closely cooperate.

The United States welcomes the opportunity to further enhance cooperation and collaboration through the High-Level Policy Review Group. Such meetings advance the United States’ and Canada’s common objectives around the world. The United States looks forward to continuing to strengthen the relationship between the U.S. and Canadian governments and peoples through global partnership.

The Globe and Mail. May 31, 2017. Globe editorial: Help America behave like America, again

The current principal blunt instrument of American foreign policy – we speak of Donald Trump’s Twitter account – has lately been aimed at a previously unthinkable target: America’s European allies, above all Germany.

On Tuesday, and not for the first time, Mr. Trump swung a paw at a long-standing partner. “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change,” he wrote at 6:40 a.m.

The missive followed an extraordinary comment earlier this week by German Chancellor Angela Merkel, to the effect that the U.S. and Britain are no longer reliable allies for her country.

“The times in which we could completely depend on others are on the way out. I’ve experienced that in the last few days,” Ms. Merkel said in a speech at a Bavarian beer tent. “We Europeans truly have to take our fate into our own hands.”

Ms. Merkel is in the midst of an election campaign, and criticizing the perfidious anglosphere plays as well with German voters as criticizing Europeans does with Mr. Trump’s audience. But her ire was real, prompted by Mr. Trump’s words and actions during last week’s meeting of the leaders of the North Atlantic Treaty Organization and the G7 in Italy.

In the course of those five days, NATO began to unravel. Combined with the events of the past year – America’s election of a man who called NATO “obsolete,” who cheered Brexit and backed France’s Frexit-promoting National Front, and who consistently demonstrates a reflexive hostility to democratic allies – it seems like the Western alliance’s dissolution may be happening, right before our eyes.

Somewhere, Russian strongman Vladimir Putin is laughing. For decades, Russian and Soviet foreign policy aimed to drive a wedge into NATO, specifically between the U.S. and Germany.

In Canada, the repercussions of this deepening split will be profound. The question for the Liberal government is what to do about it.

Ottawa’s principal aim must be to not get caught in the crossfire – no simple task, considering the increasingly isolationist and protectionist White House and Congress.

Prime Minister Justin Trudeau’s values align more closely with those of Ms. Merkel and new French President Emmanuel Macron. But Canada’s key economic relationship is with our largest trading partner, the U.S. That relationship has to be Issue No. 1 for any Canadian PM. And remember, Mr. Trump does not hold all of the cards in Washington’s system of divided government, he will not be in the White House forever, and so far, he has done more barking than biting.

That is the backdrop against which a re-negotiation of the North American free-trade agreement will take place.

As that saga unfolds, Canada, signatory of a free-trade deal with the European Union, will also have to stake out a role within the new NATO dynamic.

Much has been made by Mr. Trump of the paltry defence spending of alliance members. Canada spends just one per cent of GDP on national defence; NATO countries have committed to spending two per cent. Most European countries fail to meet that target.

And though Canada punches well above its weight in other ways, being far more willing than the Europeans to send troops into combat (Afghanistan), to join American-led missions (Iraq) and to militarily stand up to Russia (a training mission in Ukraine, Canadian troops based in the Baltics), when the measure is dollars and cents, Canada is one of the alliance’s worst laggards.

Yes, Canada should step up defence spending, and not because Mr. Trump asked. However, reaching the two per cent of GDP target would involve Ottawa spending an extra $20-billion a year, year after year. That won’t be happening any time soon. Liberal Ottawa lacks the desire, and the federal budget doesn’t offer the means.

Canada must do more within the Western alliance, but it can’t suddenly spend twice as much.

Spending aside, it feels odd to have to make the case for NATO, and to have to make it to its leader, the American President.

But the Russian annexation of Crimea and the ongoing machinations in Ukraine and the Balkans, coupled with the recent Kremlin interference in elections in the U.S. and France, mean the alliance has taken on renewed importance.

Defence Minister Harjit Sajjan put off delivery of his department’s long-anticipated defence policy review until after last week’s NATO summit – as it turns out, an inspired move.

As for free trade, it is a dense thicket, what with Mr. Trump’s vacillating and contradictory agendas.

Ultimately, though, on free trade and NATO, Ottawa’s goals are the same: Keep America in the club. And help America behave like America, again.

ENERGY - G7

StatCan. 2017-06-01. Quarterly capital spending: Oil and gas industries, first quarter 2017

Capital expenditures for the oil and gas extraction industries totalled $10.6 billion in the first quarter, up 5.1% from the first quarter of 2016. This was the first year-over-year increase in spending since the fourth quarter of 2014. Despite the increase this quarter, spending remains well below the peak of $19.8 billion reported in the first quarter of 2014.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170601/dq170601c-eng.pdf

The Globe and Mail. May 31, 2017. What oil shock? Suddenly, Canada leads G7 in economic growth
DAVID PARKINSON, ECONOMICS REPORTER

Canada’s first-quarter economic growth number didn’t quite live up to advance billing, but make no mistake: The country’s economy has shaken off its oil-shock yoke and set itself on a world-class roll.

Statistics Canada’s gross domestic product report showed that real GDP (i.e. excluding inflation) grew at an annualized pace of 3.7 per cent in the quarter – a disappointment only because expectations had gone sky-high amid a raft of recent strong economic indicators. The median estimate among economists was 4.2 per cent, which would have contended for the fastest-growing quarter in more than five years.

Instead, we settled for merely a run-of-the-mill excellent quarter.

It was, however, enough to rank Canada as the fastest-growing economy in the G7 in the first three months of the year. Canada was also the fastest-growing G7 economy in the previous quarter. And the quarter before that.

After languishing below the G7 average for the better part of two years as the economy struggled to rebuild from the collapse in oil prices that decimated one of its biggest industries, Canada has emerged as a growth leader among major advanced economies.

This no longer looks like a mere bounce-back from a rough first-half of 2015, and the severe but temporary impact of the Fort McMurray wildfires. This looks like an economy that has quite definitively turned the corner.

“Growth has left the earlier oil-price shock in the rear-view mirror,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a research report. “We’re making solid progress in eliminating earlier disinflationary slack and getting back to full employment. We’re back.”

Even the apparent disappointment in first-quarter growth came only because Statscan also revised upward its GDP estimates for the previous two quarters. After the revisions, GDP is pretty much right where the experts thought it would be at the end of the first quarter – which is to say, pretty darned warm. Over the past three quarters, the economy has grown by an average of 3.5 per cent annualized.

This has put the economy considerably farther down the road to full recovery than experts envisioned just a few months ago. In January, the Bank of Canada estimated fourth-quarter GDP growth of 1.5 per cent annualized, and projected first-quarter growth of 2.5 per cent. Statscan’s data now put each of those quarters more than a full percentage point above those targets. The federal government’s budget, issued two months ago, forecast growth for all of 2017 of 1.9 per cent; some economists on Wednesday were talking about something north of 2.5 per cent.

Part of the reason for that optimism was the economy’s performance in March. The monthly GDP figures, released at the same time as the quarterly numbers, put month-over-month growth at a brisk 0.5 per cent, well ahead of economists’ expectations. That means the economy entered the second quarter at a faster pace than economists had baked into their forecasts – which sets the quarter up for stronger growth than economists have projected.

And the March gains were remarkably broad-based: 16 of 20 industries posted growth in the month. The economy might not be firing on all cylinders, but it’s getting close.

That said, no one expects the economy to keep humming along at a 3.5-per-cent growth pace. For a developed economy with an aging work force, anything north of 2 per cent is considered impressive; north of 3 per cent is downright torrid. And indeed, there were elements of the first-quarter report that suggest a moderation is in the cards for the second quarter.

Notably, a large part of the quarterly growth was fuelled by a $12.2-billion build-up in business inventories, the biggest quarterly increase in two years. That suggests that manufacturers were stockpiling output rather than selling it – which often signals a slowdown in production in the subsequent quarter, as businesses rely on their inventories to fill customer orders.

Economists also pointed out that a fire-related shutdown of a Suncor oil sands facility in Alberta for all of April will take a bite out of economic output in the second quarter. Quebec’s brief construction strike may have a smaller impact.

But those are temporary delaying factors in what looks like an increasingly sustainable economic expansion. Crucially, the first quarter showed a rapid acceleration in business investment – the one critical element of Canada’s recovery that had been missing since the oil shock hit at the end of 2014. Business investment in machinery and equipment, a key indicator of business expansion, soared at an annualized rate of 23 per cent in the quarter, an encouraging signal for hiring and growth in coming quarters.

One big beneficiary of this better-than-expected economic growth could be Canada’s government finances.

Bank of Montreal chief economist Doug Porter said that thanks to a combination of better-than-expected real growth and price increases for Canadian goods, nominal GDP – the version of growth that includes inflation, the more indicative figure for government revenues – looks on track to grow by nearly 6 per cent this year, far ahead of Ottawa’s budget forecast of 4.1 per cent.

The government indicated in the budget that a one-percentage-point change in one-year nominal GDP growth would affect its bottom line by about $4.7-billion; if nominal GDP comes in at the pace Mr. Porter suggested, the result could shrink the government’s projected $28.5-billion deficit by roughly one-third.

REUTERS. Jun 1, 2017. 'Axis of love': Saudi-Russia detente heralds new oil order
By Dmitry Zhdannikov and Vladimir Soldatkin

MOSCOW (Reuters) - A meeting between the two men who run Russia and Saudi Arabia's oil empires spoke volumes about the new relationship between the energy superpowers.

It was the first time that Rosneft boss Igor Sechin and Saudi Aramco chief Amin Nasser had held a formal, scheduled meeting - going beyond the numerous times they had simply encountered each other at oil events around the world.

Their conversation also broke new ground, according to two sources familiar with the talks in the Saudi city of Dhahran last week who said the CEOs discussed possible ways of cooperating in Asia, such as Indonesia and India, as well as in other markets.

The sources did not disclose further details, but any cooperation in Asia between Russia and Saudi Arabia - the world's two biggest oil exporters - would be unprecedented.

State oil giant Aramco confirmed the meeting took place but declined to give details of the closed-door talks, which took place on the same day as OPEC kingpin Saudi Arabia and non-OPEC Russia led a global pact to extend a crude output cut to prop up prices. Kremlin oil major Rosneft declined to comment.

The meeting - which also saw Nasser give Sechin a tour of Aramco's HQ, according to the sources - gives an insight into the newfound, unexpected and fast-deepening partnership between the two countries. It is one that will be closely watched by big oil consumers around the world which have long relied on the hot rivalry between their top suppliers to secure better deals.

Such a detente between Moscow and Riyadh would have been almost unthinkable in the past.

Up until a year ago, the two sides had virtually no dialogue at all, even in the face of a spike in U.S. shale oil production that had led to a collapse in global prices from mid-2014. Sechin was strongly opposed to Russia cutting output in tandem with OPEC.

In a sign of their white-hot Asian rivalry, Rosneft outbid Aramco to buy India's refiner Essar last year and boost its share in the world's fastest growing fuel market.

Fast forward a matter of months, and Moscow and Riyadh have become the main protagonists of the pact to cut output - agreed in December and extended last week - and are even discussing possible cooperation in their core Asian markets.

"It is a new 'axis of love'," one senior Gulf official said of the relationship.

On Tuesday, Putin welcomed Saudi Deputy Crown Prince Mohammed bin Salman in the Kremlin and both men said they would deepen cooperation in oil and work on narrowing their differences over Syria, where Moscow and Riyadh are backing opposing sides in a civil war.

"The most important thing is that we are succeeding in building a solid foundation to stabilize oil markets and energy prices," said Prince Mohammed.

Putin said the countries would work together to resolve a "difficult situation".

WHY NOW?

The first attempt at cooperation between the two countries failed spectacularly with both sides unable to agree joint actions at an OPEC meeting in December 2014, six months after oil prices began tumbling from above $100 a barrel.

To add insult to injury, Sechin pledged to keep pushing output higher, even if prices fell to $20 per barrel. Saudi's then oil minister, Ali al-Naimi, retaliated by saying the Russian oil output would collapse as a result of low prices, a prediction that turned out to be wrong.

Much has changed since then, however, economically and politically - and the unlikely partnership between Moscow and Riyadh has been born out of necessity.

When oil prices collapsed, both economies were driven into deficit after years of high spending and are only now slowly recovering. With Russia heading for a presidential election in early 2018, and Prince Mohammed having pledged to reform the Saudi economy and publicly list Aramco, neither country can afford another oil price shock.

The ousting of veteran minister Naimi and his replacement with the more pragmatic Khalid al-Falih last year also appeared to have helped, with their dialogue facilitated by OPEC's new secretary general Mohammad Barkindo.

"If minister Falih says something, I know it will be done," Russian Energy Minister Alexander Novak said last week in Vienna after Russia and OPEC agreed to extend output cuts.

Novak is looking to organize a trip for Falih to a Russian Arctic field, having visited Aramco's facilities in the Empty Quarter desert himself last October. "Last year, minister Falih took us to a desert - we want to show him an ice desert," Novak joked last week.

Barkindo told Reuters: "They (Saudi Arabia and Russia) are the leading lights of the Declaration of Cooperation between OPEC and non-OPEC which has opened a new chapter in the history of oil."

'SPASIBO'

On Tuesday, Novak and Falih reiterated in Moscow they would do "whatever it takes" to stabilize oil markets, borrowing a famous phrase used by European Central Bank President Mario Draghi five years ago to defend the euro.

They also discussed the outlook for non-OPEC production including U.S. shale output, which has resumed growing over the past year as private American producers have cut costs and adapted to lower prices.

U.S. crude is now being exported all over the world and the chances of private producers agreeing to cooperate with OPEC are minimal because of tough U.S. anti-monopoly legislation.

"Both Russia and the Gulf countries are interested in some type of oil price stabilization and they hope that they can achieve this without undertaking a sort of massive cuts which they had to do back in the 1980s," said Paul Simons, a former U.S. diplomat now serving as deputy executive director of the International Energy Agency.

Saudi Arabia and Russia say they will remain in partnership long after the current output reduction deal expires.

"It is necessary to work out new framework principles for continued cooperation between OPEC and non-OPEC even after the expiration of the Vienna agreements," Novak said on Wednesday.

Falih, for his part, ended his speech by thanking Novak in Russian: "Spasibo."

(Additional reporting by Rania El Gamal, Reem Shamseddine, Nerijus Adomaitis and Olesya Astakhova; Writing by Dmitry Zhdannikov; Editing by Pravin Char)

OPEC. REUTERS. Jun 1, 2017. Exclusive: OPEC looked at extra 1-1.5 percent oil supply cut, could revive proposal
By Rania El Gamal and Alex Lawler

DUBAI/LONDON (Reuters) - OPEC discussed cutting its oil output by a further 1-1.5 percent when it met last week, three sources familiar with the matter said, and could revisit the proposal should inventories remain high and continue to weigh on prices.

The Organization of the Petroleum Exporting Countries and non-member producers ultimately decided at their May 25 meeting to extend their existing supply-cutting agreement for nine months, although oil ministers including Saudi Arabia's Khalid al-Falih confirmed deeper curbs had been debated.

One of the sources said the idea floated was to widen OPEC's supply cut by about 300,000 barrels per day (bpd).

That would equate to a further curb of about 1 percent of April output of nearly 32 million bpd and bring OPEC's total pledged cut to 1.5 million bpd, from 1.2 million bpd.

"They wanted to do some scenarios and get around 300,000 bpd of extra cuts to be distributed among everyone," the source, who declined to be identified, said. "But I think they decided to wait and see how the market will react first."

The initial price reaction to OPEC's May 25 decision was one of disappointment that producers had not deepened their cuts. Brent crude fell 5 percent to below $52 a barrel and was trading near there on Thursday, half its level of mid-2014.

OPEC officials nonetheless hope an inventory glut will ease in the next few months as market fundamentals move closer to balance. OPEC is not scheduled to meet again to set policy until November.

"By the next meeting, if prices and the situation remain like this, they will have to do something ... Everyone will be on board (for more cuts) if prices remain like they are now," the source said, adding that he expected the market and prices to improve by the third quarter.

A second source familiar with the matter said "everything is possible", when asked whether the option of a deeper cut could be revived.

A third source, an OPEC delegate, was skeptical that a larger cut would be agreed on by all parties, including non-OPEC producers. "I doubt it," that source said. "There was a proposal for a deeper cut, but it didn't work."

A fourth source, also an OPEC delegate, was skeptical for the same reason.

"To ensure a proposal can be feasible, you need to see who can buy in," that delegate said. "I believe the number of countries who can buy in will be few. However, continuing the current agreement is much more acceptable even for a longer period of time until the rebalancing is achieved."

WHATEVER IT TAKES

OPEC, Russia and other producers agreed last year to cut production by 1.8 million bpd for six months starting on Jan. 1.

Oil prices have gained from the pact but stockpiles remain high and production from non-participating countries, including the United States, has been rising, keeping crude below the $60 that top exporter Saudi Arabia would like to see this year.

Riyadh is preparing to list around 5 percent of its national oil company Saudi Aramco in 2018 and wants higher oil prices ahead of the initial public offering (IPO) for a better valuation, industry and OPEC sources have told Reuters.

"I think the Saudis have a target oil price for the Aramco IPO," the first source said. Falih, however, said after OPEC's meeting that the IPO did not affect the decision to extend the duration of the supply cut.

A deeper cut, along with extending the curbs for various lengths of time, were among the scenarios reviewed by an OPEC panel, the Economic Commission Board, days before the OPEC ministerial meeting.

Falih, who currently holds the OPEC presidency, said after the May 25 meeting that keeping the existing cuts for another nine months was the best outcome.

On Wednesday in Moscow, Falih reiterated his country's position to do "whatever it takes" along with Russia to help stabilize the market, signaling an open-ended policy to reduce the inventory overhang.

OPEC has a self-imposed goal of bringing inventories in industrialized countries down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

The next OPEC meeting is on Nov. 30 in Vienna. Another panel, the Joint Ministerial Monitoring Committee, will convene in Russia in July and has a mandate to recommend adjusting the supply pact, if needed.

(Editing by Dale Hudson)

OPEC. REUTERS. Jun 1, 2017. Oil prices under pressure from rising OPEC supplies
By Christopher Johnson and Ahmad Ghaddar

LONDON (Reuters) - Oil prices pared early gains on Thursday despite U.S. industry data showing a big drop in crude stocks last week, with investors skeptical that OPEC-led cuts will be enough to rebalance an oversupplied market.

Brent crude oil LCOc1 eased by 3 cents to $50.73 a barrel by 1327 GMT, while U.S. light crude CLc1 gained 14 cents to $48.46. The two contracts hit session highs of $51.44 and $49.07 respectively.

The contracts fell about 3 percent to three-week lows on Wednesday after news that an increase in Libyan oil production had helped to boost OPEC crude output in May, representing the first monthly rise this year. [OPEC/O]

"Sentiment is very poor and yesterday's survey from Reuters regarding OPEC production in May added to the scepticism about OPEC's capability to rebalance the market as quickly as hoped for," Commerzbank commodities analyst Carsten Fritsch told the Reuters Global Oil Forum.

Industry data on U.S. oil inventories from the American Petroleum Institute (API) late on Wednesday had given prices an initial lift on Thursday morning.

API figures showed that U.S. crude inventories fell by 8.7 million barrels to 513.2 million in the week to May 26, compared with analyst expectations for a decrease of only 2.5 million barrels. [API/S]

"This was well ahead of forecasts," said Stephen Brennock, analyst at London brokerage PVM Oil Associates. "(It) is helping the oil market regain some ground this morning."

The U.S. Energy Information Administration (EIA) reports its official figures for U.S. stockpiles at 1500 GMT on Thursday.

The U.S. inventories data provided some relief after a week of negative news on the global supply-demand balance.

The Organization of the Petroleum Exporting Countries and other producers including Russia are trying to restrict output to drain stockpiles that are close to record highs in many parts of the world.

OPEC last week discussed cutting its oil output by a further 1-1.5 percent, and could revisit the proposal should inventories remain high and continue to weigh on prices, sources said.

However, U.S. crude production is rising fast as new technology helps to extract shale oil, making the United States more self-sufficient in energy.

President Donald Trump has vowed to provide extra support for U.S. oil production and is widely expected to pull the United States out of a landmark global climate accord.

Phillip Futures' investment analyst Jonathan Chanes said a U.S. withdrawal would signal Trump's intention to further roll back emission regulations.

"That would favor the use and demand of fossil fuels," Chanes said.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by David Goodman and Dale Hudson)

AVIATION

The Globe and Mail. Reuters. Jun. 01, 2017. Boeing scraps Canada jet announcement after Sajjan’s criticism
DAVID LJUNGGREN

OTTAWA — Boeing Co on Thursday scrapped an announcement about the fighter jets it hopes to sell to Canada, a day after the country’s defense minister objected to the firm’s behavior in a trade dispute against Canadian plane maker Bombardier Inc “Due to the current climate, today is not the most opportune time to share this good news story,” Boeing spokesman Scott Day said in a statement issued at an Ottawa defense show.

While he did not specifically refer to the trade dispute, his comments appeared to be a reference to growing tensions between Ottawa and the U.S airplane manufacturer.

Last month, Canada said it “strongly disagrees” with the U.S. Commerce Department decision to investigate Boeing’s claims that Bombardier sold planes below cost in the United States and benefited unfairly from Canadian government subsidies.

As a result, government ministers have cut off contacts with Boeing.

The company had been due to announce at the show on Thursday which Canadian companies would benefit if the purchase went ahead. Boeing has 560 suppliers in Canada.

Even lower-level Canadian officials were not visiting the company’s stand at the defense industry exhibition, said one source familiar with the matter who didn’t want to be identified given the sensitivity of the situation.

Defense Minister Harjit Sajjan on Wednesday said the firm would be a trusted military ally in decades to come, but he complained the anti-dumping petition against Bombardier was “not the behavior we expect of a trusted partner.”

Canada says it needs the 18 Super Hornet jets as a stopgap until it can launch an open competition to replace its fleet of 77 aging Boeing CF-18 planes.

A Super Hornet deal with Boeing would generate new in-service support contracts for industry in Canada’s aerospace hub of Quebec, where existing CF-18s are now maintained.

Montreal-based simulator manufacturer CAE Inc works with L-3 MAS, a Quebec-based division of L3 Technologies Inc , to provide in-service support for the CF-18s.

Boeing has already said it would collaborate with L-3 MAS on production and support of the Super Hornets if Canada purchases the fighter jets.

INDUSTRY

REUTERS. Jun 1, 2017. Canada manufacturing growth cools modestly in May

OTTAWA, June 1 (Reuters) - - The pace of growth in the Canadian manufacturing sector cooled slightly in May as new orders and output slowed, though demand for exports rose to the highest level in two-and-a-half years, data showed on Thursday.

The Markit Canada Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 55.1 last month from 55.9 in April. A reading above 50 shows growth in the sector.

New orders declined to 55.7 from 57.6, while output declined to 54.3 from 55.8. Nonetheless, companies were optimistic about the stronger economy and said clients, particularly in the energy sector, were more willing to spend.

New orders for exports rose to 53.3 from 52.6, the highest level since November 2014 as companies saw more demand from the United States.

But backlogs of work rose to 52.0 from 51.0, suggesting companies were feeling pressure on their operating capacity. The measure of supplier delivery times also deteriorated, falling to 43.1 from 45.3 and indicating longer delivery times.

(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)

REUTERS. Jun 1, 2017. GM reports higher Canadian auto sales for May

MONTREAL (Reuters) - General Motors Co (GM.N: Quote) on Thursday reported it sold 31,149 vehicles in Canada last month, a 36 percent rise compared with a year earlier, fueled by demand for crossovers and light trucks.

The company added that was its best performance for May in eight years. It contrasted with a 16.4 percent drop in sales in May 2016 versus the year-earlier period.

In April, total Canadian auto sales declined for the first time in 2017.

However, GM reported the sale of 30,948 vehicles in April, an increase of 16 per cent over the same month a year earlier.

About 1.97 million vehicles were sold in Canada last year, a record full-year high, due to higher consumer demand for pickups and SUVS.

Scotiabank senior economist Carlos Gomes forecast in April that Canadian auto sales would decline slightly in 2017 to about 1.94 million units.

(Reporting By Allison Lampert; Editing by Jim Finkle and W Simon)

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