Oil flirts with $50

Feb. 3: Plus, the ballad of Chip and Lulu(lemon), Obama's $4 trillion budget, and a burrito brand's quarterly profits

Oil has a spring in its step this morning, extending Friday’s rally and moving up 11 per cent over two days, which also gave the TSX/S&P composite index a three-digit boost yesterday. The rally on Thursday was the biggest single day gain in a year and a half, after reports that the number of U.S. oil rigs was at late 1980s levels as oil and gas companies cut back. This morning, West Texas Intermediate is looking perky, sitting just a touch above $50, while Brent, the global benchmark, is back above $55 at $56.33, although this could change quickly.

Could this represent a turnaround for the seven-month oil rout? Let’s see how today goes.

In economic news today, we have everything from auto sales to the industrial price product index and the raw materials price index (RMPI), which could give us some insight to where producers see demand going in the coming months. In a similar vein, we’ll see factory orders and vehicle sales from the U.S., and in the eurozone, we’ll see the producer price index, which affects wholesale prices, and so can be an indicator of future consumer inflation (or deflation) levels. The Reserve Bank of India also met this morning, and opted to leave their benchmark interest rate at 7.75 per cent.

Casualties in the oil industry – from Scotland to Calgary. Oil may be seeing a bounce today, but the industry doesn’t seem to be counting on a quick rebound. Today, Royal Dutch Shell will announce plans for how they’ll decommission one of the U.K.’s biggest oilfields, located above Scotland in the North Sea. The project will be expensive, time consuming and complicated – among other issues, Shell has to figure out what to do with the oil storage tanks. It isn’t the only one – most of the platforms in the North Sea are expected to be decommissioned over the coming decades, and the oil rout will probably speed up the process. In the mean time, the housing market in Calgary is feeling the pain: the local real estate board says home sales were down 35 per cent last month, while listings were up by 40 per cent.

Lululemon founder decamps to rival family brand. Anything to do with Lululemon prompts journalists to make terrible puns, so here we go: Chip Wilson’s final stretch at the yoga wear brand is over. In a tale of sportswear rivalry, Wilson will join the Kit & Ace brand, founded by his wife and son, which means he’ll still be spreading stretch pants far and wide. The controversial former CEO is often known for his comments following Lululemon’s sheer-pants debacle, when he said the issue was not legging quality, but the rubbing of wearers’ thighs.

A rate cut down under. The Reserve Bank of Australia has cut their interest rate to a record low  of 2.25 per cent. That’s a cut of 0.25 per cent, pushing stocks up to above a six-year high, as the Australian dollar weakened. The cut came as Australia, like Canada, sees the impact of a commodities slump, including cuts to the mining industry. The similarities between the two countries are well noted – when the Bank of Canada cut their rates, the FT, for one, noted that Australian central bankers were watching closely while planning the timing of theirs.

Obama’s big budget. Yesterday the American President released his budget, a $4-trillion plan to cut economic inequality, tax offshore profits, increase infrastructure, expand child care and employment benefits, and make community college free. One of the elements is a plan for a one-off tax on American companies’ offshore funds – estimated to be in the trillions – of 14 per cent, which would go toward updating highways and other infrastructure. The plan already has fierce opposition from business associations as well as political opponents.

How much money can you make from burritos? The fast-growing Chipotle Mexican Grill will report their fourth-quarter earnings today, and given the time and space spent on the dimming of the golden arches, it’s only fitting to have a look at what has often been called McDonalds’ main rival in the U.S. market. The chain is known for sustainable and made-to-order food, and is seen as a barometer of changing tastes in fast food that have left big-name brands struggling to catch up. Irony of ironies: McDonalds’ actually used to own Chipotle. It divested the company in 2006 for $1.6 billion. By 2013, the chain was worth $13 billion.

Need to know:
TSX: 14,900.47 (+227), Monday
Loonie: 79.31 (0.84 cents), Monday
Oil (WTI): $50.84, Tuesday morning (4:00 a.m.)