Barlow’s Research Roundup: Record production shortfalls could lead to US$150 per barrel oil
Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Oil shortage
BofA Securities commodity and derivatives strategist Francisco Blanch finds record oil production shortfalls,
“Global oil supply disruptions have reached record levels in 2026, with the scale of the production shortfall exceeding anything seen in the historical data going back to 1965. The market entered the conflict unusually well supplied following several quarters of surplus, allowing inventories to absorb much of the initial disruption. But that cushion is being rapidly depleted, with particularly large stock draws in China and declining strategic inventories across OECD economies. At the same time, disruptions to Middle Eastern and Russian refining have compounded the crude shortage, keeping petroleum product availability exceptionally tight. The result is an oil market that has successfully absorbed an enormous physical shock so far, but with substantially less protection against the next one. Thus, the direction of the US-Iran war remains central to the evolution of oil prices over the next 12 months … Does the Democratic midterm gains set the stage for an eventual Iran peace deal? Only time will tell, but much ultimately depends on President Trump … The most bullish scenario remains a renewed U.S.-Iran kinetic conflict: global oil inventories are now lower, U.S. shale appears less responsive to price than in previous cycles, and short-run oil-demand elasticity remains limited. Under those conditions, another major Middle Eastern disruption could require substantially higher prices to clear the market, potentially pushing Brent towards $150/bbl in 2027”
Trade with U.S. continues decline
BMO senior economist Shelly Kaushik found some interesting details in Canada’s most recent report on trade,
“With the Canada-U.S. trade war in the spotlight during the midterms, the September data came in at a perfect time. The diversification push remains a major story for Canada. The share of Canadian exports to the U.S. has dropped below 70 per cent from above 75% pre-trade war. There are a few non tariff factors helping, like higher gold exports to non-U.S. destinations in recent years due to financial market volatility. Still, the briskness of the decline since February 2025 isn’t a coincidence. On the import side, less than 60 per cent come from the United States. That’s off recent lows, but we’ll likely need more data before determining whether the ‘Buy Canadian’ (or non-American) movement has peaked. Here, too, it’s not just a tariff story, e.g., Canadian data centre construction has driven a recent surge in computer equipment imports from Asia. The world waits to see how exactly the blue wave will impact U.S. trade policy, if at all. Even if there are no meaningful changes to the tariff regime, a little bit of certainty will go a long way”
TSX earnings outlook fading
RBC Capital Markets new head of Canadian equity strategy Sara Mahaffy reports on TSX earnings reporting season so far,
“So far, headline beat rates have been strong for the TSX, with both earnings and revenue beat rates rising and nearing past highs. Earnings beats have been rewarded, and interestingly much more so than revenue beats (and similarly earnings misses have been penalized more than revenue misses) … the tone around demand and margins remains broadly positive, but our indicators have eased slightly relative to last reporting season. In terms of specific topics, we’ve found that sentiment around geopolitics, FX, and productivity has improved so far relative to last reporting season, while sentiment around cost pressures, pricing power, interest rates, the consumer, and AI have slipped a bit … Bottom-up consensus net income growth forecasts for 2026 have continued to move higher, though 2027 forecasts have been stuck in neutral. Additionally, while the breadth of earnings revisions remains slightly positive, our indicator has started to slip again … We’ve been highlighting that Financials and Industrials have looked expensive on our models, while Communication Services, Materials, Real Estate, and Energy have generally looked attractive. In our recent update we noticed some movements in some of the other sectors, with valuations for Utilities, Consumer, and Info Tech sectors creeping up again. Utilities in particular looks slightly expensive again on our models”.
Ms. Mahaffy has overweight recommendations on consumer staples and energy.
Bluesky post of the day
This is an incredible chart $CAT
— Tom Hearden (@followtheh.bsky.social) November 5, 2026 at 6:46 AM
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Diversion
“A Devastating Disease Is Threatening the World’s Chocolate Supply – but Scientists May Have Found the Answer” - SciTechDaily