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inemptystadium B18SPORTS
B15-B18OTTAWA/QUEBEC EDITION ■ WEDNESDAY, MARCH 11, 2020 ■ GLOBEANDMAIL.COMS&P/TSX
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-15.40COMPANIESBMO ......................................................................................... B6
CIBC......................................................................................... B6
DELTA ....................................................................................... B3
NATIONAL BANK..................................................................... B6
RBC .......................................................................................... B6
SCOTIABANK........................................................................... B6
TD ............................................................................................ B6
UNITED AIRLINES ..................................................................... B3RESTRUCTURING
NygardGroupseekscreditorprotectionafter
sexualassaultallegationsagainstfounder B3JOHN MINCHILLO/ASSOCIATED PRESSTRAVELDemandfor
privatejets
soarsamid
global
infection
worries
B2GLOBEINVESTOR
Fourreasonstostay
calmamidmarket
panic B6The Bank of Canada will have to
slash its key interest rate by an-
other three-quarters of a percent-
age point in its next rate decision
in mid-April, Bank of Montreal
says, as plunging oil prices and
mounting coronavirus fears
prompt economists to rewrite
their economic and rate fore-
casts.
“Given the expectations for
weaker growth, we anticipate
that the Bank of Canada will be
cutting rates 100 basis points over
the next two meetings,” BMO’s
economics department said in a
research note Tuesday. (A basis
point is one-hundredth of a per-centage point.)
It said it anticipates a 75-basis-
point cut in the bank’s next rate
decision on April 15, and another
25 basis points in the following
decision on June 3.
If that happens, it would re-
duce the BoC’s key rate to 0.25 per
cent – matching its record low, set
during the financial crisis in 2009.
Other private-sector forecasters
haven’t yet matched BMO’s 75-
basis-point call, but the econom-
ics departments at the country’s
other big banks are looking to re-
vise their own forecasts this week- and they also hinted that deep-
er rate cuts are on the way.
“I don’t think any of us can put
a pin [on] what the timing is go-
ing to look like ... but we’re pretty
comfortable with 100 basis points
over all by the summertime,”
BMO chief economist Douglas
Porter said in an interview. “The
central banks will be pretty ag-
gressive to get out ahead of this.”
Interest-rate derivatives in the
bond market imply that traders
see a 50-point cut in April as most
likely. But they have priced in fur-
ther cuts extending to the sum-
mer, likely bottoming at either
0.5 per cent or 0.25 per cent.
Central banks typically adjust
rates in quarter-point incre-
ments, but the escalating CO-
VID-19 outbreak has increased
the urgency for policy makers in
Canada and around the world to
provide support to an increasing-
ly unstable global economy and
financial markets.
RATES,B2BMOexpectsBankofCanadatocut
keyinterestratetorecordlow
DAVIDPARKINSON
ECONOMICSREPORTERTravel insurance companies have begun adjusting their pol-
icies to exclude the global coronavirus outbreak, labelling it a
foreseeable reason for trip cancellations.
Typically, travellers who purchase regular trip cancella-
tion insurance have been able to get refunds if an advisory
was issued for their destination after they booked. Now, as
the novel coronavirus becomes a travel concern, a number of
insurers are updating their policies to no longer include the
virus as a reason to honour a cancellation claim.
Allianz Global Assistance Canada is the third Canadian
travel insurance company to change its regular trip cancella-
tion policy to exclude claims related to COVID-19 for any pol-
icies purchased on or after Wednesday.
“Given the continued spread of COVID-19 internationally,
[Allianz] has identified coronavirus as a known event for trip
cancellation and interruption,” spokesperson Dan Keon said
in an e-mail. The result, he said, is that “trip cancellation and
interruption claims related to coronavirus will not be paya-
ble.”
Most trip cancellation policies have an exclusion clause for
“known events.” They specify that if customers were aware
before purchasing a policy of a reason or event that could
cause them to cancel their trip, then that claim will not be
payable.
Allianz customers who purchased coverage before
Wednesday can still make a claim for trip cancellation or in-
terruption owing to the coronavirus if the Canadiangovern-
ment issues a Level 3 or 4 advisory for their destination be-
fore their departure date, Mr. Keon said.
The government has issued five travel warnings, including
for China, Iran, northern Italy, South Korea and Japan.
INSURANCE,B5
Insurersupdatetravel
cancellationterms
toexcludecoronavirus
CLAREO’HARA
WEALTHMANAGEMENTREPORTER
I
n the game of chicken, two
drivers race toward one an-
other head on. The one who
swerves first to avoid a fatal
crash is the chicken. Classic
game theory.
So it is with Russia and Saudi
Arabia, which last week ended
their bromance and opened up
their oil spigots. On Monday, oil
prices fell by almost a third at
one point, the biggest drop since
the 1991 Gulf War, and ended the
day down more than 20 per cent.
On Tuesday, prices rose by about
6 per cent, to US$36 a barrel, but
the loss since early January,
when oil topped US$68, was still
horrendous.
The outlook doesn’t look
good. Saudi Arabia signalled on
Tuesday that it will dump anoth-
er 2.3 million barrels a day onto
the global market, taking its total
daily supply to an astonishing
12.3 million barrels. Olivier Jakob,
a former oil trader who is ma-
naging director of Swiss oil con-
sultancy Petromatrix, called the
Saudi move highly aggressive:
“forcing as much crude as pos-
sible in a market that does not
want it.”
The oil war is on. Who will
swerve first, the Russians or the
Saudis?
The more popular view says
the Saudis will win – their ability
to tough it out over the long run
exceeds that of the Russians.
This belief centres on three fac-
tors.
REGULY, B5MostpickSaudi
Arabiatowin
globaloilgame
ofchicken.
Theyarewrong
ERICREGULYROMEOPINIONCompanies in Canada’s oil patch
are slashing capital budgets and
warning of job cuts as the spread
of the coronavirus and a crude
production spat between Saudi
Arabia and Russia glut global oil
supplies and send prices plung-
ing.
Calgary-basedCenovus Ener-
gy Inc.cut its capital budget by
32 per cent Tuesday, putting pos-
sible expansions at both Christi-
na Lake and Foster Creek on hold
and suspending the majority of
its planned capital spending at
the company’s Deep Basin and
Marten Hills operations.
The Cenovus decisions follow
moves byOvintiv Inc., formerly
Encana Corp., to reduce its cap-
ital budget and rein in spending.
Cenovus said in a statement it
will continue “modest spending”
on engineering and permitting
for a potential diluent recovery
unit, but it doesn’t intend to
sanction any new projects and
will look for more operational
and capital spending reductions
“if necessary.”
Ovintiv’s stock price fell by
more than 70 per cent and Ceno-
vus lost half of its share price val-
ue Monday as a global oil price
war sent crude prices diving to
their lowest levels in four years,
battering energy stocks and
threatening to deepen the eco-
nomic downturn in Alberta.
Both companies’ stock prices re-
covered slightly Tuesday.
The TSX Composite Index fell
by more than 10 per cent on
Monday. Western Canadian Se-
lect crude prices crept back past
$20 Tuesday after a $17.80 low on
Monday, reflecting a gentle up-
tick in share prices for Canadian
producers including MEG Energy
Corp. and Frontera Energy Corp.,
but the overall picture was far
from a general recovery.
That has led Alberta’s Premier
and Energy Minister to crisis
talks with the energy sector.
They met with large and small-
scale producers, drillers, pipeline
companies and the oil service
sector this week to understand
the extent of the damage.
Speaking with The Globe and
Mail during a brief break be-tween meetings, Energy Minister
Sonya Savage said while she
didn’t want to paint a grim pic-
ture, the industry is cutting cap-
ital expenditures, scaling back
drilling programs and can expect
potential job losses.
“We are in a very, very uncer-
tain time and a very precarious
situation,” she said. “We don’t
know where the price is going to
go and for how long.”
To deal with languishing pric-
es, Cenovus has suspended its
crude-by-rail program. That
means it will no longer take ad-
vantage of Alberta’s special pro-
duction allowance program, im-
plemented by the United Conser-
vative government to try to
boost oil activity in the face of
mandated production cuts.
PRODUCERS, B5Oilproducerscutspending,
productionafterpricecollapse
AlbertaEnergyMinister
fearsjobcutsafter
companiesreduce
capitalbudgets
EMMAGRANEY
ENERGYREPORTER
CALGARY
Cenovusestimatesa
6-per-centdropinits
2020oilsands
production,nowhitting
between350,000and
400,000 barrels a day.
LARRY MACDOUGAL/THE
CANADIAN PRESS