Oil mostly flat as rising U.S. output offsets OPEC worries

NEW YORK (Reuters) - Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production.

“Oil prices are finely balanced in today’s trading session. Ongoing protests in Iran, together with recent detention of several princes in Saudi Arabia, have reinvigorated geopolitical concerns,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

”However, prospects for further increases in U.S. oil production amid recent improvements seen in oil prices continue to promote bearish sentiment,” Kumar said.

Brent futures LCOc1 gained 16 cents, or 0.2 percent, to settle at $67.78 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 29 cents, or 0.5 percent, to settle at $61.73

Last week, both contracts rose to their highest since May 2015 with Brent at $68.27 and WTI at $62.21.

U.S. production C-OUT-T-EIA is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers, according to federal energy data. [EIA/M]

Only Russia and Saudi Arabia produce more.

“The U.S. oil price is now into a range that is anticipated to attract increased shale oil production,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Traders may decide that discretion is the better part of valor while markets wait on evidence of what happens to the rig count and production levels over the next couple of months,” Spooner said.

U.S. drillers reduced the number of oil rigs operating by five in the week to Jan. 5, the first decline in three weeks, according to a report by energy services firm Baker Hughes on Friday. [RIG/U]

Rising U.S. production is the main factor countering output cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries and by Russia, which began in January 2017 and are set to last through 2018.

 A senior OPEC source from a major Middle Eastern oil producer said OPEC was monitoring unrest in Iran, as well as Venezuela’s economic crisis, but will boost output only if there are significant and sustained production disruptions from those countries.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore, said “the OPEC versus shale debate will rage” this year, being a key price-driving factor.

However, Innes added that Middle East turmoil would remain a key focus for oil markets and had the potential to “send oil prices rocketing higher.”

Additional reporting by Dmitry Zhdannikov in London, Henning Gloystein and Florence Tan in Singapore; editing by Marguerita Choy and Diane Craft


C$ climbs against U.S. dollar; oil near 2-1/2-year peak

TORONTO (Reuters) - The Canadian dollar strengthened to a 10-week high against its U.S. counterpart on Tuesday, the first trading day of 2018, as the greenback broadly fell and the price of oil held near its highest in 2-1/2 years.


At 4 p.m. EST (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2507 to the greenback, or 79.96 U.S. cents, up 0.6 percent from Friday’s close. It traded between C$1.2500, its strongest level since Oct. 20, and C$1.2557 during the session.

The currency rose nearly 7 percent in 2017.

The loonie, as the Canadian currency is colloquially known, has gained steadily versus the greenback since mid-December as part of a broader U.S. dollar retreat, which one corporate trader said may be prompting Canadian exporters to trim their targets to the high C$1.20s from the low C$1.30s previously.

It’s put “a significant seed of doubt in the minds of Canadian exporters,” said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.

He said Friday’s Canadian employment report for December will be a key piece of data to help the Bank of Canada decide whether to hike rates in January or to wait for later in the year. Bets are slightly in favor of a hold-steady decision.

The U.S. dollar .DXY retreated against a basket of major currencies as data showing a faster pace of euro zone manufacturing activity boosted the euro.

The price of oil, one of Canada’s major exports, touched its highest intraday since mid-2015 amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia, before settling slightly lower.

Still, speculators have cut bullish bets on the Canadian dollar to the lowest since July, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Dec. 26, net long positions had fallen to 17,346 contracts from 45,901 a week earlier.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3 Canadian cents to yield 1.703 percent and the benchmark 10-year CA10YT=RR falling 30 Canadian cents to yield 2.079 percent.



Canadian dollar near flat vs weaker greenback ahead of domestic data

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Monday, with the loonie trading in a narrow range ahead of domestic data later in the week that could help guide expectations for the interest rate outlook. 

At 9:21 a.m. ET (1421 GMT), the Canadian dollar CAD=D4 was nearly unchanged at C$1.2871 to the greenback, or 77.69 U.S. cents. The currency traded in a range of C$1.2843 to C$1.2881.


The loonie dipped 0.1 percent last week after being pressured on Friday by weaker-than-expected domestic manufacturing data.

The currency also fluctuated last week on remarks by Bank of Canada Governor Stephen Poloz.

Poloz worried about the potential to slip into a “deflationary scenario” if interest rates are raised too fast to deal with financial imbalances, in an interview with The Globe and Mail that was published on Saturday.

Still, the central bank is leaving the door open to further rate hikes in early 2018, making it clear that a number of uncertainties that could derail the economy, such as North America Free Trade Agreement (NAFTA) renegotiation, are a reason for caution but not inaction.

NAFTA negotiators made some progress on less controversial issues last week but left untouched the thorniest subjects of autos, dispute settlement and an expiry clause to be tackled at pivotal talks in January in Montreal.

Foreign investment in Canadian securities accelerated in October, driven by a record purchase of bonds, data from Statistics Canada showed.

Canada’s inflation report for November and October retail sales data are due on Thursday, while gross domestic product data for October is due on Friday.

The price of oil, one of Canada’s major exports, was supported by a North Sea pipeline outage and a Nigerian oil worker strike.

U.S. crude CLc1 prices were up 0.6 percent at $57.65 a barrel.

The U.S. dollar .DXY dipped against a basket of major currencies amid doubt whether a proposed U.S. tax overhaul program would have a major impact on economic growth, after the bill moved another step closer to ratification over the weekend.

Speculators have trimmed bullish bets on the Canadian dollar for eight of the last nine weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3.5 Canadian cents to yield 1.569 percent and the 10-year CA10YT=RR falling 12 Canadian cents to yield 1.85 percent.

Reporting by Fergal Smith; Editing by Jonathan Oatis


Canada oil producers exhaust options as pipelines, railroads fill

By Nia Williams and Catherine Ngai

CALGARY, Alberta/NEW YORK, Dec 18 (Reuters) - Canadian oil producers are running out of options to get crude to market as pipeline and rail capacity fills up, driving prices to four-year lows and increasing the risk of firms having to sell cheaply until at least late 2019.

This will drive down the profit margins for the oil sands industry, already struggling to compete with cheaper and abundant supplies from U.S. shale. A number of foreign oil majors have left Canada’s oil sands to invest in more profitable U.S. shale plays, selling over $23 billion in Canadian assets this year alone.

Canada’s oil sands output is still growing - but only as projects under construction are completed and smaller expansions come online. Oil firms are not commissioning large new projects because they cannot build them profitably with oil in the $50s a barrel.

The deeper discount on crude means next year could be just as tough for Canadian producers from a price perspective as 2017, even though international crude prices have strengthened.

“We have a build-up of supply and that’s only going to get worse next year. We are adding more and more pressure into a constrained export system,” said Wood Mackenzie analyst Mark Oberstoetter.

The volume of crude in storage has hit record levels in western Canada and heavy crude is trading near its widest discount to U.S. crude since December 2013, driven by increased supply and a leak on TransCanada Corp’s Keystone export pipeline last month.

The discount on Canadian heavy crude blew out to as much as $28 a barrel below the West Texas Intermediate benchmark, pushing the outright price of Canadian barrels to less than $30.

Many traders and analysts expect the discount to be wider in 2018 than the negative $12 a barrel year-to-date average as oil supply rises.


Canada to create overseas mining watchdog early in 2018

(Reuters) - Ottawa plans early next year to create an independent office to oversee Canadian mining, oil and gas companies’ activities abroad, a government spokesman said on Tuesday, a move that environmental and human rights groups have long demanded.

The office would have both an “advisory and robust investigative mandate,” a spokesman for Canadian Trade Minister Francois-Philippe Champagne said in an email.

The move would fulfill a 2015 campaign promise by Canadian Prime Minister Justin Trudeau’s Liberal Party to appoint an extractive industries’ watchdog.

Nearly two-thirds of the world’s public mining companies are listed in Canada, while Canadian mining and exploration companies were present in 102 foreign countries in 2015, according to Canadian government data.

Non-government groups have called for years for greater oversight of Canadian mining companies abroad following a number of environmental incidents and accusations of human rights abuses, including that of forced labor at Canadian miner Nevsun Resources’ mine in Eritrea. Nevsun has denied the allegations.

Trudeau’s predecessor, Conservative Stephen Harper, established a Corporate Social Responsibility Counselor in 2009, but critics have said it is toothless as the office focuses mainly on facilitating dialogue between companies and affected communities.

The Mining Association of Canada, which represents the industry, was not immediately available for comment after hours.

Reporting by Nicole Mordant in Vancouver; Editing by Peter Cooney



Canada’s Oil Capital Is Making the Leap Toward Renewable Energy

Clean energy is coming to Canada’s oil patch.

The government of Alberta -- home to the world’s third-largest oil reserves -- on Wednesday auctioned off 595 megawatts of renewable energy capacity to be built in the province. That exceeded the government’s target of 400 megawatts.
The process marks a major step for Alberta -- Canada’s largest consumer of coal and its second-largest producer of the fuel -- in its efforts to transition to all renewable and gas-fired generation by 2030. Rather than a change in direction, Alberta’s government billed the move toward renewables, part of its Climate Leadership Plan, as a continuation of the province’s leading position in energy.
“It’s an industry that’s going to continue to be at the core of who we are and what we do for many, many years to come,” Premier Rachel Notley said at a news conference.
The winning bidders were Capital Power Corp., which is planning a wind farm with 201 megawatts of capacity, EDP Renewables, which is developing a 248-megawatt project, and Enel Green Power SpA, which will build two wind farms with total capacity of 146 megawatts, according to an emailed statement. Combined, the wind farms can power more than 250,000 homes, officials said.

The weighted average bid was 3.7 Canadian cents (3 U.S. cents) a kilowatt-hour, the lowest price for wind power ever in Canada. Developers agreed to sell power for 8.5 Canadian cents a kilowatt-hour in an Ontario procurement last year.

Climate Leadership Plan

The Climate Leadership Plan seeks to phase out all pollution from coal-fired electricity and get 30 percent of the province’s power, or about 5,000 megawatts of capacity, from renewable sources by 2030. The first round of the competition started with a request for expressions of interest in March and saw 29 projects advance to the bidding stage.

Alberta’s government, controlled by the left-leaning New Democratic Party, has sought to balance efforts to curb climate change while not harming the province’s major industry. Alberta’s oil sands contain the world’s third-largest stores of crude, with proven reserves of about 165.4 billion barrels, and produced about 2.5 million barrels of crude bitumen last year, roughly the same oil output as the entire country of Mexico.

Coal Production

Coal is also a major industry in Alberta. The province consumes about two-thirds of the fuel used in Canada for generating electricity, according to the nation’s natural resources department. Alberta has 6,457 megawatts of coal-fired generating capacity, more than four times the 1,530 megawatts in second-place Saskatchewan.

The province also accounted for 42 percent of Canada’s coal production last year, according to government estimates. Alberta was expected to produce 27.5 million tons of coal this year, according to the province’s energy regulator.

Notley credits the Climate Leadership Plan with helping the province secure federal government approval for Kinder Morgan Inc.’s expansion of the Trans Mountain oil pipeline as well as Enbridge Inc.’s expansion of its Line 3 conduit. Both projects have been seen as key supports for the oil sands, which are a top target of environmentalists seeking to limit global greenhouse gas emissions.

The Pembina Institute, a Calgary-based environmental organization that has been critical of the oil sands industry, praised the power auction on Wednesday, saying it showed that renewables are the affordable electricity-generation option for the province moving forward.

“It’s a good example of how a competitive process coupled with good policy design can result in cheap clean energy,” Binnu Jeyakumar, the institute’s program director for electricity, said in an emailed statement.


Heavy barrels hit widest discount in four years

CALGARY, Alberta (Reuters) - The discount on Canadian heavy crude slumped to its deepest level in four years on Tuesday, hurt by export pipeline outages and high storage inventories in western Canada.

Western Canada Select heavy blend crude for January delivery in Hardisty, Alberta, weakened to $26.50 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers, accelerating recent losses. On Monday WCS settled at $23 per barrel below WTI. 

The discount is the widest since December 2013 and a blow to Canadian producers who had been enjoying a rally in U.S. crude, which is trading near its highest level in two years.

The blow-out in differentials put the outright price of WCS at just under $31 a barrel. 

Pipeline company Enbridge Inc said on Monday there will be extra rationing of space in December on its Mainline network, which transports the bulk of Canadian crude to the United States, because of unplanned outages in the western part of its system.

Pipeline apportionment drives Canadian prices lower because it leads to a glut of crude building up in Alberta. Storage inventories in the oil sands province are already high after a nearly two-week shutdown of TransCanada Corp’s Keystone pipeline in November because of a spill in rural South Dakota.

The 590,000-bpd Keystone pipeline is running with pressure reduced by 20 percent on the orders of U.S. regulators, and TransCanada has not said when that will lift.

One Calgary-based crude trader said it was likely some market players were hitting position limits after the steep falls over the last week, and being forced to sell barrels to contain losses.

“The barrels are just backing up faster than they can be cleared right now even though everybody is scrambling to get supply on the rails,” said Martin King, an analyst with GMP FirstEnergy.

Crude-by-rail shipments are expected to rise next year as oil sands supply from new projects such as Suncor Energy’s Fort Hills increases and outpaces pipeline capacity.

King said he expected differentials to average around $15 a barrel below WTI in 2018 given the extra costs associated with rail, but the current deep discount was unlikely to last.

Light synthetic crude also fell sharply on the pipeline congestion, which comes as supply from an 80,000-bpd expansion at Canadian Natural Resources Ltd’s Horizon oil sands project ramps up.

Synthetic crude for January delivery traded at $3.00 per barrel below WTI, down from Monday’s settle of $2.30 per barrel below the benchmark.

Reporting by Nia Williams; Editing by Chizu Nomiyama and Susan Thomas


Canada’s Oil Capital Turns to Amazon and Airlines to Make Up for Price Plunge

Mark Craig didn’t worry much when oil plunged from $100 a barrel to less than $50 in late 2014. Having worked in the Canadian oil industry since high school, the Calgary resident had seen booms and busts before. His confidence seemed justified when, just months after taking a buyout at British oil giant BP Plc, he was hired to manage the IT department at Calgary-based Penn West Petroleum in April 2015. Then, four months later, Penn West cut half its staff, including Craig, in the midst of an accounting scandal. Oil had just begun to take another leg down, ultimately bottoming below $30 a barrel, and no one in the city that’s the epicenter of Canada’s oil and gas industry was hiring. Two years later, no one is hiring still. “After Penn West, I realized there were basically no jobs out there,” says Craig, 56. “It was a very harsh reality that slapped me in the face.” 

Most oil producers are operating under the assumption that the days of $100 crude are gone for good, and they’re planning to stay as lean as possible. As that realization sinks in, Craig—and Calgary—are retooling.


The unemployment rate in the province of Alberta, of which Calgary is the largest city with about 1.47 million residents, was 7.3 percent in November. That’s down from a peak of 9 percent a year earlier, but it’s still a full percentage point higher than the national average. The oil, gas and mining industries employed about 143,000 workers in the province at the end of last month, down almost 40,000 from July 2014, when oil prices began their long slide. 

The job loss is visible in Calgary’s downtown, where the vacancy rate for office space sits at about 27 percent, near a record high, according to brokerage CBRE Group Inc. By contrast, only about 10 percent was empty in 2014. Landlords are now so desperate for tenants that the average rent they’re charging for the highest-quality space is cheaper than the lowest-quality space was in 2008, CBRE says.

“I love roller coasters, but this was a bit too much,” says Mayor Naheed Nenshi, who says he has watched the city’s attempts to diversify beyond hydrocarbons ever since the early 1990s, when he was a student at the University of Calgary and the industry accounted for about half the city’s economic activity. (It’s closer to 30 percent now.)  

The drive has continued under Nenshi, who’s serving his third term since he was first elected in 2010. Rather than trying to set up new industries from scratch, his administration has concentrated on building out those in which the city already has a toehold, such as transportation and logistics, agribusiness, renewable energy, financial services, manufacturing, and creative industries such as film and television. “We need to ensure that we are taking advantage of the downturn to attract different kinds of businesses, to create a more resilient economy, to create an economy with shock absorbers, so that we are better suited to manage the ups and downs of world commodity prices,” he says. 

His administration can claim a few successes so far. Amazon.com Inc. announced in October that it will be opening a fulfillment center in the city that will eventually employ more than 750 full-time workers. Another major victory was WestJet Airlines Ltd.’s decision in September to base its new low-fare carrier, dubbed Swoop, in Calgary. While WestJet’s headquarters are in the city, the company says it was aggressively wooed by two other Canadian cities it would not identify, and there was no guarantee it would choose its hometown. 

Incentives offered by Calgary and Alberta helped clinch the deal, according to Bob Cummings, WestJet's executive vice president for strategy and head of the Swoop startup. With the prize of more than 500 jobs hanging in the balance, all of the stakeholder groups involved in the process showed they were “hungry” for the development, helping sway WestJet’s decision, says Cummings, adding. “I’m not sure Calgary was quite at that level five to six years ago, when oil was at $100.”  

Looking ahead, Mayor Nenshi is confident that the city’s long-shot bid to host Amazon’s second headquarters will have the effect of luring additional tech businesses to the city. The campaign has grabbed media attention with ads featuring a glowering, bearded man and the tagline “Hey, Amazon. Not saying we’d fight a bear for you ... but we totally would.” 

While Calgary’s boosters see the city’s oil and gas heritage as an advantage, the industry is often viewed as stodgy and old-fashioned by those in other lines of business. Persuading outsiders that the local workforce has skills that can be deployed in other lines of work is challenging and frustrating, says Mary Moran, president and chief executive officer of Calgary Economic Development. “The ability to drill 5 kilometers down and 3 kilometers across to hit a bathtub-sized target—that’s innovation,” says Moran, describing the expertise required to extract oil from slabs of rock deep underground. “We didn’t invent Tinder, we didn’t invent Shopify, but there’s still pretty intricate and sophisticated technology that’s happening here.”

Calgary may one day be able to tout startup success stories like Shopify, an Ottawa-based e-commerce company with 1,500 employees. RocketSpace, a San Francisco-based tech accelerator, announced plans in May to open its first Canadian campus in downtown Calgary early next year. While the operation will employ fewer than a dozen people, the company has leased 75,000 square feet of office space, most of which will be occupied by fledgling companies. 

Moran is quick to say that no one expects the energy industry to disappear from the city entirely, but as its footprint shrinks, locals will have to make some adjustments. “People are having to make a mindset shift, because if you’re going to work in a smaller company, you’re going to have to grind it out a little bit more,” she says. “You won’t make as much money, you won’t have as short hours, you won’t have Fridays off.”

Craig, the industry veteran, says he can live with that—and many people in his situation feel the same way, he says. To help his peers get back on their feet, Craig created a nonprofit late last year, the GoldMind Project. The group is run entirely by volunteers and holds events to help unemployed workers revamp their résumés, decide whether they want to be entrepreneurs, or just get motivated. At a recent event downtown, a local career consultant gave an hourlong talk on networking and answered questions from the 50 attendees, ranging from how to use LinkedIn to when to slip a new contact your business card.

In addition to GoldMind, Craig has started a one-man tech-consulting business. A current project involves designing a case-management system for a local law firm. He hasn’t quit looking for full-time work—though he’s resigned to the knowledge that any position he lands will be less cushy than his last one. “There’s no longer that job that people wanted to have into retirement, with a pension and all of that,” he says. “That’s started to sink in for a lot of people.” —With Katia Dmitrieva


CANADA FX DEBT-C$ hits 4-week low as oil prices gyrate on OPEC decision

(Adds analyst quotes and details throughout, updates prices) * Canadian dollar at C$1.2902, or 77.51 U.S. cents * Loonie touches its weakest since Nov. 1 at C$1.2909 * Bond prices mixed across the yield curve * Canada-U.S. 2-year spread hits widest since June 27 By Fergal Smith TORONTO, Nov 30 (Reuters) - The Canadian dollar weakened to a four-week low against its U.S. counterpart on Thursday as oil prices gyrated and data showed a widening in the country's current account deficit. Canada's current account deficit swelled in the third quarter to C$19.35 billion, the third largest in history, as the country's international trade gap in goods continued to expand. "The current account numbers were a reminder of a long term headwind for the Canadian economy," said Adam Button, currency analyst at ForexLive in Montreal. "The Canadian dollar was whipped around by uncertainty on the OPEC decision and the U.S. tax bill," Button said. U.S. crude prices clawed back earlier losses to settle up 0.2 percent at C$57.40 a barrel after OPEC and non-OPEC producers led by Russia agreed to extend output cuts until the end of 2018. Oil is one of Canada's major exports. U.S. Treasury yields rose on optimism about U.S. tax overhaul efforts, but the greenback pared some of this week's gains against a basket of major currencies. At 4 p.m. (2100 GMT), the Canadian dollar was trading at C$1.2902 to the greenback, or 77.51 U.S. cents, down 0.3 percent. The currency's strongest level of the session was C$1.2851, while it touched its weakest since Nov. 1 at C$1.2909. For the month, the loonie dipped 0.1 percent. Separate domestic data showed that Canadian average weekly earnings rose 1 percent in September from August. Data on Canada's jobs for November and gross domestic product for the quarter will be released on Friday. That could help guide expectations for next week's interest rate decision by the Bank of Canada. The central bank raised rates in July and September for the first time in seven years but has since turned more cautious on the outlook for the economy. Canadian government bond prices were mixed across the yield curve, with the two-year up 1 Canadian cent to yield 1.431 percent and the 10-year falling 7 Canadian cents to yield 1.889 percent. The gap between Canada's 2-year yield and its U.S. equivalent widened by 3.3 basis points to a spread of -35.9 basis points, its widest since June 27. (Reporting by Fergal Smith; Editing by Meredith Mazzilli and Peter Cooney)


Canadian dollar hits one-week low against stronger greenback as oil dips

TORONTO (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Tuesday as oil prices dipped and the greenback broadly climbed. The U.S. dollar .DXY rose against a basket of major currencies, boosted by a 17-year high for U.S. consumer confidence in November and the prospect of tax cuts.

 “We have had progress on the U.S. tax reform agenda,” said Eric Theoret, currency strategist at Scotiabank. “It’s a broad rally in the U.S. dollar on this optimism.” 

Prices of oil, one of Canada’s major exports, were weighed by uncertainty over the outcome of an OPEC meeting this week at which an extension to its price-supporting output cuts will be discussed.

U.S. crude oil futures CLc1 settled 0.2 percent lower at $57.99 a barrel.

At 4 p.m. ET (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2815 to the greenback, or 78.03 U.S. cents, down 0.4 percent.

The currency’s strongest level of the session was C$1.2756, while it touched its weakest since Nov. 21 at C$1.2825.

Vulnerabilities created by Canada’s high household debt and hot housing market remain elevated but should ease over time as a stronger economy and tighter mortgage requirements help improve conditions, the Bank of Canada said.

Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 4 Canadian cents to yield 1.419 percent and the 10-year CA10YT=RR rising 41 Canadian cents to yield 1.84 percent. The 10-year yield touched its lowest since Aug. 29 at 1.805 percent, while the gap between the 10-year yield and its U.S. equivalent widened by 4.9 basis points to a spread of -48.8 basis points.

Data will be released Friday on Canada’s jobs for November and gross domestic product for the quarter.

Reporting by Fergal Smith; Editing by Bernadette Baum


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