Canadian Suncor's profits exceed expectations, supported by rising oil and profit margins

The pound sterling rose to its highest levels since September 15, on Wednesday, supported by the decline of the US dollar following the wide victory of the Democratic Party in the midterm congressional elections, while investors await the Bank of England’s decision on monetary policy, scheduled to be issued on Thursday.

The pound rose by 0.63 percent against the dollar, reaching $1.3495 at 10:22 GMT, and also rose slightly against the euro to 83.43 pence, according to Reuters.

The pound benefited from the weakness of the dollar, after the Democrats were able to seize control of both chambers of the US Congress.

Focus on the British currency has increased since British Finance Minister John Healey announced the budget, which included cautious tax and spending plans aimed at supporting families affected by “global economic storms.”

Sterling also received support from expectations of the Bank of England raising interest rates, as financial market data indicate that traders are pricing in an increase in interest rates during Thursday’s meeting.

High interest rates usually enhance the value of the currency, but some analysts believe that a large part of the optimism about sterling has already been reflected in prices, which limits the chances of achieving further gains.

Goldman Sachs analysts wrote in a note that market expectations regarding the Bank of England raising interest rates are still high compared to their counterparts in the G10, while the pound’s valuation levels represent a clear challenge to the British currency.

Some economists polled by Reuters expect the central bank to seek to calm market bets on implementing three to four interest rate increases during 2027.

For their part, Bank of America Global Research analysts believe that raising interest rates accompanied by a monetary easing tone may put pressure on the pound, but they do not expect it to have a long-term negative impact, in light of the improvement in the fundamental factors supporting the economy.

The profits of Suncor Energy, the Canadian integrated oil and gas company, exceeded analysts’ expectations for third-quarter profits. High oil prices and strong refining margins helped offset the decline in production volumes and refining operations.

The Iran war, now in its ninth month, has disrupted global energy supplies, pushing crude oil prices higher. The average price of Brent crude oil reached $89.27 per barrel during the quarter, an increase of 31 percent compared to the same period of the previous year.

Integrated oil companies, such as Imperial Oil and Suncor, benefited from the global fuel market, which witnessed turmoil due to the war. The rise in oil prices contributed to enhancing profit margins in both the production and refining sectors.

Last week, Imperial Oil also exceeded analysts' expectations for its quarterly profits, supported by strong refining margins.

During the aforementioned quarter, Suncor recorded a decline in both primary production and refining volumes. However, higher oil prices helped revenues from oil sands production increase by 32 percent to C$9.32 billion (US$6.66 billion).

Revenues from refining operations also jumped by more than 65 percent to about 13.4 billion Canadian dollars, driven by the more than doubling of “standard refining margins,” which allowed refineries to achieve much greater profits from processing each barrel of crude oil.

The company's primary production - which is based in Calgary, Alberta - decreased by 2 percent, reaching 852,500 barrels per day, while the refining volume decreased slightly, reaching 487,700 barrels per day.

Suncor announced a quarterly dividend of 66 Canadian cents per share, payable on December 24, which represents a 10 percent increase compared to the previous quarter.

In October, Suncor agreed to sell its shares in three offshore oil assets in Canada to the Ithaca Company for 1.2 billion Canadian dollars. It also raised the value of the share buyback program from 500 million Canadian dollars to 750 million Canadian dollars per month, starting in October.

The company recorded an adjusted operating profit of 3.97 Canadian dollars per share for the quarter ended September 30, exceeding analysts' average estimate of 3.28 Canadian dollars per share, according to data compiled by the London Stock Exchange Group.