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Weekly Energy Market Review

Weekly Energy Market Review

Energy market summary for the week ending June 16, 2017:

  • A surprise build in gasoline inventories sent oil prices lower this week, now back to the levels of late November, pre-OPEC production cuts.
  • Despite lower oil prices and a hike in US interest rates, the Canadian dollar gained almost 2% for the week on expectations for an interest rate hike sometime in the near future.
  • Energy stocks continue to sink lower on the TSX, wiping out all gains for the year on the broader stock market.
  • The US energy sector continue to benefit from a rotation out of high-flying technology stocks, gaining another 0.5% for the week.
  • Independent refiners are bucking the trend to hit new yearly highs, as lower crude prices are helping to improve refining margins.
MARKET OVERVIEW
  • Money continues to flow out of commodity markets, rotating into treasuries this week.
  • The bond market was the best performing sector, continuing to rally from the lows of December.
  • US markets had a flat week, still hovering close to their all-time highs.
CURRENCIES & BONDS

  • The loonie continues to rally from the lows of mid-May on rumblings that the Bank of Canada may actually raise interest rates in the near future. Chances of an interest rate hike have moved to 72%, up from just 22% the previous week.
  • The US Federal Reserve raised interest rates again this week, and signalled another rate hike is likely before year end. The news failed to move long term interest rates or the US dollar.  
EQUITY MARKETS

  • The TSX remains one of the worst performing markets globally, now down 4% from the highs of mid-February. The TSX erased all 2017 gains this week, returning to the levels of last December.
  • Several US exchanges, including the Dow, S&P 500 and NYSE managed to eek out a small gain this week, still hovering near record-high territory.
CANADIAN SECTORS: TSX

US SECTORS: S&P 500
  • With the exception of utilities stocks, all sectors on the TSX declined this week, led lower by energy, materials and staples.
  • In US markets, money moved out of high-flying technology stocks and into other sectors, including energy.
  • Energy remains the worst performing sector in the US, and the only sector no where near its old highs.
OIL PRICES

  • Gasoline inventories rose much more than expected last week, sending oil prices lower. Despite strong SUV sales, gasoline sales have been sluggish leaving many to wonder what happened to this year's summer driving season. Gasoline prices declined over 3% for the week.
  • West Texas Intermediate (WTI) was unable to hold on to US$45/bbl this week, now back to November levels, pre-OPEC deal.
  • OPEC says its Reference Basket (ORB) declined 4.2% in May to an average of $49.20/bbl, dipping below the US$50 mark for the first time since last November.
  • The light sweet/medium sour spread in Asia continues to narrow as OPEC members focus their production cuts on medium sour blends, limiting the supply.
 

WEEKLY US INVENTORY REPORT

JUNE 14, 2017

 
ENERGY SECTOR PERFORMANCE
  • The Canadian energy sector is back to levels of mid-April 2016.
  • Despite lower oil prices, US energy stocks staged a decent rally, gaining 0.5% for the week.

TSX ENERGY STOCKS
TSX: INTEGRATED & REFINERS
  • Suncor Energy (SU) has once again pushed back its forecast for Syncrude's return to normal operation, this time estimating mid-July. The company says light oil shipments have been reduced to 130,000 bbl/day, down from a previous estimate of 140,000 bbl/day.
TSX: ENERGY SERVICES
  • Precision Drilling (PD) and ShawCor (SCL) hit intraday 52-week lows in the TSX this week.
TSX: MIDSTREAM
  • TransCanada (TRP) announced plans to spend $2 billion through 2021 to expand its NOVA Gas Transmission network, bringing more gas from Western Canada to key markets across North America.
  • Enbridge (ENB) and Inter Pipeline (IPL) hit new intraday 52-week lows on the TSX this week.
TSX: LARGE CAP PRODUCERS
  • Cenovus (CVE), Crescent Point (CPG) and ARC Resources (ARX) hit new intraday 52-week lows on the TSX this week.
TSX: MEDIUM CAP PRODUCERS
  • MEG Energy (MEG) and Peyto Exploration (PEY) hit new intraday 52-week lows on the TSX this week.
TSX: SMALL CAP PRODUCERS
  • Crew Energy (CR) has temporarily suspended production in the Montney area due to slope movement at one of its pipelines near the Wapiti River, about 25 km southwest of Grande Prairie.
  • Bonavista Energy (BNP), Bonterra Energy (BNE), Baytex Energy (BTE), Crew Energy (CR), Gran Tierra (GTE), Surge Energy (SGY), Spartan Energy (SPE) and TORC Oil & Gas (TOG) hit new intraday 52-week lows on the TSX this week.

S&P 500 ENERGY STOCKS
S&P 500: INTEGRATED & REFINERS
  • ExxonMobil (XOM) has made a positive final investment decision on the development of the Liza oil field, location offshore Guyana.
  • A Washington State judge has overturned a US$2.4 million fine levied against Tesoro Corp (TSO) for a 2010 explosion at the company's Anacortes refinery.
  • Low crude oil prices are helping to boost refining stocks, including Marathon Petroleum (MPC) and Tesoro (TSO), which both hit 52-week highs on the NYSE this week (although still far from their 2015 highs).
  • Hess (HES) hit an intraday 52-week low this week.
S&P 500: ENERGY SERVICES
  • Schlumberger (SLB) hit an intraday 52-week low this week.
S&P 500: MIDSTREAM
S&P 500: LARGE CAP PRODUCERS
  • This week's 52 week lows include Anadarko Petroleum (APC) and Devon Energy (DVN).
S&P 500: MID CAP PRODUCERS

UPGRADES & DOWNGRADES
  • Anadarko Petroleum (NYSE:APC): Downgraded from Equal Weight to Underweight at Barclays. The company decreased its price target from US$52 to US$42.
  • Enbridge (TSX:ENB): Price target decreased from $67 to $64 at RBC and from $64 to $61.25 at GMP Securities.
  • Encana (TSX:ECA): Price target decreased from $12.50 to $11.50 at TD Securities.
  • Paramount Resources (TSX:POU): Price target increased from $22 to $25 at BMO.
  • Penn West Petroleum (TSX:PWT): Price target increased from $2.50 to $2.75 at Raymond James Financial.
  • TransCanada (TSX:TRP): Price target increased from $71 to $72 at Scotiabank, from $71 to $72 and from $68 to $70 at CIBC.
Weekly Energy Market Review

Weekly Energy Market Review

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