Inverted yield curve spooks global markets

Inverted yield curve spooks global markets

Today's energy market summary:

  • After moving higher in the morning, oil prices fizzled in the afternoon, with WTI and Brent ending Tuesday up 0.6%. 

  • Canadian Light was the largest gainer in oil markets, rising 3.5% as the discount to WTI narrowed by almost US$1/bbl.

  • The Canadian heavy discount widened slightly after reports that both TransCanada's (TRP.TO -0.6%) Keystone pipeline and Enbridge's (ENB.TO -1.4%) Mainline network were hit by power outages, disrupting crude exports to the US. Keystone, which runs to the Gulf Coast, was completely shut-in, while the Mainline, which runs to the Midwest and southern Ontario, was reported running at reduced rates.

  • The American Petroleum Institute is forecasting yet another sizeable increase in US crude stockpiles, roughly 5.4 million barrels, including a 1.4 million barrel build in Cushing. Gasoline and distillate stockpiles are also expected to show a big increase. Official numbers from the EIA are due Thursday morning, delayed one delay due to tomorrow's National Day of Mourning. Note that US markets will also be closed on Wednesday.

Today's equity market action:

  • An inverted yield curve spooked global stock markets on Tuesday. Yields on 5-year bonds declined to 2.79%, falling below the 2-year, which ended the day at 2.80%. Inverted yields almost always warn of slowing economic growth. However, the "official" yield curve (10 vs 2-year) is still slightly positive, ending the day at 0.11, a level not seen since the Great Recession of 2008.

  • The Dow Jones Industrial Average (DJIA) plunged almost 800 points, ending the day down 3.1%. The Dow Transports and Russell 2000 Small Cap Index were the worst hit, falling over 4%. The S&P 500 declined 3.2% while the Nasdaq tumbled 3.8%. In Toronto, the TSX fell a more modest 1.4%. Utilities was the only sector ending Tuesday slightly in the positive, thanks to falling bond yields.

  • In the energy space, the TSX energy basket fell 2.2%, with services and producers leading to the downside. The SPX energy sector fell 2.9%, wiping out all of yesterday's gains, with all subsectors posting losses.

Today's notable energy news:

  • Babcock and Wilson (BW -0.9%) was awarded a "significant contract" to provide five modularized steam boilers to Imperial Oil (IMO.TO +0.8%) for its Aspen SAGD project, currently under construction north of Fort McMurray. The value of the contract was not disclosed.

  • Enbridge (ENB.TO -1.4%) has agreed to sell its New Brunswick gas distribution business to a subsidiary of Algonquin Power & Utilities (AQN.TO -1.1%) for $331 million. The deal is expected to close next year.

  • Gibson Energy (GEI.TO +2.7%) says it expects to spend between $200 and $250 million on capital projects in 2019, down over 10% from this year's expenditures. More than half of those funds will be allocated towards adding more storage at the Hardisty terminal. CEO Steve Spaulding says he expects to sanction two to four new tanks per year, while growing internal cash flow 10% annually post-2020.

  • US federal regulators have ruled that TransCanada's (TRP.TO -0.6%) 24.4 MMcf/day Portland Xpress expansion in New England will not significantly affect the environment. The expansion includes three phases, which will increase capacity on its Portland Natural Gas Transmission System. Portand Xpress currently has an estimated in-service date of November 2020, contingent on final federal approvals.

  • Marathon Petroleum (MPC -2.0%) now says it expects to realize US$1.4 billion in synergies, after its recent merger with Andeavor, revised higher from a previous estimate of US$1 billion. Total crude runs through its 16 refineries are expected to rise to 2.8 million bbl/day in the fourth quarter, up from 1.8 million pre-merger. MPC is now the largest US refiner by capacity.

  • Schlumberger (SLB -3.7%) warned that its Q4 revenues out of North America could decline as much 15% from the previous quarter due to lower hydraulic fracking activity. Guidance for Q1/2019 was also revised lower.

  • Both Chevron (CVX -2.8%) and ExxonMobil (XOM -2.2%) are planning to sell their stakes in the Azeri-Chirag-Gunashli field, Azerbaijan's largest oilfield located in the Caspian Sea. Chevron holds a 9.6% stake, while Exxon owns 6.8%, worth a combined US$5 billion. The field produced about 600,000 bbl/day this year. Chevron is also looking to sell its 8.9% interest in the Baku-Tbilisi-Ceyhan pipeline.

  • Toronto-based Frontera Energy (FEC.TO -0.8%) shut-in production at Peru's largest oilfield after a state-owned pipeline was severed last week by protesters, spilling more than 8,000 barrels of crude. Protestors are also preventing maintenance workers from accessing the damaged pipeline. The PetroPeru pipeline has been sabotaged 19 times in the past two years.

  • Apache Corp (APA -4.0%) announced first oil from its 100% owned Garten project in the UK North Sea. The field is currently producing about 14,000 bbl/day of oil and 16 MMcf/day of natural gas.

OIL PRICES - DAILY % CHANGE
WTI DIFFERENTIALS
STREAM CLOSE %CHG L 52WK H
BRENT$62.08▲0.658.71
 
86.29
WTI$53.25▲0.650.29
 
76.41
CDN LT$35.29▲3.520.83
 
69.32
C5+$42.73▲1.137.04
 
71.40
WCS$30.45▼2.912.59
 
56.21
CRUDE OIL FUTURES CURVES
BRENT
WTI
█ DEC 4   █ NOV 27   █ NOV 20   █ NOV 13   (USD/BBL)
MARKET OVERVIEW
MARKETS
CURRENCIES & YIELDS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK
ENERGY SECTORS

TSX ENERGY SUB-SECTORS

SPX ENERGY SUB-SECTORS
TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • Gibson Energy (GEI +2.7%)
  • Imperial Oil (IMO +0.8%)
  • Birchcliff Energy (BIR 0%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • Paramount Res (POU -10.1%)
  • Nuvista Energy (NVA -9.8%)
  • Trican Well Svc (TCW -8.3%)
  • Whitecap Res (WCP -8.3%)
  • Seven Generations (VII -7.3%)
  • 12-MO LOWS
  • Secure Energy (SES -2.9%)
  • Seven Generations (VII -7.3%)
  • ARC Resources (ARX -3.6%)
  • Whitecap Res (WCP -8.3%)
  • Paramount Res (POU -10.1%)
  • Precision Drilling (PD -6.5%)
  • Nuvista Energy (NVA -9.8%)
  • Advantage O&G (AAV -4.9%)
  • 10-YR LOWS
  • Seven Generations (VII -7.3%)
  • ARC Resources (ARX -3.6%)
  • Precision Drilling (PD -6.5%)
  • Advantage O&G (AAV -4.9%)
  • DEATH CROSSES
  • Gran Tierra (GTE -6%)
  • Birchcliff Energy (BIR 0%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Suncor EnergySU42.61▼-0.840.49
     
    55.4726D   W
    Imperial OilIMO38.39▲0.833.43
     
    44.9134D   W
    Husky EnergyHSE16.82▼-0.315.29
     
    22.9928↑D   W
    MIDSTREAM
    EnbridgeENB43.59▼-1.437.36
     
    51.0490D   W
    TransCanadaTRP55.03▼-0.648.92
     
    63.2988D   W
    Pembina PipelinePPL44.50▼-1.537.60
     
    47.8479D   W
    Inter PipelineIPL21.25▼-0.120.68
     
    27.9234D   W
    Keyera KEY28.55▼-1.927.85
     
    38.9117D   W
    Gibson EnergyGEI20.28▲2.715.68
     
    23.3291D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ35.81▼-2.132.08
     
    49.0826D   W
    Cenovus EnergyCVE10.77▼-2.09.03
     
    14.8429D   W
    EncanaECA8.93▼-5.18.86
     
    18.543D   W
    TourmalineTOU18.52▼-2.017.73
     
    26.1918D   W
    Vermilion EnergyVET32.66▼-2.530.55
     
    50.4617D   W
    SERVICES
    Pason SystemsPSI19.52▼-1.216.05
     
    24.5751D   W
    EnerflexEFX16.09▼-3.113.55
     
    18.7285D   W
    ShawcorSCL19.18▼-5.018.72
     
    29.5010D   W
    Mullen Group MTL12.31▼-0.812.04
     
    16.9320D   W
    Secure EnergySES6.94▼-2.96.92
     
    9.8221↓D   W
    REFINING & MARKETING
    Parkland FuelPKI37.54▼-2.025.12
     
    47.4589D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • Cabot O&G (COG +0.8%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • Diamondback (FANG -6.3%)
  • Cimarex Energy (XEC -5.3%)
  • Pioneer Natural Res (PXD -5%)
  • Baker Hughes (BHGE -4.8%)
  • Concho Res (CXO -4.7%)
  • 12-MO LOWS
  • Schlumberger (SLB -3.7%)
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM79.43▼-2.272.16
     
    89.3058↑D   W
    ChevronCVX117.24▼-2.8107.54
     
    133.8855D   W
    MIDSTREAM
    Kinder MorganKMI16.68▼-3.514.69
     
    19.8353D   W
    Williams CoWMB25.05▼-2.523.54
     
    33.6744D   W
    ONEOKOKE60.60▼-3.451.28
     
    71.9939D   W
    LARGE CAP E&P
    ConocoPhillipsCOP66.92▼-3.250.08
     
    80.2456D   W
    EOG ResourcesEOG104.07▼-3.796.54
     
    133.5334D   W
    Occidental PetroOXY69.67▼-2.362.47
     
    87.6728D   W
    Anadarko PetroAPC52.98▼-4.546.80
     
    76.7011D   W
    Concho ResCXO128.41▼-4.7123.63
     
    163.1139D   W
    SERVICES
    SchlumbergerSLB44.12▼-3.744.02
     
    80.352D   W
    HalliburtonHAL31.44▼-3.730.47
     
    57.864D   W
    Ntl-Oilwell VarcoNOV31.68▼-3.731.30
     
    49.086D   W
    Baker HughesBHGE22.14▼-4.821.67
     
    37.762D   W
    TechnipFMCFTI23.51▼-4.322.39
     
    35.007D   W
    REFINERS
    Marathon PetroMPC63.34▼-2.060.64
     
    88.4516D   W
    Phillips 66PSX91.40▼-0.888.99
     
    123.9714D   W
    Valero EnergyVLO79.51▼-2.276.25
     
    126.984D   W
    HollyFrontierHFC58.14▼-1.242.42
     
    83.2815D   W
    NYSE ADRs
    ADRs BULLISH INDICATORS
    12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • ADRs BEARISH INDICATORS
    12-MO LOWS
  • None
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A60.69▼-1.958.55
     
    73.8610D   W
    TotalTOT55.51▼-2.653.37
     
    65.6938↑D   W
    BPBP40.95▼-0.636.15
     
    47.8346D   W
    EniE32.42▼-2.431.72
     
    40.1530D   W
    EquinorEQNR23.95▼-1.819.91
     
    28.9342D   W
    ANALYST RATINGS

    UPGRADES

    • Canadian Natural Resources (CNQ.TO): Upgraded from Neutral to Outperform at Macquarie.

    • Trican Well Service (TCW.TO): Upgraded from Outperform to Strong Buy at Raymond James.

    DOWNGRADES

    • Suncor Energy (SU.TO): Downgraded from Outperform to Neutral at Macquarie.


    UPDATED: DAILY (END-OF-DAY)

    SOURCES:
    • OIL PRICES REFLECT NEAR MONTH CONTRACT FROM THE NYMEX/CME GROUP
    • EQUITY PRICES PROVIDED BY NYSE & TMX GROUP
    • CHARTPACKS COURTESY STOCKCHARTS.COM (DIVIDEND ADJUSTED)

    NOTES:
    • OIL PRICES, FUTURES AND DIFFERENTIALS IN USD/BBL
    • C5+ = EDMONTON CONDENSATE
    • FUTURES CURVES SHOW PRICES FOR NEAR-MONTH CONTRACT (C1) AND NEXT 5-MONTHS (C2-C6)
    • TSX SHARE PRICES IN CAD; S&P 500 PRICES IN USD
    • ADR: AMERICAN DEPOSITORY RECEIPTS LISTED ON NYSE IN USD
    • SHARE PRICE CHANGES (INCL. NEW HIGHS & LOWS) EXCLUDE DIVIDENDS

    RANK:
    • BASED ON STOCKCHARTS TECHNICAL RANK (SCTR)
    • REFLECTS RELATIVE STRENGTH AMONG OTHER ENERGY STOCKS (PERCENTILE RANKING)
    • RISING RANK (↑) REFLECTS INCREASING RELATIVE STRENGTH
    • FALLING RANK (↓) REFLECTS DECREASING RELATIVE STRENGTH.
    Canadian Light gains almost 10% as discount to WTI falls below US$15 a barrel

    Canadian Light gains almost 10% as discount to WTI falls below US$15 a barrel

    Canadian crude prices surge after Alberta government meddles with oil markets

    Canadian crude prices surge after Alberta government meddles with oil markets

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