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.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||42.61||▼-0.8||40.49||55.47||26||D W|
|Imperial Oil||IMO||38.39||▲0.8||33.43||44.91||34||D W|
|Husky Energy||HSE||16.82||▼-0.3||15.29||22.99||28↑||D W|
|Pembina Pipeline||PPL||44.50||▼-1.5||37.60||47.84||79||D W|
|Inter Pipeline||IPL||21.25||▼-0.1||20.68||27.92||34||D W|
|Gibson Energy||GEI||20.28||▲2.7||15.68||23.32||91||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.81||▼-2.1||32.08||49.08||26||D W|
|Cenovus Energy||CVE||10.77||▼-2.0||9.03||14.84||29||D W|
|Vermilion Energy||VET||32.66||▼-2.5||30.55||50.46||17||D W|
|Pason Systems||PSI||19.52||▼-1.2||16.05||24.57||51||D W|
|Mullen Group||MTL||12.31||▼-0.8||12.04||16.93||20||D W|
|Secure Energy||SES||6.94||▼-2.9||6.92||9.82||21↓||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.54||▼-2.0||25.12||47.45||89||D W|
|Exxon Mobil||XOM||79.43||▼-2.2||72.16||89.30||58↑||D W|
|Kinder Morgan||KMI||16.68||▼-3.5||14.69||19.83||53||D W|
|Williams Co||WMB||25.05||▼-2.5||23.54||33.67||44||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||104.07||▼-3.7||96.54||133.53||34||D W|
|Occidental Petro||OXY||69.67||▼-2.3||62.47||87.67||28||D W|
|Anadarko Petro||APC||52.98||▼-4.5||46.80||76.70||11||D W|
|Concho Res||CXO||128.41||▼-4.7||123.63||163.11||39||D W|
|Ntl-Oilwell Varco||NOV||31.68||▼-3.7||31.30||49.08||6||D W|
|Baker Hughes||BHGE||22.14||▼-4.8||21.67||37.76||2||D W|
|Marathon Petro||MPC||63.34||▼-2.0||60.64||88.45||16||D W|
|Phillips 66||PSX||91.40||▼-0.8||88.99||123.97||14||D W|
|Valero Energy||VLO||79.51||▼-2.2||76.25||126.98||4||D W|
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.
UPDATED: DAILY (END-OF-DAY)
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