Oil prices power higher as US dollar slides and OPEC cuts production
Today's energy market summary:
- Oil prices increased across the board on Wednesday, rising for the eighth day in a row on falling US inventories, a softer US dollar and sharp drop in OPEC output.
- Brent and WTI gained about 5%, breaking above US$60 and US$50, respectively, for the first time since mid-December.
- Canadian benchmarks all rallied in sympathy. The discount on Canadian heavy fell below US$11/bbl for the first time since August 2017, boosting WCS by almost 8%. Canadian synthetic crude also returned to par with WTI.
- The Energy Information Administration (EIA) reported a 1.7 million barrel drawdown in US crude stockpiles and record imports of Canadian crude, estimated at 3.8 million bbl/day during the first week of January.
- Despite a 19 million barrel increase in US gasoline and distillate stockpiles last week, gasoline prices rose almost 5% while heating oil gained 3% for the day.
- According to Platts, OPEC production declined 630,000 bbl/day to 32.43 million bbl/day in December, the lowest since last summer. Saudi Arabia says it plans to reduce output by another 100,000 bbl/day going into February.
- Morgan Stanley cut its 2019 oil price forecasts by over 10%, with Brent now expected to average US$61 a barrel, and WTI forecasted at US$54.
In treasury and currency markets today:
- Minutes from December's FOMC meeting showed hesitation among policymakers to raise US interest rates aggressively in 2019. The news sent the US dollar lower by 0.7%, returning to the lows of mid-October.
- Higher oil prices and a strong employment report helped boost yields on longer duration US bonds, steeping the yield curve.
- The Bank of Canada kept interest rates unchanged today at 1.75%. Governor Poloz says he expects the economy to return to more normal growth rates by October. The loonie ticked up 0.5%.
Today's equity market action:
- Global equity markets rose again on Wednesday, with Chinese markets posting the biggest gains.
- The S&P 500 rose 0.4% while the TSX rose 1.4%.
- The TSX energy sector rose another 2% on Wednesday while the SPX energy sector increased 1.5%.
- Gains were seen across all subsectors with most energy components ending the day in the positive.
Today's notable energy news:
- TransCanada (TRP.TO +0.1%) announced plans to change its name to TC Energy, better reflecting its significant presence in the US and Mexico. The change is subject to shareholder approval.
- Crew Energy (CR.TO +2.2%) says it averaged 22,400 boe/day in Q4, exiting the year at about 24,000 boe/day, weighted 70% gas. Annual production is estimated at 23,850 boe/day, in line with previous guidance. The company has set a 2019 capital budget of about $100 million, which should be funded through operating cash flow.
- Canadian billionaire Seymour Schulich increased his stake in Pengrowth Energy (PGF.TO +6.2%) to 28.8%, or 160 million shares.
- Chesapeake Energy (CHK +12.7%) says it averaged about 463,000 boe/day in the fourth quarter, with Q4 capital expenditures estimated at US$545 million. The company's recent divestitures and refinancing has taken US$2.6 billion of debt off its balance sheet.
- TechnipFMC (FTI +2.6%) was awarded a "significant" contract to provide EPC services and installation for BP's (BP +0.8%) Atlantis Phase 3 expansion project in the Gulf of Mexico.
- Royal Dutch Shell (RDS.A +1.2%) closed on its acquisition of Total's (TOT +2.2%) 26% stake in the Hazira LNG terminal and Hazira Port in India, boosting its ownership to 100%. Financial terms of the deal were not disclosed.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||40.56||▲2.2||35.53||55.47||D W|
|Imperial Oil||IMO||35.28||▲0.2||33.43||44.91||D W|
|Husky Energy||HSE||15.29||▲2.8||13.33||22.99||D W|
|Pembina Pipeline||PPL||43.85||▲2.0||37.60||47.84||D W|
|Inter Pipeline||IPL||20.94||▲2.9||18.60||26.37||D W|
|Gibson Energy||GEI||19.78||▲0.2||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.09||▲1.6||30.11||49.08||D W|
|Cenovus Energy||CVE||10.72||▲2.5||8.74||14.84||D W|
|Vermilion Energy||VET||30.48||▲2.0||26.67||50.46||D W|
|Pason Systems||PSI||19.15||▲1.3||16.05||24.57||D W|
|Mullen Group||MTL||12.47||▲0.5||11.39||16.93||D W|
|Secure Energy||SES||7.75||▲3.8||6.25||9.82||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||35.08||▲1.3||26.73||47.45||D W|
|Exxon Mobil||XOM||72.42||▲0.5||64.65||89.30||D W|
|Kinder Morgan||KMI||17.26||▲0.7||14.62||19.83||D W|
|Williams Co||WMB||25.15||▲1.1||20.36||33.67||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||99.19||▲3.8||82.04||133.53||D W|
|Occidental Petro||OXY||65.78||▲1.2||56.83||87.67||D W|
|Anadarko Petro||APC||47.91||▲1.2||40.40||76.70||D W|
|Pioneer Natural Res||PXD||145.81||▲2.5||119.08||213.40||D W|
|Baker Hughes||BHGE||23.17||▼-0.2||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||28.37||▲1.5||24.27||49.08||D W|
|Marathon Petro||MPC||64.22||▲2.2||54.29||88.45||D W|
|Phillips 66||PSX||91.99||▲0.7||78.44||123.97||D W|
|Valero Energy||VLO||77.29||▼-0.1||68.81||126.98||D W|
Callon Petroleum (CPE): Upgraded from Equal Weight to Overweight at Capital One Financial.
Concho Resources (CXO): Upgraded from Equal Weight to Overweight at Morgan Stanley.
Diamond Offshore Drilling (DO): Upgraded from Sell to Hold at DNB Markets.
ENI (E): Upgraded from Hold to Buy at Berenberg Bank.
Ensco (ESV): Upgraded from Hold to Buy at DNB Markets.
Noble Energy (NBL): Upgraded from Equal Weight to Overweight at Morgan Stanley.
PBF Energy (PBF): Upgraded from Equal Weight to Overweight at Morgan Stanley.
PetroChina (PTR): Upgraded from Equal Weight to Overweight at Morgan Stanley.
Rowan Companies (RDC): Upgraded from Hold to Buy at DNB Markets.
Transocean (RIG): Upgraded from Hold to Buy at DNB Markets.
Targa Resources (TRGP): Upgraded from Neutral to Outperform at Credit Suisse.
Bonterra Energy (BNE.TO): Downgraded from Strong Buy to Outperform at Raymond James.
Delek US (DK): Downgraded from Overweight to Equal Weight at Morgan Stanley.
Laredo Petroleum (LPI): Downgraded from Overweight to Neutral at Piper Jaffray.
Marathon Oil (MRO): Downgraded from Overweight to Equal Weight at Capital One.
Nabors Industries (NBR): Downgraded from Positive to Neutral at Susquehanna Bancshares.
Oasis Petroleum (OAS): Downgraded from Overweight to Neutral at Piper Jaffray.
Penn Virgina (PVAC): Downgraded from Overweight to Equal Weight at Capital One.
RPC (RES): Downgraded from Neutral to Sell at Citigroup.
UPDATED: DAILY (END-OF-DAY)
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• EQUITY PRICES PROVIDED BY NYSE & TMX GROUP
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• OIL PRICES, FUTURES AND DIFFERENTIALS IN USD/BBL
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