Oil prices get a boost on hopes for steeper OPEC cuts
Today's energy market summary:
- Rumours of a tentative deal on US government funding and progress on US/China trade talks helped boost equity markets, global bond yields and most commodities on Tuesday.
- Crude oil prices, including Canadian benchmarks rose about 1.5%. Differentials on Canadian light and heavy crude were roughly unchanged.
- The American Petroleum Institute is forecasting a crude inventory drawdown of almost 1 million barrels for last week, including over 500,000 barrels in Cushing. Official numbers from the Energy Information Administration (EIA) are due tomorrow morning.
- In this month's Short Term Energy Outlook, the EIA warns rising output from the US will more than offset losses from other global producers, returning oil markets to a surplus later this year. The EIA says US output hit a record 12 million bbl/day in January.
- In its February Monthly Oil Market report, OPEC says production declined by 797,000 bbl/day, falling to 30.8 million bbl/day in January. The cartel tweaked its 2019 demand growth forecast to 1.24 million bbl/day in 2019, down 50,000 bbl/day, while 2019 supply estimates were revised higher by 80,000 bbl/day to 2.18 million bbl/day.
- In an interview with the Financial Times, Saudi Arabia's energy minister now says he plans to cut output by 500,000 bbl/day more than originally planned, potentially reducing the kingdom's output to 9.8 million bbl/day in March.
Today's equity, treasury and currency market action:
- Global bond yields ticked slightly higher on Tuesday, including the US and Canada.
- The US dollar dipped 0.4%, giving a small boost to the Euro, pound and loonie.
- After a subdued start to the week, world equity markets stage a modest rally on Tuesday.
- Tokyo's Nikkei was the best performing developed market, rising 2.6%, while most European exchanges gained about 1%.
- In the US, the NYSE rose 1.1%, while the NASDAQ gained 1.4%.
- The S&P 500 index rose 1.2%, with gains seen across most sectors, including a 1.2% increase in energy stocks.
- In Toronto, the TSX rose 0.5%. Except for mining stocks, most other sectors posted gains for the day. Energy was the best performing sector, rising 1.5%.
Today's notable energy news:
- Shareholders have approved Encana Corp's $7.7 billion merger with Newfield Exploration, allowing the deal to close on Wednesday. Encana shareholders will own 63.5% of the new company, with Newfield shareholders owning the remaining 36.5%.
- The Egyptian government awarded a record number of concessions this week, as the country looks to establish itself as a major gas exporter. License winners include Royal Dutch Shell, Eni, BP, Petronas and ExxonMobil.
- Chevron CEO Mike Wirth says he plans to stay in Venezuela despite looming sanctions, while he continues to work with the US government to ensure full compliance with US law. Chevron and Schlumberger have been granted permission to stay in the country until late July. Last week, Total CEO Patrick Pouyanne announced plans to pull all his employees out of the country.
Today's 2018 reserves revisions and 2019 guidance updates:
- Advantage Oil & Gas says it produced a record 45,686 boe/day in the fourth quarter of last year, up 61% y/y. Total proved plus probable (2P) reserves rose 4.4% to 432 million barrels of oil equivalent.
- Chinook Energy says it averaged 3,719 boe/day in 2018, but exited the year at 3,500 boe/day due to Enbridge's shutdown of its T-South pipeline network. The company has now returned to an "unrestricted" flow of 4,500 boe/day. 2P reserves were estimated at 35,626 million barrels of oil equivalent at the end of last year, up 5% from the end of 2017.
- 2P reserves at Pine Cliff Energy were estimated at 61.6 million barrels of oil equivalent (weighted 92% natural gas), down 8% from the previous year. The company has approved a 2019 capital budget of $10 million.
|CURRENCIES & YIELDS|
|Suncor Energy||SU||43.08||▲0.2||35.53||55.47||D W|
|Imperial Oil||IMO||35.75||▲0.4||33.43||44.91||D W|
|Husky Energy||HSE||15.51||▲2.3||13.33||22.99||D W|
|Pembina Pipeline||PPL||47.17||▲0.7||37.60||47.84||D W|
|Inter Pipeline||IPL||21.18||▲0.4||18.60||25.66||D W|
|Gibson Energy||GEI||20.35||▲3.9||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.66||▲2.8||30.11||49.08||D W|
|Cenovus Energy||CVE||10.43||▲3.9||8.74||14.84||D W|
|Vermilion Energy||VET||31.63||▲0.7||26.67||49.67||D W|
|Pason Systems||PSI||19.65||▼-0.8||16.61||24.57||D W|
|Mullen Group||MTL||11.66||▼-0.5||11.26||16.93||D W|
|Secure Energy||SES||8.04||▲2.7||6.25||8.91||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.80||▲1.3||27.96||47.45||D W|
|Exxon Mobil||XOM||75.40||▲1.8||64.65||87.36||D W|
|Kinder Morgan||KMI||18.48||▲1.1||14.62||18.67||D W|
|Williams Co||WMB||26.73||▲0.0||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||95.63||▲1.5||82.04||133.53||D W|
|Occidental Petro||OXY||65.75||▲1.4||56.83||87.67||D W|
|Anadarko Petro||APC||42.80||▲0.5||40.40||76.70||D W|
|Pioneer Natural Res||PXD||141.39||▲2.7||119.08||213.40||D W|
|Baker Hughes||BHGE||24.74||▼-0.3||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||28.81||▼0.0||24.27||49.08||D W|
|Marathon Petro||MPC||61.87||▲0.2||54.29||88.45||D W|
|Phillips 66||PSX||94.00||▼-0.3||78.44||123.97||D W|
|Valero Energy||VLO||82.33||▼-1.2||68.81||126.98||D W|
Altagas (ALA.TO): Upgraded from Market Perform to Buy at Cormark.
Petrobras (PBR): Upgraded from Neutral to Buy at UBS.
UPDATED: DAILY (END-OF-DAY)
• OIL PRICES REFLECT NEAR MONTH CONTRACT FROM THE NYMEX/CME GROUP
• EQUITY PRICES PROVIDED BY NYSE & TMX GROUP
• CHARTPACKS COURTESY STOCKCHARTS.COM (DIVIDEND ADJUSTED)
• 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