Inverted yield curve spooks traders, sending oil prices lower
Today's energy market action:
- Renewed concerns over a global slowdown sent funds out of stocks and commodities on Friday, and into treasuries.
- Brent declined 1.2%, giving back all gains from earlier in the week, while WTI fell 1.6% for the day.
- Canada's light and heavy crude benchmarks both sank about 2%. Differentials were roughly unchanged.
- Henry Hub dropped over 2% while heating oil declined about 1%. Gasoline prices also dipped 0.2% for the day.
Today's treasury, currency and equity market action:
- Traders were spooked by an inverted yield curve on Friday morning, with yields on the US 10-year now 2 basis points below 3-month treasuries. The German 10-year dropped below zero for the first time since the fall of 2016, while Japanese 10-year bonds sank to -0.07%.
- Currencies also went for a wild ride on Friday, triggered by weak manufacturing data out of Germany overnight, sinking the Euro 0.7%. The yen rose 0.7%, as investors fled to safety, while the British pound also gained 0.7%, on renewed hopes for a Brexit extension.
- The loonie declined 0.5%, ending the week just below 74.50 cents. The US dollar ended the day up 0.2%.
- Global markets mostly retreated on Friday, including Europe, the US and Canada.
- In New York, the NASDAQ fell 2.5%, while the NYSE and S&P 500 declined 1.9%. Except for rate-sensitive utilities stocks, all other sectors posted losses for the day. Energy declined 2.6%.
- The TSX fell 1% on Friday, including a 2.7% drop in the energy sector.
- Almost all energy components on the TSX and SPX ended Friday in the red. Foreign ADRs listed on the NYSE also ended the day lower.
Today's notable energy news:
- US oil rig counts declined for the fifth week in a row, falling another 9 on Friday to 824. Most of the declines were located in the Permian basin, where 459 rigs remain in service. Canadian rig counts were cut in half this week, dropping by 49 by Friday.
- Houston-based Nuevo Midstream Dos has agreed to acquire Republic Midstream, owner and operator of a crude gathering, storage and distribution network in the Eagle Ford Shale. Nuevo Midstream is backed by EnCap Flatrock Midstream, while Republic Midstream is an affiliate of ArcLight Capital Partners. Financial terms of the deal were not disclosed.
- Severe flooding in the US Midwest has taken about 13% of the country's ethanol production offline. Facilities in Nebraska, Iowa and South Dakota have been forced to shut down or reduce output, in part due to washed-out rail lines. The US produces about 1.1 million bbl/day of ethanol, used primarily for blending with gasoline.
- Brazil's Petrobras says it plans to spend US$320 million to hedge part of its oil output at US$60 for Brent. The company says the move is intended to partially protect its operational cash flow. The hedges expire at the end of the year.
|Suncor Energy||SU||45.19||▼-2.3||35.53||55.47||D W|
|Imperial Oil||IMO||36.43||▼-2.0||33.43||44.91||D W|
|Husky Energy||HSE||13.59||▼-2.2||13.33||22.99||D W|
|Pembina Pipeline||PPL||49.61||▼-1.2||37.60||50.45||D W|
|Inter Pipeline||IPL||21.78||▼-1.5||18.60||25.66||D W|
|Gibson Energy||GEI||22.87||▼-2.9||15.90||23.63||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||37.02||▼-2.6||30.11||49.08||D W|
|Cenovus Energy||CVE||11.77||▼-4.3||8.74||14.84||D W|
|Vermilion Energy||VET||33.60||▼-2.3||26.67||49.67||D W|
|Pason Systems||PSI||20.07||▼-2.6||16.61||24.57||D W|
|Mullen Group||MTL||12.20||▼-1.7||11.26||16.93||D W|
|Secure Energy||SES||8.32||▼-2.9||6.25||9.44||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||39.58||▼-3.0||27.96||47.45||D W|
|Exxon Mobil||XOM||80.48||▼-1.6||64.65||87.36||D W|
|Kinder Morgan||KMI||19.90||▼-2.6||14.62||20.44||D W|
|Williams Co||WMB||28.47||▼-1.6||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||93.68||▼-3.3||82.04||133.53||D W|
|Occidental Petro||OXY||65.24||▼-3.0||56.83||87.67||D W|
|Anadarko Petro||APC||43.23||▼-4.5||40.40||76.70||D W|
|Pioneer Natural Res||PXD||140.56||▼-3.5||119.08||213.40||D W|
|Baker Hughes||BHGE||27.16||▼-4.6||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||26.63||▼-4.6||24.27||49.08||D W|
|Marathon Petro||MPC||61.30||▼-2.4||54.29||88.45||D W|
|Phillips 66||PSX||95.98||▼-2.6||78.44||123.97||D W|
|Valero Energy||VLO||84.63||▼-2.0||68.81||126.98||D W|
Centennial Resource Development (CDEV): Downgraded from Buy to Accumulate at Johnson Rice.
Kinder Morgan (KMI): Downgraded from Overweight to Neutral at JP Morgan Chase.
UPDATED: DAILY (END-OF-DAY)
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