Inverted yield curve spooks traders, sending oil prices lower

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.
OIL PRICES - DAILY % CHANGE
WTI DIFFERENTIALS
STREAM CLOSE %CHG L 52WK H
BRENT$67.03▼1.250.47
 
86.29
WTI$59.04▼1.642.53
 
76.41
CDN LT$54.04▼1.720.83
 
69.32
C5+$54.04▼1.737.04
 
71.40
WCS$49.54▼1.712.59
 
56.21

CRUDE OIL FUTURES CURVES
BRENT
WTI
█ MAR 22   █ MAR 15   █ MAR 8   █ MAR 1   (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
  • Birchcliff Energy (BIR +0.5%)
  • TransCanada (TRP +0%)
  • 12-MO HIGHS
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • MEG Energy (MEG -6.6%)
  • Baytex Energy (BTE -5.6%)
  • Gran Tierra (GTE -5.5%)
  • Ensign Energy Svcs (ESI -4.3%)
  • Cenovus Energy (CVE -4.3%)
  • 12-MO LOWS
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H CHART
    INTEGRATED
    Suncor EnergySU45.19▼-2.335.53
     
    55.47D   W
    Imperial OilIMO36.43▼-2.033.43
     
    44.91D   W
    Husky EnergyHSE13.59▼-2.213.33
     
    22.99D   W
    MIDSTREAM
    EnbridgeENB49.17▼0.037.36
     
    49.70D   W
    TransCanadaTRP60.67▲0.047.90
     
    61.17D   W
    Pembina PipelinePPL49.61▼-1.237.60
     
    50.45D   W
    Inter PipelineIPL21.78▼-1.518.60
     
    25.66D   W
    Keyera KEY31.14▼-2.824.05
     
    38.91D   W
    Gibson EnergyGEI22.87▼-2.915.90
     
    23.63D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ37.02▼-2.630.11
     
    49.08D   W
    Cenovus EnergyCVE11.77▼-4.38.74
     
    14.84D   W
    EncanaECA9.43▼-4.36.90
     
    18.54D   W
    TourmalineTOU21.35▼-1.315.84
     
    26.19D   W
    Vermilion EnergyVET33.60▼-2.326.67
     
    49.67D   W
    SERVICES
    Pason SystemsPSI20.07▼-2.616.61
     
    24.57D   W
    EnerflexEFX19.37▼-1.613.55
     
    20.38D   W
    Mullen Group MTL12.20▼-1.711.26
     
    16.93D   W
    ShawcorSCL21.46▼-2.515.11
     
    28.89D   W
    Secure EnergySES8.32▼-2.96.25
     
    9.44D   W
    REFINING & MARKETING
    Parkland FuelPKI39.58▼-3.027.96
     
    47.45D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • None
  • 12-MO HIGHS
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • Cimarex Energy (XEC -6.3%)
  • Marathon Oil (MRO -5.7%)
  • TechnipFMC (FTI -4.9%)
  • Concho Res (CXO -4.9%)
  • Baker Hughes (BHGE -4.6%)
  • 12-MO LOWS
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H CHART
    INTEGRATED
    Exxon MobilXOM80.48▼-1.664.65
     
    87.36D   W
    ChevronCVX123.09▼-2.2100.22
     
    131.08D   W
    MIDSTREAM
    Kinder MorganKMI19.90▼-2.614.62
     
    20.44D   W
    Williams CoWMB28.47▼-1.620.36
     
    32.22D   W
    ONEOKOKE69.01▼-1.250.26
     
    71.99D   W
    LARGE CAP E&P
    ConocoPhillipsCOP66.07▼-3.056.05
     
    80.24D   W
    EOG ResourcesEOG93.68▼-3.382.04
     
    133.53D   W
    Occidental PetroOXY65.24▼-3.056.83
     
    87.67D   W
    Anadarko PetroAPC43.23▼-4.540.40
     
    76.70D   W
    Pioneer Natural ResPXD140.56▼-3.5119.08
     
    213.40D   W
    SERVICES
    SchlumbergerSLB42.47▼-4.034.99
     
    75.43D   W
    HalliburtonHAL28.73▼-4.424.70
     
    54.91D   W
    Baker HughesBHGE27.16▼-4.620.09
     
    37.76D   W
    Ntl-Oilwell VarcoNOV26.63▼-4.624.27
     
    49.08D   W
    TechnipFMCFTI22.66▼-4.918.20
     
    34.39D   W
    REFINERS
    Marathon PetroMPC61.30▼-2.454.29
     
    88.45D   W
    Phillips 66PSX95.98▼-2.678.44
     
    123.97D   W
    Valero EnergyVLO84.63▼-2.068.81
     
    126.98D   W
    HollyFrontierHFC50.61▼-3.346.75
     
    83.28D   W
    NYSE ADRs
    COMPANY TICKER CLOSE %CHG L 52WK H CHART
    Royal Dutch ShellRDS.A62.88▼-1.955.04
     
    73.86D   W
    TotalTOT56.01▼-2.649.70
     
    65.69D   W
    BPBP43.95▼-1.336.28
     
    47.83D   W
    EniE35.44▼-1.729.75
     
    40.15D   W
    EquinorEQNR22.50▼-2.219.95
     
    28.93D   W
    ANALYST RATINGS

    UPGRADES

    • TechnipFMC (FTI): Upgraded from Hold to Buy at HSBC.

    DOWNGRADES

    • Centennial Resource Development (CDEV): Downgraded from Buy to Accumulate at Johnson Rice.

    • Kinder Morgan (KMI): Downgraded from Overweight to Neutral at JP Morgan Chase.

    LATEST ENERGY NEWS

    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
    WCS discount narrows to almost US$9 a barrel

    WCS discount narrows to almost US$9 a barrel

    WCS tops US$50 a barrel, returning to levels of last July

    WCS tops US$50 a barrel, returning to levels of last July

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