Oil prices dip as crude stockpiles continue to build, and greenback breaks out to new highs
Today's energy market action:
WTI posted its first loss for the week, falling 0.6% on Wednesday. WCS fell 1.5% as the discount to WTI widened by US$0.40/bbl to US$12.15. Canadian Light fell 0.8%. Brent bucked the downtrend, rising 0.1%.
According to the Energy Information Administration (EIA), US crude stockpiles rose by 5.5 million barrels last week. Gasoline inventories posted their tenth consecutive week of declines.
The International Energy Agency (IEA) says world oil markets are "now adequately supplied," despite the potential for further declines in Iranian output. The agency says global spare production capacity remains "comfortable," due in part to a major boost in US output expected this year, and lofty global stockpiles, which remain above the 5-year average.
Heating oil declined 1% while gasoline prices also slipped 0.4% on Wednesday. Henry Hub natural gas prices were little changed for the day.
Today's currency and equity market action:
The Bank of Canada kept its overnight lending rate unchanged at 1¾%, noting that economic growth has slowed more than projected in its January assessment. The Bank says it expects the economy to improve in the second half of this year, with real GDP growth now forecasted at 1.2%, rising to 2% in 2020. The loonie sank another 0.5%, ending the day just above 74 cents.
Concerns over the health of the Chinese economy sank the Aussie dollar and New Zealand kiwi by about 1%, while weak data out of Germany dropped the Euro 0.6%. The US dollar index continues to gain ground against foreign currencies, ending Wednesday at a new 22-month high.
Markets in New York and Toronto moved higher in the morning, but fizzled by the end of the day. The NYSE declined 0.3% while the S&P 500 fell 0.2%. US markets were in defensive mode. Energy was the worst performing sector, posting a 2% loss for the day.
The TSX also declined 0.5%. After five consecutive days of solid gains, the TSX energy basket gave back 2.3%, and was also the worst performing sector on the TSX.
Today's notable energy news:
Crude-by-rail shipments at CP Rail declined to 17,000 carloads in the first quarter, blamed on a narrowing of the heavy oil differential that resulted from Alberta's curtailment program. CP says it expects rail shipments to rebound back to as much as 25,000 carloads in Q2.
Royal Dutch Shell announced a significant deepwater discovery in the US Gulf of Mexico (GoM). Blacktip is Shell's second major discovery in the Perdido Corridor, jointly owned with Chevron, Equinor and Repsol. The company says it is on track to exceed 900,000 boe/day out of the US GoM by 2020.
ExxonMobil announced plans to expand its Fawley refinery in the UK, adding another 38,000 bbl/day of ultra-low sulphur diesel capacity. The expansion will come at a cost of about US$1 billion. The Fawley refinery and chemical plant is Britain’s largest integrated facility.
Exxon also announced the the addition of 7 million acres in Namibia, after signing an agreement with Namibian government and state-owned National Petroleum Corporation (NAMCOR). The company says it expects to commence exploration activities sometime this year.
Today's notable M&A news:
Occidental Petroleum launched a US$57 billion bid for Anadarko Petroleum, significantly topping Chevron's offer. Occidental is offering US$76 a share, structured 50/50 cash and stock, plus assumption of Anadarko's debt. If successful, the deal would make Occidental the largest producer in the Permian, boosting total output to 533,000 boe/day.
Anadarko confirmed receipt of Occidental's offer, and says it is currently evaluating the proposal. Earlier this month, the company's board unanimously approved a US$50 billion offer from Chevron, structured 25% cash and 75% stock. Chevron's takeover is subject to a US$1 billion break-up fee.
According to Reuters, Shell is in advanced talks to buy BP's 27.5% stake in the Shearwater oil and gas field in the UK North Sea. The asset is reported to be worth about US$250 million. Shell currently has a 28% stake in Shearwater.
Reuters is also reporting that Israel's Delek Group is in the final stages of negotiations for Chevron's UK North Sea assets, estimated to be worth about US$2 billion. The assets produce about 50,000 bbl/day of oil and 155 MMcf/day of natural gas.
Today's first quarter earnings results:
Cenovus Energy reported a net profit of $110 million, much improved from a $914 million loss for the first quarter of last year. Production declined about 8% y/y to 447,270 boe/day in the first quarter, due to the province’s curtailment program. The company also cut its 2019 heavy oil production guidance by 7% to between 350,000 and 370,000 bbl/day. Cenovus says its mandated production cuts have been more than offset by higher oil prices, proving the effectiveness of Alberta's curtailment program.
Western Energy Services reported a 15% drop in operating revenues, falling to $61.8 million in the first quarter, due mostly to lower contract drilling and oilfield rental activity in Canada. Drill rig utilization fell from 52% to just 34% in Q1, blamed on Alberta's curtailment program. The company posted a $7.1 million loss for the quarter.
QEP Resources reported a net loss of US$117 million for the first quarter, up from a US$54 million loss for the same time last year. The loss was blamed mostly on a 74% drop in gas production and a number of non-cash charges. The company produced about 86,000 boe/day in Q1.
Refiner CVR Energy posted a net profit of US$101 million in Q1, on revenues of US$1.5 billion. Refining margins declined 6% y/y to US$16.55 per barrel.
Oilfield services provider RPC reported a 23% drop in first quarter revenues, falling to US$335 million. The decline was blamed on lower pricing and lower activity levels within its pressure pumping business. The company posted a net operating loss of US$2 million in Q1, down from a US$61 million profit for the same time last year.
|Suncor Energy||SU||44.34||▼-3.5||35.53||55.47||D W|
|Imperial Oil||IMO||39.88||▼-1.3||33.52||44.91||D W|
|Husky Energy||HSE||14.57||▼-1.2||13.21||22.99||D W|
|Pembina Pipeline||PPL||49.74||▼-1.1||39.15||50.65||D W|
|Inter Pipeline||IPL||22.28||▼-0.8||18.60||25.66||D W|
|Gibson Energy||GEI||23.11||▼-0.8||16.15||23.75||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||41.25||▼-2.2||30.11||49.08||D W|
|Cenovus Energy||CVE||13.74||▼-1.9||8.74||14.84||D W|
|Vermilion Energy||VET||35.91||▼-2.1||26.67||49.67||D W|
|Pason Systems||PSI||20.59||▲0.2||17.18||24.57||D W|
|Mullen Group||MTL||11.82||▼-2.4||11.26||16.93||D W|
|Secure Energy||SES||8.38||▼-2.1||6.25||9.44||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||41.52||▼-1.5||28.78||47.45||D W|
|Exxon Mobil||XOM||81.76||▼-1.9||64.65||87.36||D W|
|Kinder Morgan||KMI||20.08||0.0||14.62||20.44||D W|
|Williams Co||WMB||28.68||▼-0.5||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||103.94||▼-2.5||82.04||133.53||D W|
|Occidental Petro||OXY||62.00||▼-0.6||56.83||87.67||D W|
|Anadarko Petro||APC||71.40||▲11.6||40.40||76.70||D W|
|Pioneer Natural Res||PXD||172.37||▼-1.9||119.08||213.40||D W|
|Baker Hughes||BHGE||25.61||▼-1.3||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||26.49||▼-5.1||24.27||49.08||D W|
|Marathon Petro||MPC||59.50||▼-2.6||54.29||88.45||D W|
|Phillips 66||PSX||94.28||▼-3.2||78.44||123.97||D W|
|Valero Energy||VLO||87.73||▼-2.8||68.81||126.98||D W|
UPDATED: DAILY (END-OF-DAY)
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