Inverted yield curve sinks oil prices, sending TSX energy sector to 16-year low

Inverted yield curve sinks oil prices, sending TSX energy sector to 16-year low

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Today’s energy market action:

  • Recession fears sparked another sell-off in stocks and commodities on Wednesday, including energy.

  • Brent and WTI both declined about 3% for the day, while gasoline prices fell 3.5%. Canada's light and heavy benchmarks fell closer to 4%, despite little change in their respective discounts.

  • According to the Energy Information Administration, US crude stockpiles rose by 1.6 million barrels last week, while gasoline and distillate stockpiles fell 1.4 and 1.9 million barrels, respectively. Despite falling rig counts, production was reported unchanged at 12.3 million bbl/day.

  • US imports of Canadian crude rose 3% to 3.85 million bbl/day last week. Overall petroleum demand in the US remains quite healthy at 22.1 million bbl/day.

Today's currency and treasury market action:

  • Weak economic data out of China and Germany overnight sent bond yields lower on Wednesday, particularly German 10-year bunds, which fell to an unprecedented low of -0.66%. 

  • Yields on the US 10-year also continue to free-fall, briefly inverting the yield curve (10 vs 2-yr) for the first time since mid-2007. The yield curve was last inverted in 2006 during the subprime mortgage crisis, a precursor to the 2007 financial crisis, and the Great Recession that followed in 2008.

  • Safe-haven currencies and precious metals were the only place to hide on Wednesday. The yen shot up 0.7%, while the US dollar edged up 0.1%, ending the day just shy of 98 points. The loonie declined 0.7%, ending the day just above 75 cents.

Today in equity markets:

  • The Dow Jones Industrial Average continued its roller-coaster ride, sinking another 800 points (or 3%) for the day. Since touching an all-time high in mid-July, the Dow is now down almost 2,000 points.

  • The NYSE, NASDAQ and S&P 500 also sank about 3% for the day. Losses were seen across all sectors. Energy was the worst performer, falling over 4%, and returning to lows of last December.

  • In Toronto, the TSX fell 1.8%. Except for gold stocks, all sectors posted losses for the day. Energy declined 3.4%, breaking down to levels last seen in 2003.

Today's notable energy news:

  • As part of its second quarter earnings release today, Obsidian Energy says it continues to make progress in its cost-cutting program by "meaningfully" reducing its corporate head count. The company has set a goal of reducing its administrative costs from the current $2.20/boe to $1.85 towards the latter half of this year. Operating costs are tracking about $13 a barrel, in line with expectations. For the first half of this year, Obsidian posted a net loss of $216 million, up from a $161 million loss for the same time last year.

  • Birchcliff Energy says it averaged 78,453 boe/day in the second quarter, ahead of expectations and 3% higher than the same time last year. The company plans to drill more wells this year, resulting in a $38 million increase in its 2019 capital spending program. Birchcliff also raised its full-year production guidance to between 77,000 to 79,000 boe/day.

  • Due to a steep sell-off in share prices, Encana amended the terms of its US$213 million buyback program. The company lowered its share purchase price from a previous range of US$4.70 to US$5.40 per share, to a new range of US$4.15 to US$4.75/share.

  • Kinder Morgan announced US$170 million in new projects, aimed at improving its blending capabilities in the Houston Ship Channel. The funds are earmarked for upgrades to its Pasadena Terminal, Jefferson Street Truck Rack and Galena Park Terminal, with all enhancements expected to be completed by the end of 2020.

OIL PRICES - DAILY % CHANGE
WTI DIFFERENTIALS
STREAM CLOSE %CHG L 52WK H
BRENT$59.48▼3.050.47
 
86.29
WTI$55.23▼3.342.53
 
76.41
SCO$56.77▼3.225.15
 
71.86
C5+$52.70▼3.437.04
 
68.87
CDN LT$52.27▼3.620.83
 
63.86
WCS$43.17▼4.012.59
 
56.30

CRUDE OIL FUTURES CURVES
BRENT
WTI
█ AUG 14   █ AUG 7   █ JUL 31   █ JUL 24   (USD/BBL)
MARKET OVERVIEW
MARKETS
CURRENCIES & YIELDS
     TSX SECTORS
52WK Δ
     SPX SECTORS
52WK Δ
ENERGY SECTORS

TSX ENERGY SUB-SECTORS

SPX ENERGY SUB-SECTORS
TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
None
12-MO
HIGHS
None
TSX BEARISH INDICATORS
BOTTOM
5
Kelt Exploration (KEL -12%)
Baytex Energy (BTE -8.6%)
Crescent Point (CPG -8.4%)
Birchcliff Energy (BIR -8.3%)
Tourmaline (TOU -7.7%)
12-MO
LOWS
Imperial Oil (IMO -2.1%)
Husky Energy (HSE -4.5%)
Tourmaline (TOU -7.7%)
Vermilion Energy (VET -3.6%)
Enerflex (EFX -3.3%)
Mullen Group (MTL -3.4%)
Secure Energy (SES -5.3%)
ARC Resources (ARX -4.9%)
Birchcliff Energy (BIR -8.3%)
Baytex Energy (BTE -8.6%)
Ensign Energy Svcs (ESI -5.2%)
Freehold Royalties (FRU -3.5%)
Gran Tierra (GTE -3.7%)
Kelt Exploration (KEL -12%)
Nuvista Energy (NVA -6.1%)
Precision Drilling (PD -5.7%)
Peyto Exploration (PEY -6.4%)
TORC O&G (TOG -4.9%)
Whitecap Res (WCP -5.8%)
COMPANY TICKER CLOSE %CHG L 52WK H CHART
INTEGRATED
Suncor EnergySU37.15▼-2.135.53
 
54.51D   W
Imperial OilIMO32.39▼-2.132.33
 
44.69D   W
Husky EnergyHSE8.55▼-4.58.49
 
22.99D   W
MIDSTREAM
EnbridgeENB43.62▼-2.539.40
 
51.22D   W
TC EnergyTRP63.60▼-2.947.90
 
67.15D   W
Pembina PipelinePPL48.32▼-1.439.15
 
50.65D   W
Inter PipelineIPL24.46▼-0.918.60
 
25.24D   W
Keyera KEY32.59▼-0.824.05
 
38.41D   W
Gibson EnergyGEI22.97▼-1.516.90
 
24.43D   W
LARGE CAP E&P
Cdn Natural ResCNQ30.94▼-2.730.11
 
46.39D   W
Cenovus EnergyCVE11.05▼-4.38.74
 
14.26D   W
EncanaECA5.66▼-3.75.25
 
17.60D   W
TourmalineTOU12.55▼-7.712.46
 
23.86D   W
Vermilion EnergyVET19.65▼-3.619.48
 
43.91D   W
SERVICES
Pason SystemsPSI16.40▼-1.316.30
 
24.57D   W
EnerflexEFX13.22▼-3.313.19
 
20.38D   W
Mullen Group MTL8.98▼-3.48.88
 
16.93D   W
ShawcorSCL16.51▼-2.915.11
 
28.89D   W
Secure EnergySES6.06▼-5.35.98
 
9.44D   W
REFINING & MARKETING
Parkland FuelPKI42.34▼-2.031.59
 
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 -9.5%)
Apache (APA -8.4%)
Ntl-Oilwell Varco (NOV -8.1%)
Devon Energy (DVN -6.7%)
Baker Hughes (BHGE -6.6%)
12-MO
LOWS
EOG Resources (EOG -4.4%)
ConocoPhillips (COP -3.9%)
Occidental Petro (OXY -2.4%)
Schlumberger (SLB -6.6%)
Halliburton (HAL -6%)
Ntl-Oilwell Varco (NOV -8.1%)
Marathon Petro (MPC -5.3%)
Cimarex Energy (XEC -9.5%)
Apache (APA -8.4%)
Cabot O&G (COG -4.9%)
Helmerich & Payne (HP -2.6%)
Cimarex Energy (XEC -9.5%)
COMPANY TICKER CLOSE %CHG L 52WK H CHART
INTEGRATED
Exxon MobilXOM67.65▼-4.064.65
 
87.36D   W
ChevronCVX117.74▼-3.8100.22
 
127.60D   W
MIDSTREAM
Kinder MorganKMI19.80▼-3.514.62
 
21.50D   W
Williams CoWMB23.11▼-3.320.36
 
31.05D   W
ONEOKOKE67.71▼-2.850.26
 
72.38D   W
LARGE CAP E&P
ConocoPhillipsCOP51.78▼-3.951.51
 
80.24D   W
EOG ResourcesEOG75.02▼-4.474.26
 
133.53D   W
Occidental PetroOXY43.70▼-2.443.08
 
83.35D   W
Pioneer Natural ResPXD122.72▼-4.4114.79
 
189.78D   W
Hess CorpHES59.36▼-4.335.59
 
74.81D   W
SERVICES
SchlumbergerSLB32.34▼-6.632.20
 
65.74D   W
HalliburtonHAL18.33▼-6.018.12
 
42.57D   W
Baker HughesBHGE22.01▼-6.620.09
 
34.52D   W
Ntl-Oilwell VarcoNOV18.74▼-8.118.69
 
47.46D   W
TechnipFMCFTI23.27▼-4.618.20
 
32.91D   W
REFINERS
Marathon PetroMPC44.63▼-5.344.27
 
88.45D   W
Phillips 66PSX97.53▼-2.278.44
 
122.00D   W
Valero EnergyVLO76.00▼-3.468.81
 
122.42D   W
HollyFrontierHFC44.28▼-5.837.73
 
76.56D   W
NYSE ADRs
COMPANY TICKER CLOSE %CHG L 52WK H CHART
Royal Dutch ShellRDS.A56.38▼-2.355.04
 
70.09D   W
TotalTOT48.32▼-2.347.91
 
65.69D   W
BPBP36.26▼-2.536.15
 
47.16D   W
EniE29.10▼-3.029.01
 
39.16D   W
EquinorEQNR16.49▼-4.116.47
 
28.93D   W
ANALYST RATINGS

UPGRADES

  • Southwestern Energy (SWN): Upgraded from Sell to Neutral at UBS.

DOWNGRADES

  • Storm Resources (SRX.TO): Downgraded from Outperform to Sector Perform at National Bank.

  • Total Energy Services (TOT.TO): Downgraded from Outperform to Sector Perform at AltaCorp Capital.

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
• PRICE CHARTS PROVIDED BY STOCKCHARTS.COM ARE DIVIDEND ADJUSTED

NOTES:
• OIL PRICES, FUTURES AND DIFFERENTIALS SHOWN IN USD/BBL
• WCS = WESTERN CANADIAN SELECT; C5+ = EDMONTON CONDENSATE; SCO = SYNTHETIC CRUDE
• FUTURES CURVES REFLECT 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
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