Oil prices post sixth week of declines despite plans for more OPEC cuts
This week's notable Canadian economic data from Statistics Canada:
After falling in August, manufacturing sales rose 0.2% in September to $58.5 billion. Sales of chemicals and petroleum products all posted gains for the month.
This week's US economic data:
The consumer price index rose 0.3% in October, blamed mostly on a higher energy prices, including gasoline, fuel oils and electricity. Excluding energy and food, core-CPI ticked lower from 2.2% to 2.1% y/y.
Retail sales rose 0.8% in October, the highest in five months, and much more than economists were expecting. Auto sales rose 1.1%, contributing to most of the gains.
Industrial output rose 0.1% in October. Manufacturing rose 0.3%, including a 2.8% drop in the auto sector. Mining activity declined 0.3%, while energy production also dropped 0.5%.
Weekly jobless claims rose by 2,000 to 216,000 last week.
Federal Reserve Chairman Jerome Powell says the US economy is strong but may face "headwinds" next year, which will determine how fast and how high interest rates can be increased. GDP growth is tracking at 3.5% thanks to strong consumer spending and record-low unemployment. Powell says there's still room for improvement in the US economy, and downplayed the recent upheaval in global equity markets.
Despite threats of rising rates, bond yields declined around the world this week, including Canada.
The British pound was the biggest loser in currency markets this week, falling 1% due to severe disagreements over wording of the new UK/EU Brexit agreement. The Euro surged 1.5% while the loonie also gained 0.5%. The US dollar hit a new multi-year high on Monday but ended the week 0.4% lower.
Both the International Energy Agency and OPEC issued bearish monthly reports this week, warning that markets will be significantly oversupplied going into 2019, due in part to rapid growth in US output and slowing demand from emerging markets.
OPEC is expected to call for a 1.4 million bbl/day from its members and allies in 2019.
According to the US Energy Information Administration, US crude production hit another record high of 11.7 million bbl/day last week, and is well on its way to topping 12 million bbl/day sometime next year.
The US added two new oil rigs this week, bringing the total to 888. Canada added one new rig, to a total of 118.
Despite expectations for more output cuts next year, Brent and WTI declined again this week, falling 5% and 6%, respectively. This is the sixth consecutive week of declines for both benchmarks.
Canada's light and heavy benchmarks sank to new lows on Tuesday but rallied sharply on Friday, after expiry of the December contract.
Natural gas was this week's big winner in energy commodities, rising 15% as the US eastern seaboard gets hit with an early winter blast and stockpiles sit at a 15-year low.
Morgan Stanley says it expects oil prices to "find firmer footing" towards the end of the year, keeping its year-end Brent forecast unchanged at US$77.50 a barrel. The investment firm says concerns over slowing demand out of India and China are overdone, while OPEC is largely expected to trim production in the near term. The firm also says the current supply glut is limited to light-sweet crudes, while medium and heavier grades are in much shorter supply, resulting in more favourable prices.
Despite optimism over US/China trade negotiations, equity markets remain in the gutter, with most global markets posting losses for the week. Australia and Tokyo were the worst hit globally, each falling about 3%. In US markets, the Dow and Nasdaq both declined over 2%. In Toronto, the TSX dipped less than 1%.
Chinese markets were the only exception, as the Hang Seng, Hong Kong and Shanghai exchanges ended the week higher.
Despite a rebound in Canadian energy prices, the TSX energy sector declined 3.8%. This week marks the seventh consecutive week of losses for the sector.
On the S&P 500, energy declined over 2%, with several oilfield services names hitting new one-year lows during the week.
BMO's chief investment strategist says he sees a “massive bounce” in energy stocks next year. Brian Belski calls the Canadian stock market a "huge contrarian buy" and prefers large-cap names such as Canadian Natural Resources, Suncor Energy, TransCanada and Enbridge in the energy space.
|Suncor Energy||SU||43.68||▼-1.6||40.49||55.47||24||D W|
|Imperial Oil||IMO||41.98||▲2.7||33.43||44.91||73||D W|
|Husky Energy||HSE||17.43||▼-4.5||15.09||22.99||24||D W|
|Pembina Pipeline||PPL||44.60||▼-1.6||37.60||47.84||81||D W|
|Inter Pipeline||IPL||22.76||▼-2.5||20.68||27.92||65||D W|
|Gibson Energy||GEI||21.92||▼-2.8||15.68||23.32||97↓||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.70||▼-3.9||35.19||49.08||17||D W|
|Cenovus Energy||CVE||10.67||▼-9.7||9.03||14.84||17||D W|
|Seven Generations||VII||12.30||▼-1.2||11.57||19.40||9||D W|
|Pason Systems||PSI||21.77||▼-2.9||16.05||24.57||93||D W|
|Mullen Group||MTL||13.27||▼-2.9||13.02||16.93||24||D W|
|Secure Energy||SES||8.15||▼-5.7||6.98||9.82||68||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.21||▼-12.7||24.97||47.45||80↓||D W|
|Exxon Mobil||XOM||78.96||▼-2.4||72.16||89.30||49||D W|
|Kinder Morgan||KMI||17.28||▼-1.4||14.69||19.83||66||D W|
|Williams Co||WMB||25.13||▼-0.8||23.54||33.67||27||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||105.20||▼-0.3||96.54||133.53||21||D W|
|Occidental Petro||OXY||73.38||▼-0.2||62.47||87.67||39||D W|
|Anadarko Petro||APC||56.38||▼-3.1||46.80||76.70||12||D W|
|Concho Res||CXO||138.39||▲1.4||123.63||163.11||42||D W|
|Ntl-Oilwell Varco||NOV||33.65||▼-4.6||31.47||49.08||6||D W|
|Baker Hughes||BHGE||23.37||▼-8.4||22.55||37.76||2||D W|
|Phillips 66||PSX||96.61||▼-3.1||89.14||123.97||19||D W|
|Valero Energy||VLO||83.95||▼-4.1||80.88||126.98||5||D W|
|Marathon Petro||MPC||65.44||▼-2.6||60.95||88.45||13||D W|