Oil prices post sixth week of declines despite plans for more OPEC cuts

Oil prices post sixth week of declines despite plans for more OPEC cuts

WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
NEUTRAL
  • After reaching a new multi-year high on Monday, the US dollar sank later in the week, ending Friday down 0.4% w/w.
SUPPLY
BEARISH
  • US production hit a record 11.7 million bbl/day last week.
  • Russian output also hit a record 11.4 million bbl/day in October.
  • OPEC production rose another 127,000 bbl/day to 32.9 million bbl/day in October, on higher output from the UAE and Saudi Arabia.
  • Saudi Arabia says it will cut shipments by 500,000 bbl/day in December, but stopped short of announcing any production cuts. The kingdom is expected to produce a record 11 million bbl/day this month.
DEMAND
BEARISH
  • OPEC downgraded its 2019 world oil demand forecast by 70,000 bbl/day to 1.29 million bbl/day, citing a slowdown in emerging markets. The cartel warns that markets will be oversupplied by 1.36 million bbl/day if there's no change in output from here.
  • The IEA also warned of slowing demand from emerging markets.
SENTIMENT
BEARISH
  • Backwardation has disappeared on both Brent and WTI, leaving both benchmarks firmly in contango.
  • The number of short positions have increased considerably for Brent, while traders continue to unwind long positions. WTI saw an increase in shorts, while longs remain relatively stable.
  • Oil prices managed to catch a small bounce late in the week, but clearly remain in a downtrend since the beginning of October.
CURRENCIES & BONDS

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.

SUPPLY & DEMAND UPDATES

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.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

NOV 15, 2018

Crude inventories rise another 10M bbls as US output hits a new record high

 

The US added two new oil rigs this week, bringing the total to 888. Canada added one new rig, to a total of 118.

OIL MARKETS
USD/BBL
% CHG W/W
52-WK
BRENT
WTI
C5+
CDN LT
WCS
66.76
56.46
42.96
29.46
20.16
61.22
55.14
37.76
20.83
12.59
86.29
76.41
71.40
69.32
56.21

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.

CRUDE OIL FUTURES CURVES
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ MONTH 3   █ MONTH 5 (VS NEAR MONTH)
MANAGED MONEY: FUTURES & OPTIONS
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ LONG   █ SHORT █ NET LONG (1000 BBL CONTRACTS)
EQUITY MARKETS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

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.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

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.

TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • TORC O&G (TOG +5.9%)
  • Vermilion Energy (VET +4.7%)
  • Imperial Oil (IMO +2.7%)
  • TransCanada (TRP +2.4%)
  • ARC Resources (ARX +1.9%)
  • 12-MO HIGHS
  • Enerflex (EFX -4.6%)
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • Trican Well Svc (TCW -15.8%)
  • Encana (ECA -13.8%)
  • Parkland Fuel (PKI -12.7%)
  • Crescent Point (CPG -11.3%)
  • Cenovus Energy (CVE -9.7%)
  • 12-MO LOWS
  • Keyera (KEY -0.2%)
  • Cdn Natural Res (CNQ -3.9%)
  • Encana (ECA -13.8%)
  • Seven Generations (VII -1.2%)
  • Shawcor (SCL -1%)
  • Mullen Group (MTL -2.9%)
  • Baytex Energy (BTE -1.1%)
  • CES Energy (CEU -3.3%)
  • Crescent Point (CPG -11.3%)
  • Freehold Royalties (FRU -5.4%)
  • Kelt Exploration (KEL -6.9%)
  • Nuvista Energy (NVA -3%)
  • Paramount Res (POU -1.7%)
  • PrairieSky (PSK -5.7%)
  • Trican Well Svc (TCW -15.8%)
  • TORC O&G (TOG +5.9%)
  • Vermilion Energy (VET +4.7%)
  • Whitecap Res (WCP -5.7%)
  • 10-YR LOWS
  • Crescent Point (CPG -11.3%)
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Suncor EnergySU43.68▼-1.640.49
     
    55.4724D   W
    Imperial OilIMO41.98▲2.733.43
     
    44.9173D   W
    Husky EnergyHSE17.43▼-4.515.09
     
    22.9924D   W
    MIDSTREAM
    EnbridgeENB42.68▼-1.937.36
     
    51.0481D   W
    TransCanadaTRP52.56▲2.448.92
     
    65.1858D   W
    Pembina PipelinePPL44.60▼-1.637.60
     
    47.8481D   W
    Inter PipelineIPL22.76▼-2.520.68
     
    27.9265D   W
    Keyera KEY29.47▼-0.228.45
     
    38.9120D   W
    Gibson EnergyGEI21.92▼-2.815.68
     
    23.3297↓D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ35.70▼-3.935.19
     
    49.0817D   W
    EncanaECA10.06▼-13.89.76
     
    18.543D   W
    Cenovus EnergyCVE10.67▼-9.79.03
     
    14.8417D   W
    TourmalineTOU19.42▼-1.717.78
     
    26.1920D   W
    Seven GenerationsVII12.30▼-1.211.57
     
    19.409D   W
    SERVICES
    ShawcorSCL21.52▼-1.021.03
     
    29.5019D   W
    Pason SystemsPSI21.77▼-2.916.05
     
    24.5793D   W
    Mullen Group MTL13.27▼-2.913.02
     
    16.9324D   W
    EnerflexEFX17.55▼-4.613.55
     
    18.7294D   W
    Secure EnergySES8.15▼-5.76.98
     
    9.8268D   W
    REFINING & MARKETING
    Parkland FuelPKI37.21▼-12.724.97
     
    47.4580↓D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • Concho Res (CXO +1.4%)
  • Apache (APA +0.9%)
  • Cabot O&G (COG +0.5%)
  • Helmerich & Payne (HP 0%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • Concho Res (CXO +1.4%)
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • EQT Corp (EQT -53.7%)
  • Newfield Expl (NFX -13%)
  • Devon Energy (DVN -10.5%)
  • Baker Hughes (BHGE -8.4%)
  • Halliburton (HAL -7.2%)
  • 12-MO LOWS
  • Schlumberger (SLB -4.3%)
  • Halliburton (HAL -7.2%)
  • TechnipFMC (FTI -5.4%)
  • Baker Hughes (BHGE -8.4%)
  • Valero Energy (VLO -4.1%)
  • Devon Energy (DVN -10.5%)
  • EQT Corp (EQT -53.7%)
  • Newfield Expl (NFX -13%)
  • 10-YR LOWS
  • Baker Hughes (BHGE -8.4%)
  • EQT Corp (EQT -53.7%)
  • DEATH CROSSES
  • Ntl-Oilwell Varco (NOV -4.6%)
  • Phillips 66 (PSX -3.1%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM78.96▼-2.472.16
     
    89.3049D   W
    ChevronCVX119.06▼-0.4107.54
     
    133.8855D   W
    MIDSTREAM
    Kinder MorganKMI17.28▼-1.414.69
     
    19.8366D   W
    Williams CoWMB25.13▼-0.823.54
     
    33.6727D   W
    ONEOKOKE62.20▼-1.449.65
     
    71.9941D   W
    LARGE CAP E&P
    ConocoPhillipsCOP66.12▼-0.948.97
     
    80.2439D   W
    EOG ResourcesEOG105.20▼-0.396.54
     
    133.5321D   W
    Occidental PetroOXY73.38▼-0.262.47
     
    87.6739D   W
    Anadarko PetroAPC56.38▼-3.146.80
     
    76.7012D   W
    Concho ResCXO138.39▲1.4123.63
     
    163.1142D   W
    SERVICES
    SchlumbergerSLB48.22▼-4.347.07
     
    80.353D   W
    HalliburtonHAL32.46▼-7.231.75
     
    57.863D   W
    Ntl-Oilwell VarcoNOV33.65▼-4.631.47
     
    49.086D   W
    TechnipFMCFTI24.26▼-5.423.51
     
    35.005D   W
    Baker HughesBHGE23.37▼-8.422.55
     
    37.762D   W
    REFINERS
    Phillips 66PSX96.61▼-3.189.14
     
    123.9719D   W
    Valero EnergyVLO83.95▼-4.180.88
     
    126.985D   W
    Marathon PetroMPC65.44▼-2.660.95
     
    88.4513D   W
    HollyFrontierHFC63.83▼-1.342.42
     
    83.2842D   W
    NYSE ADR ENERGY STOCKS
    ADRs BULLISH INDICATORS
    12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • ADRs BEARISH INDICATORS
    12-MO LOWS
  • Royal Dutch Shell (RDS.A -1.6%)
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • Sasol Limited (SSL -5.3%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A62.02▼-1.660.27
     
    73.8615D   W
    TotalTOT57.11▼-0.553.37
     
    65.6935D   W
    BPBP40.84▼-1.036.15
     
    47.8331D   W
    EniE34.12▼-2.632.13
     
    40.1534D   W
    EquinorEQNR24.78▼-0.119.76
     
    28.9337D   W
    UPDATED: EVERY WEEKEND
    SOURCES:
  • COMMODITY PRICES REFLECT NEAR MONTH CONTRACT FROM THE NYMEX/CME GROUP
  • EQUITY PRICES & SECTOR PERFORMANCE PROVIDED BY NYSE & TMX GROUP
  • FUTURES & OPTIONS CONTRACTS FROM ICE/CFTC (WEEKLY DATA FOR PREVIOUS TUESDAY)
  • CHARTPACKS COURTESY STOCKCHARTS.COM (DIVIDEND ADJUSTED)
  • NOTES:
  • CRB = THOMSON REUTERS/CORECOMMODITY CRB INDEX
  • C5+ = EDMONTON CONDENSATE
  • US BONDS = TLT = iSHARES 20+ YEAR TREASURY BOND ETF
  • CA BONDS = XBB = iSHARES CANADIAN UNIVERSE BOND INDEX ETF
  • SECTOR & SUBSECTOR PERFORMANCES WEIGHTED BY MARKET CAP
  • 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
  • RANK:
  • BASED ON STOCKCHARTS TECHNICAL RANK (SCTR)
  • REFLECTS RELATIVE STRENGTH AMONG OTHER ENERGY STOCKS (PERCENTILE RANKING)
  • RISING RANK (↑) REFLECTS INCREASING RELATIVE STRENGTH
  • FALLING RANK (↓) REFLECTS DECREASING RELATIVE STRENGTH.
  • Oil prices post ninth week of losses as traders head for the exit

    Oil prices post ninth week of losses as traders head for the exit

    Oil prices sink into bear market territory as US output surges to new highs

    Oil prices sink into bear market territory as US output surges to new highs

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