Oil prices post ninth week of losses as traders head for the exit
This week's notable Canadian economic data from Statistics Canada:
The Consumer Price Index (CPI) rose at an annualized rate of 2.4%, up from 2.2% in September. Higher airfares and auto prices contributed to most of the gains. Gasoline prices are up 12% y/y.
Retail sales rose 0.2% to $50.9 billion in September, with gains led by food and beverages. Sales at gasoline stations declined 1.1%, the third decline in four months, reflecting lower gas prices.
About 446,500 Canadians received regular Employment Insurance (EI) benefits in September, down 14,300 from the previous month. Declines were seen in most provinces outside of Atlantic Canada.
US bond yields dipped again this week, as money continues to flow out of stocks and commodities, and into treasury markets and the US dollar. Yields also declined in Canada, Germany and the UK.
In currency markets, the Euro took a major hit this week, falling 1.5% after the EU threatened to punish the Italians for breaching protocols on deficit spending. The Aussie dollar and New Zealand kiwi also sank about 1.5%, due to ongoing concerns over the Chinese economy. The greenback posted a 0.5% gain, recouping some of the losses from last week. The loonie declined 0.7%.
US crude stockpiles rose for the ninth week in a row, adding another 4.9 million barrels last week. Total US crude inventories are now up over 50 million barrels from the lows of mid-September.
Refinery utilization in the Midwest bounced back this week, rising from about 74% in mid-October to over 90% last week. BP's 430,000 bbl/day Whiting Refinery in Chicago, the largest single buyer of Canadian crude, returned to normal service after being shutdown for almost two months. Stockpiles at the Cushing storage hub finally saw its first drawdown in 9 weeks.
According to Reuters, gasoline stockpiles in China are also rising, with exports falling to a 1-year low. The weakness in demand is being blamed on a glut of refining products in Asia and around the world.
According to Baker Hughes, the US took 3 oil rigs out of service this week, while Canada added 6 new rigs.
Oil prices posted a seventh consecutive week of declines, blamed mostly on negative investor sentiment. Global oil prices are now down over 30% from the highs of early October, with Brent and WTI returning to the lows of fall 2017. Wholesale gasoline prices also touched a 2 year low on Friday, falling over 12% for the week.
This week's update on Canadian crude differentials:
The heavy oil discount narrowed by almost US$4 a barrel this week, falling to US$32.50 by Friday.
Economist at TD says they expects the heavy oil differential to return to a more normal range of US$20 to 25 a barrel over the next few quarters.
The discount on Canadian Light also shrunk by almost US$2/bbl this week.
The narrowing of discounts is being attributed to higher utilization rates in the Midwest and a pick-up in crude exports by rail. According to the National Energy Board, exports by rail jumped to a record 270,000 bbl/day in September.
Superstar oil trader Andy Hall says he expects OPEC to come to the rescue of falling oil prices, predicting a recovery around the new year.
On the other side of the trade is Credit Suisse, who says production cuts from Russia and Saudi Arabia are unlikely to move the needle on oversupply in the market, given rising production from just about everywhere else.
The market meltdown continued this week, despite light trading volumes due to US Thanksgiving. The Dow Industrial was the worst performer, falling 4.4%, followed by the tech heavy Nasdaq, falling 4.3%. FAANG stocks once again led the declines, having wiped out about US$1 trillion in market cap from their most recent highs.
Except for the Nikkei, equity markets around the world sank in sympathy. In Toronto, TSX declined 1%.
The TSX energy sector posted its 8 consecutive weekly decline, falling 4.8% and returning to the lows of early 2016. Declines were broadly based. Heavy-weights TransCanada and Enbridge bucked the downtrend, each gaining almost 2% for the week. Several Canadian producers and service stocks hit new multi-year lows on Friday.
On the S&P 500, the energy sector declined over 5%, with all energy components ending the week lower. Oilfield service stocks and independent refiners were the worst hit, with many names hitting new yearly lows.
|Suncor Energy||SU||43.05||▼-1.4||40.49||55.47||27||D W|
|Imperial Oil||IMO||39.58||▼-5.7||33.43||44.91||47||D W|
|Husky Energy||HSE||15.35||▼-11.9||15.09||22.99||13||D W|
|Pembina Pipeline||PPL||43.75||▼-1.9||37.60||47.84||80||D W|
|Inter Pipeline||IPL||21.92||▼-3.7||20.68||27.92||53||D W|
|Gibson Energy||GEI||21.11||▼-3.7||15.68||23.32||97||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||33.59||▼-5.9||33.00||49.08||13||D W|
|Cenovus Energy||CVE||9.25||▼-13.3||9.03||14.84||7||D W|
|Seven Generations||VII||11.07||▼-10.0||10.89||19.40||6||D W|
|Pason Systems||PSI||21.15||▼-2.8||16.05||24.57||91||D W|
|Mullen Group||MTL||12.67||▼-4.5||12.54||16.93||21||D W|
|Secure Energy||SES||7.78||▼-4.5||6.98||9.82||61||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.84||▲1.7||25.02||47.45||93||D W|
|Exxon Mobil||XOM||75.49||▼-4.4||72.16||89.30||47||D W|
|Kinder Morgan||KMI||16.61||▼-3.9||14.69||19.83||61||D W|
|Williams Co||WMB||24.54||▼-2.3||23.54||33.67||36||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||100.70||▼-4.3||96.54||133.53||20||D W|
|Occidental Petro||OXY||69.83||▼-4.8||62.47||87.67||32||D W|
|Anadarko Petro||APC||51.62||▼-8.4||46.80||76.70||7||D W|
|Concho Res||CXO||126.96||▼-8.3||123.63||163.11||26||D W|
|Ntl-Oilwell Varco||NOV||31.62||▼-6.0||31.30||49.08||6||D W|
|Baker Hughes||BHGE||22.46||▼-3.9||21.67||37.76||2||D W|
|Phillips 66||PSX||89.00||▼-7.9||88.99||123.97||8||D W|
|Valero Energy||VLO||77.03||▼-8.2||77.00||126.98||3||D W|
|Marathon Petro||MPC||61.73||▼-5.7||60.64||88.45||10||D W|