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

WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
BEARISH
  • The Trump Administration confirmed waivers were granted China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea, allowing them to continue buying Iranian crude. The eight countries account for 75% of Iran's exports.
USD INDEX
BEARISH
  • The US dollar rose another 0.4% this week, and is poised to retest the highs of late October.
SUPPLY
BEARISH
  • According to the EIA, production out of the Lower 48 surged another 400,000 bbl/day last week, bringing total US production to yet another record high of 11.6 million bbl/day. The EIA says it expects the US to top 12 million bbl/day by the middle of next year. The agency also raised its 2019 full year forecast to 12.1 million bbl/day.
  • Iraq announced plans to boost output from the 4.6 million bbl/day, to 5 million next year and potentially as much as 8.5 million bbl/day over the next few years, pending the construction of new export pipelines.
DEMAND
NEUTRAL
  • No new news on the demand front this week.
SENTIMENT
BEARISH
  • Brent and WTI posted a fifth consecutive week of losses, now down almost 20% from the highs of early October. However, both benchmarks managed to hold above the key support levels of US$70 and US$60, respectively.
  • Both Brent and WTI have now firmly moved into contango.
  • Net longs have dropped considerably on both benchmarks. WTI also saw an increase in new short positions last week.
CURRENCIES & BONDS

Despite October's market meltdown, falling oil prices and ongoing trade wars, the US Federal Reserve says they remain committed to raising rates going forward, citing a strong labour market and resilient household spending. The next US rate hike is expected in December, which would be the fourth increase this year.

US bond yields rose on the short end of the curve, but longer duration bonds posted losses for the week, flattening the yield curve to 0.25% (10-yr vs 2-yr rates). Yields on 10-year bonds also sank in Canada, Japan and Germany.

The Canadian dollar was one of the biggest losers in currency markets this week, sinking almost 1%. The Euro and the yen declined about 0.5% as the US dollar posted a 0.4% gain.

SUPPLY & DEMAND UPDATES

According to the US Energy Information Administration (EIA), production out of the Lower 48 surged 400,000 bbl/day last week, pushing total US production to a new record high of 11.6 million bbl/day. The agency also raised its full year 2019 production forecast to 12.1 million bbl/day, up 2.6% from last month’s estimates.

OPEC and friends meet in Abu Dhabi this weekend to review the outlook for next year. Unofficially, Saudi Arabia and Russia have begun discussions on possible production cuts going into 2019. The next official OPEC/NOPEC meeting will take place in Vienna on December 6, 2018.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

NOV 7, 2018

CRUDE STOCKPILES CONTINUE TO BUILD AS LOWER 48 OUTPUT HITS ANOTHER RECORD HIGH

 

According to Baker Hughes, 12 new oil rigs were put into service in the US this week, bringing the total to 886. Canada lost 4 rigs, falling to a total of 117.

OIL MARKETS
USD/BBL
% CHG W/W
52-WK
BRENT
WTI
C5+
CDN LT
WCS
70.18
60.19
42.05
25.30
16.58
60.49
54.30
42.05
25.30
16.58
86.29
76.41
71.40
69.32
56.21

Oil prices officially hit bear market territory this week, with all benchmarks well off the highs of early October. Canadian crude and condensate prices hit new multi-year lows on Friday, despite a slight narrowing of differentials. 

Gasoline prices slid lower again this week, ending Friday down 5%, and marking a 25% drop since early October.

A cold snap is expected to hit northeastern parts of the US, sending Henry Hub natural gas prices up 13% for the week. US stockpiles are at 15 year-lows headed into the winter heating season. AECO gas prices out of Western Canada also rose almost 7%.

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

Equity market shrugged off results of this week's US midterm elections, as Democrats narrowly took control of the House, forcing Republicans, who control the Senate, to negotiate on any new legislation. US markets all posted gains for the week, led higher by Dow Industrial components, which rose almost 3%. The TSX rose 1% on Friday.

Globally, Chinese markets were once again the worst performers, as weak economic data dragged the Hong Kong, Hang Seng and Shanghai exchanges lower by about 3%.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

The TSX energy sector posted a 0.4% loss for the week, its fifth consecutive weekly decline. The S&P 500 energy sector gained almost 1%

TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • Advantage O&G (AAV +17.5%)
  • Enerflex (EFX +16%)
  • Pason Systems (PSI +14.8%)
  • Precision Drilling (PD +9.1%)
  • Inter Pipeline (IPL +8.1%)
  • 12-MO HIGHS
  • Gibson Energy (GEI +8%)
  • Pason Systems (PSI +14.8%)
  • Enerflex (EFX +16%)
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • Paramount Res (POU -14.7%)
  • Trican Well (TCW -14.1%)
  • Kelt Exploration (KEL -12.9%)
  • ARC Resources (ARX -11%)
  • Shawcor (SCL -10%)
  • 12-MO LOWS
  • Keyera (KEY -9.1%)
  • Seven Generations (VII -9%)
  • Shawcor (SCL -10%)
  • Altagas (ALA +3.1%)
  • ARC Resources (ARX -11%)
  • CES Energy (CEU +0.6%)
  • Crescent Point (CPG -4.2%)
  • Freehold Royalties (FRU +1.8%)
  • Kelt Exploration (KEL -12.9%)
  • Nuvista Energy (NVA -9.7%)
  • Paramount Res (POU -14.7%)
  • PrairieSky (PSK -5.2%)
  • Trican Well (TCW -14.1%)
  • TORC O&G (TOG -3%)
  • Vermilion Energy (VET -7.1%)
  • Whitecap Res (WCP -5.3%)
  • 10-YR LOWS
  • ARC Resources (ARX -11%)
  • Crescent Point (CPG -4.2%)
  • DEATH CROSSES
  • Suncor (SU +0.7%)
  • Mullen Group (MTL -1%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    SuncorSU44.41▲0.740.49
     
    55.4723D   W
    Imperial OilIMO40.88▼-2.733.43
     
    44.9151D   W
    Husky EnergyHSE18.26▲1.815.09
     
    22.9933D   W
    MIDSTREAM
    EnbridgeENB43.49▲5.637.36
     
    51.0478D   W
    TransCanadaTRP51.32▲1.148.92
     
    65.1836D   W
    Pembina PipelinePPL45.32▲4.837.60
     
    47.8484D   W
    Inter PipelineIPL23.34▲8.120.68
     
    27.9284↑D   W
    Keyera KEY29.53▼-9.129.35
     
    38.9114D   W
    Gibson EnergyGEI22.54▲8.015.68
     
    23.3298D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ37.16▼-0.935.31
     
    49.0819D   W
    EncanaECA11.67▲4.011.03
     
    18.546D   W
    Cenovus EnergyCVE11.82▲3.19.03
     
    14.8432D   W
    TourmalineTOU19.75▲2.717.78
     
    27.2621D   W
    Seven GenerationsVII12.45▼-9.012.38
     
    20.819D   W
    SERVICES
    ShawcorSCL21.74▼-10.021.12
     
    29.5016D   W
    Pason SystemsPSI22.43▲14.816.05
     
    24.5795D   W
    Mullen Group MTL13.67▼-1.013.43
     
    16.9325D   W
    EnerflexEFX18.39▲16.013.55
     
    18.4697D   W
    Secure EnergySES8.64▲3.16.98
     
    9.8290D   W
    REFINING & MARKETING
    Parkland FuelPKI42.61▲4.124.97
     
    47.4597D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • Cimarex Energy (XEC +11.9%)
  • EQT Corp (EQT +10%)
  • Anadarko Petro (APC +9.4%)
  • Pioneer Natural Res (PXD +8.8%)
  • Occidental Petro (OXY +7.7%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • Valero Energy (VLO -4.6%)
  • Marathon Petro (MPC -3.3%)
  • Concho Res (CXO -3.2%)
  • TechnipFMC (FTI -3.2%)
  • HollyFrontier (HFC -2.7%)
  • 12-MO LOWS
  • Schlumberger (SLB -1.9%)
  • TechnipFMC (FTI -3.2%)
  • Baker Hughes (BHGE -2.1%)
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • Valero Energy (VLO -4.6%)
  • Helmerich & Payne (HP +2.7%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM80.87▼-1.372.16
     
    89.3054D   W
    ChevronCVX119.51▲4.2107.54
     
    133.8848D   W
    MIDSTREAM
    Kinder MorganKMI17.53▲4.014.69
     
    19.8365D   W
    Williams CoWMB25.33▼-1.023.54
     
    33.6728D   W
    ONEOKOKE63.09▲0.949.65
     
    71.9943D   W
    LARGE CAP E&P
    ConocoPhillipsCOP66.73▼-1.648.97
     
    80.2433D   W
    EOG ResourcesEOG105.51▲3.196.54
     
    133.5317D   W
    Occidental PetroOXY73.55▲7.762.47
     
    87.6733D   W
    Anadarko PetroAPC58.21▲9.446.80
     
    76.7017D   W
    Concho ResCXO136.52▼-3.2123.63
     
    163.1125D   W
    SERVICES
    SchlumbergerSLB50.40▼-1.950.00
     
    80.353D   W
    HalliburtonHAL34.98▲0.233.73
     
    57.864D   W
    Ntl-Oilwell VarcoNOV35.26▼-2.431.47
     
    49.089D   W
    TechnipFMCFTI25.65▼-3.225.00
     
    35.007D   W
    Baker HughesBHGE25.51▼-2.125.35
     
    37.762D   W
    REFINERS
    Phillips 66PSX99.74▲0.789.14
     
    123.9719D   W
    Valero EnergyVLO87.58▼-4.680.00
     
    126.985D   W
    Marathon PetroMPC67.18▼-3.360.10
     
    88.4514D   W
    HollyFrontierHFC64.70▼-2.741.33
     
    83.2845D   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
  • None
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • Eni (E +0.3%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A63.00▲1.260.53
     
    73.8628D   W
    TotalTOT57.40▲0.253.37
     
    65.6928D   W
    BPBP41.24▼-0.936.15
     
    47.8330D   W
    EniE35.04▲0.332.13
     
    40.1534D   W
    EquinorEQNR24.80▼-1.519.76
     
    28.9330↓D   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 sixth week of declines despite plans for more OPEC cuts

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