Oil prices sink into bear market territory as US output surges to new highs
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.
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.
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 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%.
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%.
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%
|Imperial Oil||IMO||40.88||▼-2.7||33.43||44.91||51||D W|
|Husky Energy||HSE||18.26||▲1.8||15.09||22.99||33||D W|
|Pembina Pipeline||PPL||45.32||▲4.8||37.60||47.84||84||D W|
|Inter Pipeline||IPL||23.34||▲8.1||20.68||27.92||84↑||D W|
|Gibson Energy||GEI||22.54||▲8.0||15.68||23.32||98||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||37.16||▼-0.9||35.31||49.08||19||D W|
|Cenovus Energy||CVE||11.82||▲3.1||9.03||14.84||32||D W|
|Seven Generations||VII||12.45||▼-9.0||12.38||20.81||9||D W|
|Pason Systems||PSI||22.43||▲14.8||16.05||24.57||95||D W|
|Mullen Group||MTL||13.67||▼-1.0||13.43||16.93||25||D W|
|Secure Energy||SES||8.64||▲3.1||6.98||9.82||90||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||42.61||▲4.1||24.97||47.45||97||D W|
|Exxon Mobil||XOM||80.87||▼-1.3||72.16||89.30||54||D W|
|Kinder Morgan||KMI||17.53||▲4.0||14.69||19.83||65||D W|
|Williams Co||WMB||25.33||▼-1.0||23.54||33.67||28||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||105.51||▲3.1||96.54||133.53||17||D W|
|Occidental Petro||OXY||73.55||▲7.7||62.47||87.67||33||D W|
|Anadarko Petro||APC||58.21||▲9.4||46.80||76.70||17||D W|
|Concho Res||CXO||136.52||▼-3.2||123.63||163.11||25||D W|
|Ntl-Oilwell Varco||NOV||35.26||▼-2.4||31.47||49.08||9||D W|
|Baker Hughes||BHGE||25.51||▼-2.1||25.35||37.76||2||D W|
|Phillips 66||PSX||99.74||▲0.7||89.14||123.97||19||D W|
|Valero Energy||VLO||87.58||▼-4.6||80.00||126.98||5||D W|
|Marathon Petro||MPC||67.18||▼-3.3||60.10||88.45||14||D W|