TSX energy posts 11th week of declines, despite narrowing differentials

TSX energy posts 11th week of declines, despite narrowing differentials

WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
NEUTRAL
  • The greenback ticked higher by about 0.5%, but remains stuck in its recent trading range.
SUPPLY
BULLISH
  • World oil supply fell 360,000 bbl/day in November to 101.1 million bbl/day, on lower output from the North Sea, Canada and Russia. OPEC production rose about 100,000 bbl/day to 33 million bbl/day during the month.
  • Libya declared force majeure again this week, reducing output by 400,000 bbl/day.
  • Saudi Arabia promises to reduce output by almost 1 million bbl/day in January, down from a record 11.1 million bbl/day produced in November.
  • The EIA raised its 2019 US crude oil production forecast to 12.1 million bbl/day, up 1.18 million from this year's average.
DEMAND
BEARISH
  • Weak Chinese economic data continues to weigh on commodity markets.
  • OPEC reduced its 2019 crude demand forecast by 100,000 bbl/day to 31.44 million bbl/day, due to an expected slowdown in the Chinese economy.
  • Global oil demand growth was cut by 160,000 bbl/day next year to 1.29 million bbl/day.
SENTIMENT
BEARISH
  • The number of shorts on Brent managed money contracts continue to rise, gaining another 19 million barrels last week.
  • Net longs on WTI also declined, as long positions fell by 16 million contracts and 23 million new short positions were added.
  • Despite recent announcements of global production cuts, both Brent and WTI continue to trend sideways, but both benchmarks have managed to hold above their respective support levels.
CURRENCIES & BONDS

Today's notable US economic data:

  • US initial jobless claims declined by 27,000, the largest drop since April 2015. Claims are now back to levels not seen since the end of 1969. 

  • US inflation was reported unchanged in November, due in part to a 4.2% decline in gas prices.

US bond yields ended Friday flat to slightly higher from last week's close. Short duration bonds remains slightly inverted, with 3-year notes trading just below 2-year rates. The US dollar continues to trend sideways, gaining 0.5% for the week, reversing all losses from the previous week.

Across the pond this week:

  • British PM Theresa May narrowly survived a non-confidence vote, but says she will not lead her party into the next election. A Brexit vote scheduled for this week was cancelled and has been rescheduled for January 21, 2019. The pound sterling posted its sixth week of declines, falling another 1% on Friday, returning to the levels of early 2017.

  • The European Central Bank (ECB) officially declared an end to its €30 billion monthly asset purchase program, but promised to keep its foot on the gas pedal for as long as needed. The ECB has purchased more than €2.6 trillion in bonds since the program began in the spring of 2015. President Mario Draghi kept interest rates unchanged at zero this week.

SUPPLY & DEMAND UPDATES

This week's supply updates:

  • The US Energy Information Administration (EIA) raised its 2019 crude oil production forecast to an average of 12.06 million bbl/day in 2019, up 1.18 million bbl/day from this year. The 2018 average was reduced to 10.88 million bbl/day, down 20,000 bbl/day from its previous forecast.

  • OPEC produced about 33 million bbl/day in November, up 100,000 bbl/day from the previous month as higher output from Saudi Arabia and the UAE offset a sharp decline out of Iran. Last week, OPEC agreed to reduce output by 800,000 bbl/day in January, as measured from last October's level.

  • Saudi Arabia says it plans to slash output to about 10.2 million bbl/day in January, down 900,000 bbl/day from November's record high of 11.1 million bbl/day. The kingdom reported 10.7 million bbl/day of output in December.

  • World oil supply declined 360,000 bbl/day in November, falling to 101.1 million bbl/day on lower output from the North Sea, Canada and Russia.

  • Russian Energy Minister Alex Novak said his country will reduce output by at least 50,000 to 60,000 bbl/day in January.

OPEC reduced its 2019 crude demand forecast by 100,000 bbl/day to 31.44 million bbl/day. The International Energy Agency (IEA) now says the global crude balance could move into a deficit position next year, assuming OPEC, Russia and Alberta stick to their promised production cuts.

OECD commercial stockpiles rose by 5.7 million barrels in October, the fourth consecutive monthly decline. US crude stockpiles also declined slightly last week.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

DEC 12, 2018

Refinery utilization rates in the Midwest jump to ALMOST 98%

 

According to Baker Hughes, four oil rigs were taken out of service in the US this week, while Canada lost 7 rigs. Five rigs were also pulled out of natural gas service in Canada.

OIL MARKETS
USD/BBL
% CHG W/W
52-WK
BRENT
WTI
C5+
CDN LT
WCS
60.28
51.20
43.17
42.53
33.68
58.71
50.29
37.04
20.83
12.59
86.29
76.41
71.40
69.32
56.21

Brent and WTI continue to trend sideways, each falling over 2% for the week.

The discount on Western Canadian Select (WCS) narrowed by US$2.40/bbl, falling to about US$17.50 on Friday, a differential last seen in the middle of June. The Canadian Light discount narrowed by over US$1 to less than US$9, while the discount on Edmonton Condensate (C5+) fell to US$8/bbl, both returning to the lows of mid-August.

WCS was this week's big winner in crude markets, gaining over 3%.

After rising through much of November, Henry Hub gas prices took a big haircut this week, falling almost 15% w/w, ending Friday at US$3.83/MMBtu. In contrast, AECO gas prices gained almost 9%, ending the week at US$1.26/MMBtu.

Gasoline also declined 3.4% for the week, while heating oil fell over 2%.

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 relations, continued weakness in Chinese economic data weighed on US markets again this week. Dow Transports were the worst hit, falling over 4%, while small cap names fell about 3%. The S&P 500 declined 1.3% for the week, with energy and financials posting the biggest declines.

Lower commodity prices also dragged on markets in Toronto, Australia and Brazil. The TSX declined over 1%, dragged lower by another big sell-off in the energy sector.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

The TSX energy sector posted its eleventh consecutive week of declines, logging another 4.5% loss on Friday. The sector is now down over 30% from the levels of last summer. A number of Canadian energy components hit fresh multi-year lows during the week, including Suncor, Husky, Inter Pipeline, Encana, Tourmaline and Vermilion Energy.

The S&P 500 energy sector also declined 3.3% for the week, its seventh decline in the past 10 weeks. The sell-off continues among energy services providers, with most sitting at multi-year lows. Schlumberger is the notable stand-out, returning to the lows of early 2009 this week. Independent refiners also continue their sharp declines from the highs of last summer, with Marathon Petroleum, Phillips 66 and Valero Energy touching 1-year lows. The SPX energy basket is down over 20% from last summer.

TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • Nuvista Energy (NVA +11.3%)
  • CES Energy (CEU +9.2%)
  • Kelt Exploration (KEL +7.1%)
  • Tamarack Valley (TVE +3.8%)
  • Altagas (ALA +2.8%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • Peyto Exploration (PEY -15.8%)
  • Precision Drilling (PD -10.4%)
  • Birchcliff Energy (BIR -9.4%)
  • Encana (ECA -9%)
  • Shawcor (SCL -8.5%)
  • 12-MO LOWS
  • Suncor Energy (SU -5.4%)
  • Husky Energy (HSE -4.7%)
  • Inter Pipeline (IPL -3.2%)
  • Keyera (KEY +1.4%)
  • Encana (ECA -9%)
  • Tourmaline (TOU -5.5%)
  • Vermilion Energy (VET -7.4%)
  • Shawcor (SCL -8.5%)
  • Mullen Group (MTL -0.5%)
  • PrairieSky (PSK -1.5%)
  • Altagas (ALA +2.8%)
  • Seven Generations (VII +2.5%)
  • ARC Resources (ARX -5.8%)
  • Parex Resources (PXT -6.9%)
  • Whitecap Res (WCP -4.5%)
  • Peyto Exploration (PEY -15.8%)
  • Baytex Energy (BTE -4.4%)
  • TORC O&G (TOG +0.2%)
  • Freehold Royalties (FRU -5.4%)
  • Paramount Res (POU -3.6%)
  • Precision Drilling (PD -10.4%)
  • Kelt Exploration (KEL +7.1%)
  • Ensign Energy Svcs (ESI -5.3%)
  • Tamarack Valley (TVE +3.8%)
  • Advantage O&G (AAV -6.3%)
  • 10-YR LOWS
  • Tourmaline (TOU -5.5%)
  • PrairieSky (PSK -1.5%)
  • Altagas (ALA +2.8%)
  • Seven Generations (VII +2.5%)
  • ARC Resources (ARX -5.8%)
  • Peyto Exploration (PEY -15.8%)
  • Precision Drilling (PD -10.4%)
  • Ensign Energy Svcs (ESI -5.3%)
  • Advantage O&G (AAV -6.3%)
  • DEATH CROSSES
  • None
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Suncor EnergySU39.62▼-5.439.28
     
    55.4720D   W
    Imperial OilIMO34.78▼-7.233.43
     
    44.9120D   W
    Husky EnergyHSE15.37▼-4.715.24
     
    22.9919D   W
    MIDSTREAM
    EnbridgeENB42.77▲0.837.36
     
    51.0483D   W
    TransCanadaTRP53.55▲0.048.92
     
    62.6273D   W
    Pembina PipelinePPL43.91▲1.537.60
     
    47.8475D   W
    Inter PipelineIPL20.26▼-3.220.22
     
    27.7429D   W
    Keyera KEY28.21▲1.427.27
     
    38.9125D   W
    Gibson EnergyGEI19.37▼-1.115.68
     
    23.3287D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ34.28▼-4.332.08
     
    49.0828D   W
    Cenovus EnergyCVE10.26▲1.09.03
     
    14.8430D   W
    EncanaECA7.78▼-9.07.74
     
    18.542D   W
    TourmalineTOU16.81▼-5.516.71
     
    26.1914D   W
    Vermilion EnergyVET28.92▼-7.428.83
     
    50.4610D   W
    SERVICES
    Pason SystemsPSI18.58▼-3.216.05
     
    24.5740D   W
    EnerflexEFX15.40▼-3.613.55
     
    18.7274D   W
    ShawcorSCL16.92▼-8.516.66
     
    29.507D   W
    Mullen Group MTL12.29▼-0.511.93
     
    16.9327↑D   W
    Secure EnergySES7.22▲1.76.72
     
    9.8251D   W
    REFINING & MARKETING
    Parkland FuelPKI36.17▼-1.926.34
     
    47.4590D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • EQT Corp (EQT +5.4%)
  • ONEOK (OKE +0.3%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • Newfield Expl (NFX -10.6%)
  • Ntl-Oilwell Varco (NOV -10.5%)
  • Diamondback (FANG -9.7%)
  • Schlumberger (SLB -9.2%)
  • Cimarex Energy (XEC -8.9%)
  • 12-MO LOWS
  • Williams Co (WMB -4.2%)
  • Concho Res (CXO -6%)
  • Schlumberger (SLB -9.2%)
  • Halliburton (HAL -2.3%)
  • Ntl-Oilwell Varco (NOV -10.5%)
  • Baker Hughes (BHGE -1%)
  • TechnipFMC (FTI -4.1%)
  • Marathon Petro (MPC -2.7%)
  • Phillips 66 (PSX -3.9%)
  • Valero Energy (VLO -3.5%)
  • Apache (APA -8.4%)
  • Devon Energy (DVN -5%)
  • Noble Energy (NBL -8.4%)
  • Diamondback (FANG -9.7%)
  • Cimarex Energy (XEC -8.9%)
  • 10-YR LOWS
  • Baker Hughes (BHGE -1%)
  • Apache (APA -8.4%)
  • DEATH CROSSES
  • Exxon Mobil (XOM -2.7%)
  • Hess Corp (HES -3.3%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM75.58▼-2.772.16
     
    89.3057D   W
    ChevronCVX113.83▼-1.4107.54
     
    133.8859D   W
    MIDSTREAM
    Kinder MorganKMI16.17▼-1.114.69
     
    19.8357D   W
    Williams CoWMB23.45▼-4.223.35
     
    33.6738D   W
    ONEOKOKE60.19▲0.351.28
     
    71.9955D   W
    LARGE CAP E&P
    ConocoPhillipsCOP64.55▼-2.150.18
     
    80.2464D   W
    EOG ResourcesEOG100.08▼-3.496.54
     
    133.5339D   W
    Occidental PetroOXY65.10▼-2.262.47
     
    87.6729D   W
    Anadarko PetroAPC50.95▼-2.147.37
     
    76.7018D   W
    Concho ResCXO115.02▼-6.0114.40
     
    163.1125D   W
    SERVICES
    SchlumbergerSLB39.10▼-9.238.82
     
    80.351D   W
    HalliburtonHAL29.00▼-2.328.17
     
    57.864D   W
    Ntl-Oilwell VarcoNOV26.68▼-10.526.53
     
    49.082D   W
    Baker HughesBHGE21.45▼-1.020.81
     
    37.766D   W
    TechnipFMCFTI20.14▼-4.120.06
     
    35.003D   W
    REFINERS
    Marathon PetroMPC59.87▼-2.759.55
     
    88.4522D   W
    Phillips 66PSX86.83▼-3.986.47
     
    123.9718D   W
    Valero EnergyVLO73.30▼-3.571.48
     
    126.985D   W
    HollyFrontierHFC54.08▼-4.942.42
     
    83.2817D   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
  • PetroChina (PTR -0.5%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A58.23▼-1.857.65
     
    73.869D   W
    TotalTOT54.36▲0.153.37
     
    65.6949D   W
    BPBP38.66▼-2.236.15
     
    47.8341D   W
    EniE31.68▼-0.231.18
     
    40.1540D   W
    EquinorEQNR22.10▼-4.720.11
     
    28.9331D   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.
  • Carnage continues in energy markets as traders hit the sell button

    Carnage continues in energy markets as traders hit the sell button

    Energy stocks fail to respond to higher oil prices, as global headwinds persist

    Energy stocks fail to respond to higher oil prices, as global headwinds persist

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