Carnage continues in energy markets as traders hit the sell button
Brent and WTI both declined about 11% this week, the worst showing since January 2016. The two benchmarks are now back to the levels of late-summer 2017.
Gasoline prices dropped almost 9%, while heating oil declined 6.5%. Henry Hub natural gas prices continue to be very volatile, ending Friday 2% lower.
In Canadian oil markets:
The differential for Western Canadian Select (WCS) declined another US$1.60 to US$16/bbl, while the Canadian Light discount shrank by US$0.70 to US$8.
Despite the narrowing of differentials to WTI, both Canadian benchmarks declined about 12% for the week.
Edmonton Condensate (C5+) wins the prize for most improved this week, as the discount to WTI narrowed from US$8 to just US$3.75/bbl.
Today's notable Canadian economic data:
After a 0.1% decline in September, October real GDP expanded 0.3%, with improvements seen across most sectors. Oil and gas extraction rose 3.6% for the month, including a 5.4% improvement in oil sands output and 1.9% gain in conventional oil and gas extraction.
Retail sales rose 0.3% to $51.0 billion in October, mainly on higher sales at auto dealerships and gasoline stations.
After falling 0.7% in September, wholesale sales rose 1.0% to $63.8 billion in October, with machinery and personal goods contributing to most of the gains.
South of the border this week:
Despite opposition from President Trump, ongoing turmoil in equity markets and a downgraded 2019 growth forecast, the US Federal Reserve raised interest rates for the fourth time this year. Two more hikes are expected next year, revised lower from three.
The news sent US bond yields lower. The yield curve remains inverted on the short end, with rates on 3-year bonds slightly below 2-year notes. The "official" yield curve (10 vs 2-year) was unchanged this week at 0.16 basis points.
The US dollar declined 0.5% for the week. Investors seeking safety moved into the yen, which rose 2.4% from the previous Friday.
Despite little movement in the greenback, the Canadian dollar declined another 1.6% this week, bringing December's total decline to 2.2% so far. Falling commodity prices also dragged the Aussie dollar down another 2%.
Equity markets around the world posted heavy losses again this week. US markets were the worst hit, with most averages falling about 7%. European markets faired a bit better, declining about 3.5%. In Japan, the Nikkei slid almost 6%, due in part to a strengthening yen.
Barring a miraculous recovery next week, the Dow Jones Industrial (DJIA) is poised for its worst December showing since the Great Depression of 1931, having lost over 3,000 points (12%) so far this month. December is typically the best month for stock markets, with big gains normally seen during the last five trading days of the year (aka the Santa Claus rally) and into the first week of January.
In Toronto, the TSX declined 4.5% this week. Except for gold stocks, all sectors posted losses.
Energy continues to be one of the worst performing sectors on both sides of the border. On the TSX, energy declined over 7%, posting its 12th consecutive week of losses. The Canadian energy index is now down almost 40% from last summer, ending Friday below the lows of January 2016, and headed back to levels not seen since mid-2003.
The S&P 500 energy sector isn't fairing much better, sliding another 9% this week, and now down almost 30% from last summer. The sector is now back to the lows of January 2016.
|Suncor Energy||SU||36.33||▼-8.3||36.12||55.47||15||D W|
|Imperial Oil||IMO||34.66||▼-0.3||33.43||44.91||29||D W|
|Husky Energy||HSE||13.66||▼-11.1||13.49||22.99||13||D W|
|Pembina Pipeline||PPL||40.27||▼-8.3||37.60||47.84||49||D W|
|Inter Pipeline||IPL||19.30||▼-4.7||19.05||26.37||28||D W|
|Gibson Energy||GEI||17.59||▼-9.2||15.68||23.32||58||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||31.59||▼-7.8||31.42||49.08||21||D W|
|Cenovus Energy||CVE||9.01||▼-12.2||8.95||14.84||18||D W|
|Vermilion Energy||VET||28.41||▼-1.8||26.90||50.46||13||D W|
|Pason Systems||PSI||17.77||▼-4.4||16.05||24.57||34||D W|
|Mullen Group||MTL||11.88||▼-3.3||11.84||16.93||26||D W|
|Secure Energy||SES||6.39||▼-11.5||6.33||9.82||25||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||32.68||▼-9.6||26.34||47.45||56↓||D W|
|Exxon Mobil||XOM||68.12||▼-9.9||67.67||89.30||42||D W|
|Kinder Morgan||KMI||15.57||▼-3.7||14.69||19.83||63||D W|
|Williams Co||WMB||21.78||▼-7.1||21.55||33.67||35||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||87.26||▼-12.8||86.82||133.53||16||D W|
|Occidental Petro||OXY||59.98||▼-7.9||59.60||87.67||23||D W|
|Anadarko Petro||APC||42.95||▼-15.7||42.81||76.70||5||D W|
|Concho Res||CXO||99.85||▼-13.2||98.35||163.11||11||D W|
|Ntl-Oilwell Varco||NOV||25.24||▼-5.4||25.00||49.08||3||D W|
|Baker Hughes||BHGE||20.87||▼-2.7||20.65||37.76||10||D W|
|Marathon Petro||MPC||56.74||▼-5.2||56.49||88.45||30||D W|
|Phillips 66||PSX||82.38||▼-5.1||81.64||123.97||24||D W|
|Valero Energy||VLO||71.64||▼-2.3||70.01||126.98||13||D W|