TSX energy sector posts first weekly gain since September

TSX energy sector posts first weekly gain since September

This week's Energy Market Summary for the week ending Friday December 28, 2018:
  • Oil prices suffer meltdown on Christmas Eve ...
    ... but recover by the end of the week
  • US natural gas prices wipe out two months of gains
  • Loonie sinks to 18-month low
  • Rising equity markets boost energy stocks.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
BEARISH
  • Ongoing trade disputes between China and the US continues to weigh on energy commodities.
USD INDEX
NEUTRAL
  • The US dollar declined 0.5% for the week, ending Friday at the bottom of its recent trading range.
SUPPLY
BULLISH
  • Russia's energy minister pledged to cut the country's output by about 140,000 bbl/day in the first half of 2019.
  • According to Baker Hughes, two more oil rigs were put into service in the US this week, bringing the total to 885. Canada lost another 43 rigs, leaving only 15 rigs in oil service.
DEMAND
BEARISH
  • Weak economic data out of China renewed concerns of softening demand from emerging markets.
SENTIMENT
NEUTRAL
  • After staging a nice rally on Wednesday, oil prices fizzled by the end of the week, but remain above the lows of Monday.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$52.20▼3.050.47
 
86.29
WTI$45.33▼0.642.53
 
76.41
CDN LT$37.38▼0.720.83
 
69.32
C5+$41.58▼0.637.04
 
71.40
WCS$29.68▲0.112.59
 
56.21

Energy commodities slumped again this week, with Brent and WTI sliding to multi-year lows on Christmas Eve. Prices recovered slightly on Boxing Day but gave back most of the gains by Friday.

Brent was this week's biggest loser in crude markets, falling 3%, while WTI dipped a more modest 0.6%. The spread between Brent and WTI narrowed to less than US$7/bbl. Note that the Brent February contract expired at the end of the trading day on Friday.

Citibank says crude prices can't stay below US$45 for long, unless there's a "sharp slowdown in global oil demand" and downward revision in GDP growth. The bank has a 2019 forecast of US$49 for WTI and about US$60 for Brent.

After surging to multi-year highs in mid-November, US natural gas prices are slowly returning to pre-breakout levels, tumbling another 12% for the week. Heating oil declined almost 4% while gasoline prices dipped 0.4%.

In Canadian oil markets this week:

  • Despite no change in differentials, Canadian Light and Edmonton Condensate (C5+) d eclined less than 1%, falling in sympathy with WTI.
  • Western Canadian Select (WCS) was roughly unchanged, as the discount to WTI narrowed slightly, ending Friday at US$15.65/bbl.
 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

DEC 28, 2018

STOCKPILES FALL IN THE GULF COAST AS EXPORTS SURGE

 
CRUDE OIL FUTURES CURVES
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ MONTH 5 VS NEAR MONTH
MANAGED MONEY: FUTURES & OPTIONS
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ LONG   █ SHORT █ NET LONG (1000 BBL CONTRACTS)
CURRENCIES & BONDS

In US treasury markets, yields on shorter duration bonds declined for the week, steeping the yield curve to 0.20 basis points. Yields on 10-year notes dropped  to 2.72%, returning to the lows of last spring. 

Canadian 10-year bond rates fell to 1.95%, the lowest since mid-2017. The loonie posted its sixth consecutive week of declines, ending Friday back at the lows of May 2017.

Most global bond yields also declined this week, including Japan, where rates on 10-year notes returned to 0% for the first time since September 2017. 

Most global currencies gained ground against the greenback, which declined another 0.5% on Friday. Safe-haven buyers headed to the Swiss franc this week, boosting the franc 1.1%.

EQUITY MARKETS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

After posting heavy losses through much of December, US equity markets staged a nice recovery this week on better-than-expected holiday sales. The Dow Jones Industrial surged over 1,000 points on Wednesday, ending the week almost 3% higher. The Nasdaq was the best performing index, rising 4% from last Friday's close. The Dow Utilities index was a notable exception, sinking 1.5% for the week.

In Toronto, the TSX rose over 2%, the first weekly increase this month.

Chinese markets all posted losses of about 1% for the week after the government reported a decline in industrial profits, for the first time in 3 years. Markets in Japan and the EU also ticked lower for the week.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

After sinking to multi-year lows on Monday, energy stocks rallied later in the week, bouyed by rising equity markets. The SPX energy sector rose 1.7% while the TSX energy basket gained 3.7%. Beaten-down small cap producers in Canada posted the best results. Midstream was the worst performing subsector this week on both sides of the border.

Tudor Pickering says the recent volatility in energy stocks "is reaching the point of ridiculousness," noting that now is a good time to wade back into energy stocks. The company's 2019 energy picks include Kinder Morgan, Anadarko Petroleum, Concho Resources, Diamondback Energy, Cimarex Energy, HollyFrontier and Marathon Petroleum. In Canada, Tudor remains bullish on Enerplus, NuVista Energy and Pembina Pipeline.

Goldman Sachs says they may have been overly optimistic on Suncor Energy in 2018, but is keeping the stock on its Buy list. Problems at Syncrude and the province's curtailment program has weighed on the Canadian major, leaving it "more vulnerable to negative consensus revisions." Goldman is also keeping Cenovus Energy on its Sell list, but says the company's outlook has improved.

Despite looming changes to shipping fuel sulphur standards, Goldman also remains positive on refiners in 2019, citing "relatively resilient" diesel margins, low inventories and cheap Canadian feedstock. The firm prefers Phillips 66 and Marathon Petroleum over Valero Energy due to upside potential from their non-refining operations. In the US integrated space, Goldman picks Chevon Corp over ExxonMobil, due to Exxon's heavy exposure to refining and chemicals.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU37.84▲4.235.53
 
55.47D   W
Imperial OilIMO34.94▲0.833.43
 
44.91D   W
Husky EnergyHSE14.00▲2.513.33
 
22.99D   W
MIDSTREAM
EnbridgeENB42.16▲0.637.36
 
51.04D   W
TransCanadaTRP48.89▼-2.247.90
 
62.24D   W
Pembina PipelinePPL40.33▲0.137.60
 
47.84D   W
Inter PipelineIPL19.21▼-0.518.60
 
26.37D   W
Keyera KEY25.31▼-0.624.05
 
38.91D   W
Gibson EnergyGEI18.22▲3.615.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ32.81▲3.930.11
 
49.08D   W
Cenovus EnergyCVE9.38▲4.18.74
 
14.84D   W
EncanaECA7.94▲8.96.90
 
18.54D   W
TourmalineTOU16.69▲1.715.84
 
26.19D   W
Vermilion EnergyVET27.99▼-1.526.67
 
50.46D   W
SERVICES
Pason SystemsPSI17.80▲0.216.05
 
24.57D   W
EnerflexEFX15.63▲1.613.55
 
18.72D   W
ShawcorSCL16.35▲1.315.11
 
29.50D   W
Mullen Group MTL11.91▲0.311.39
 
16.93D   W
Secure EnergySES6.69▲4.76.25
 
9.82D   W
REFINING & MARKETING
Parkland FuelPKI34.18▲4.626.34
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM68.17▲0.164.65
 
89.30D   W
ChevronCVX108.65▲4.3100.22
 
133.88D   W
MIDSTREAM
Kinder MorganKMI15.29▼-1.814.62
 
19.83D   W
Williams CoWMB21.48▼-1.420.36
 
33.67D   W
ONEOKOKE52.98▼-1.750.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP61.67▲3.150.18
 
80.24D   W
EOG ResourcesEOG87.52▲0.382.04
 
133.53D   W
Occidental PetroOXY60.47▲0.856.83
 
87.67D   W
Anadarko PetroAPC43.20▲0.640.40
 
76.70D   W
Concho ResCXO101.81▲2.093.31
 
163.11D   W
SERVICES
SchlumbergerSLB36.60▲2.534.99
 
80.35D   W
HalliburtonHAL26.46▲2.424.70
 
57.86D   W
Ntl-Oilwell VarcoNOV25.77▲2.124.27
 
49.08D   W
Baker HughesBHGE21.44▲2.720.09
 
37.76D   W
TechnipFMCFTI19.67▲2.618.20
 
35.00D   W
REFINERS
Marathon PetroMPC58.24▲2.654.29
 
88.45D   W
Phillips 66PSX84.96▲3.178.44
 
123.97D   W
Valero EnergyVLO73.48▲2.668.81
 
126.98D   W
HollyFrontierHFC51.09▲3.542.42
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A58.11▲2.555.04
 
73.86D   W
TotalTOT52.39▲1.249.70
 
65.69D   W
BPBP38.13▲1.236.15
 
47.83D   W
EniE31.40▲2.129.75
 
40.15D   W
EquinorEQNR21.12▲1.819.95
 
28.93D   W
NEXT WEEK'S EVENTS

Tuesday:

  • Canadian and US markets closed for New Year's Day

Thursday:

  • API Weekly Statistical Bulletin (holiday schedule)

Friday:

  • StatsCan Industrial Product and Raw Material Price Indexes (Nov 2018)
  • StatsCan Labour Force Survey (Dec 2018)
  • EIA Weekly Petroleum Status Report (holiday schedule)
  • EIA Weekly Natural Gas Storage Report (holiday schedule)
  • Baker Hughes Weekly Rig Counts.
LATEST ENERGY NEWS
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
  • Energy stocks lead markets higher on the first trading week of 2019

    Energy stocks lead markets higher on the first trading week of 2019

    Carnage continues in energy markets as traders hit the sell button

    Carnage continues in energy markets as traders hit the sell button