Energy sector posts first weekly decline since late December
This week in oil markets:
- Brent posted its first weekly decline for 2019, falling almost 2%.
- WTI was almost unchanged, likely due to softness in the US dollar and the potential loss of Venezuelan barrels.
- Western Canadian Select (WCS) rose almost 4% for the week as the discount to WTI narrowed to about US$9.50 a barrel.
- Wholesale gasoline prices sank over 4%, while heating oil declined 1%.
This week's oil price forecasts:
- UK-bank Barclays said record US crude production will offset any temporary disruptions that may come from Venezuelan crude sanctions. Barclays cut its 2019 Brent forecast from US$72 to US$70 a barrel.
- Goldman Sachs says there's a "significant upside" ahead for crude oil suggesting that Brent is likely to overshoot its US$67.50 price target this year. The bank cites strong demand from China, falling supply out of OPEC and excessive pessimism over the global economy. The firm is especially bullish on midstream stocks, selecting Kinder Morgan as its top pick.
This week in natural gas markets:
- According to the EIA, natural gas prices are forecasted to remain "historically low," leading to higher demand for gas-fired power plants. Although LNG exports will absorb some of the excess supply post-2022, LNG prices are expected to fall dramatically by 2030 due to excess global capacity. US demand for natural gas out of Western Canada is expected to continue to decline.
- AECO gas prices rose 10% this week, ending Friday at $1.90/GJ. In contrast, Henry Hub gave back 9%, ending the week at US$3.18/MMBtu.
This week's Canadian economic data:
- Wholesale sales declined 1.0% in November to $63.0 billion, reversing gains from the previous month. Sales were down in most subsectors, with machinery, equipment, and building materials contributing to most of the declines.
- Retail sales also declined 0.9% to $50.4 billion in November, blamed mostly on fewer auto sales and lower sales at gasoline stations, which dipped 5% due to lower gas prices.
- The number of Canadians collecting Employment Insurance in November was roughly unchanged from the previous month. Ontario and New Brunswick saw an increase, while Quebec and the Prairie provinces posted declines. The total number of new claims rose by 3.9% to 237,000.
This week's US economic news:
- U.S. initial claims for state unemployment benefits totalled 199,000 last week, down 13,000, returning to the lows of late 1969.
- After a 35-day shutdown, US congress announced a tentative deal to reopen the government for three weeks, while negotiations on immigration and the border wall continue.
- Trade negotiations continue between the US and China. The two countries have set a March 1 deadline to resolve their dispute, although US Commerce Secretary Wilbur Ross says the two countries remain "miles and miles" apart.
This week's economic forecasts:
- China’s economic growth slowed to just 6.6% last year, the weakest in almost 30 years. Economists are expecting the government to unleash serious monetary spending to boost domestic consumption.
- ECB President Mario Draghi kept interest rates unchanged in the Eurozone this week, but left the door open for a rate hike in the second half of this year. Draghi's list of concerns include Brexit talks, slowing Chinese demand and ongoing anti-government protests in France.
- The IMF downgraded its forecast for global economic growth to 3.5% this year, rising to 3.6% in 2020. The agency warns of weakness in Europe, China and the ongoing fallout of US trade tensions.
This week in bonds and currencies:
- Concerns over global economic growth send bond yields mostly lower this week, including the US, Canada, the UK and Germany.
- The British pound continues to defy gravity, surging 2.5% on Friday. Another Brexit vote is scheduled for next week. The pound sterling has risen about 5% from the lows of early December.
- Despite pessimism in the Eurozone and weak data out of France and Germany, the Euro was unchanged this week.
US equity markets had a relatively uneventful week, with most indices ending Friday unchanged. European markets gained about 1% while Chinese markets rose closer to 2%. London's FTSE was this week's biggest loser, retreating over 2% due to a strengthening pound.
In Toronto, the TSX eked out a 0.4% gain, dragged lower by a 3.1% decline in the energy sector. The broader S&P 500 posted a 0.2% loss, with energy giving back 1.5%.
Losses were seen across all energy subsectors this week, with Canadian producers and energy services stocks posting the biggest declines. Losses in US energy markets were also broadly based, with producers and refiners leading to the downside.
This was the first weekly loss for the energy sectors on both sides of the border.
|Suncor Energy||SU||42.35||▼-0.3||35.53||55.47||D W|
|Imperial Oil||IMO||36.99||▼-0.6||33.43||44.91||D W|
|Husky Energy||HSE||15.99||▼-4.3||13.33||22.99||D W|
|Pembina Pipeline||PPL||44.89||▼-1.0||37.60||47.84||D W|
|Inter Pipeline||IPL||21.01||▼-2.6||18.60||25.70||D W|
|Gibson Energy||GEI||19.36||▼-3.2||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||34.91||▼-4.4||30.11||49.08||D W|
|Cenovus Energy||CVE||10.28||▼-4.7||8.74||14.84||D W|
|Vermilion Energy||VET||30.92||▼-5.4||26.67||49.82||D W|
|Pason Systems||PSI||20.37||▼-3.8||16.05||24.57||D W|
|Mullen Group||MTL||12.10||▼-5.6||11.39||16.93||D W|
|Secure Energy||SES||7.95||▼-1.4||6.25||9.82||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||36.35||▼-1.9||27.36||47.45||D W|
|Exxon Mobil||XOM||71.72||▼-1.7||64.65||89.30||D W|
|Kinder Morgan||KMI||17.74||▼-1.5||14.62||19.32||D W|
|Williams Co||WMB||26.67||▲1.0||20.36||33.07||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||99.10||▼-1.9||82.04||133.53||D W|
|Occidental Petro||OXY||66.53||▼-0.7||56.83||87.67||D W|
|Anadarko Petro||APC||46.89||▼-3.7||40.40||76.70||D W|
|Pioneer Natural Res||PXD||140.23||▼-3.2||119.08||213.40||D W|
|Baker Hughes||BHGE||23.49||▼-2.6||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||30.44||▼0.0||24.27||49.08||D W|
|Marathon Petro||MPC||64.08||▼-3.0||54.29||88.45||D W|
|Phillips 66||PSX||93.02||▼-2.4||78.44||123.97||D W|
|Valero Energy||VLO||82.19||▼-0.5||68.81||126.98||D W|
- API Weekly Statistical Bulletin
- February contract expiry for Henry Hub
- StatsCan Payroll, Earning and Hours (Nov 2018 data)
- US/China trade talks resume in Washington, DC
- US interest rate decision and FOMC press conference
- EIA Weekly Petroleum Status Report
- StatsCan Canadian GDP by industry (Nov 2018 data)
- StatsCan Industrial product and raw materials price indexes (Dec 2018 data)
- EIA Weekly Natural Gas Storage Report
- March contract expiry for Brent
- February contract expiry for gasoline
- Q4/2018 earnings: Valero Energy, Royal Dutch Shell, ConocoPhillips, CNX Resources
- EIA Petroleum Marketing Monthly (Nov 2018)
- Baker Hughes Weekly Rig Counts
- Q4/2018 earnings: Imperial Oil, ExxonMobil, Chevron