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

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

This week's Energy Market Summary for the week ending Friday January 4, 2019:
  • Oil prices post first gain in 4-weeks
  • Canadian light and heavy discounts continue to narrow
  • Production cuts from OPEC, Russia and Alberta take effect
  • US rig counts stagnate, despite record output
  • After an ugly 2018, energy stocks lead to the upside ...
    ... with all TSX/SPX energy components ending Friday in the green.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
NEUTRAL
  • The US dollar inched down another 0.2%, ending Friday at 95.75.
SUPPLY
BULLISH
  • OPEC and Russia have agreed to take 1.2 million bbl/day of crude off world oil markets in January. Alberta's 325,000 bbl/day curtailment program also took effect this week.
  • OPEC produced about 32.6 million bbl/day in December, down 500,000 bbl/day from the previous month.
  • Supply out of Iraq jumped about 500,000 bbl/day, offsetting a 420,000 bbl/day decline out of Saudi Arabia. Production out of Iran and Libya also dipped lower in December.
  • According to finalized monthly data from the Energy Information Administration, the US produced a record 11.54 million bbl/day in October, up almost 80,000 bbl/day from September. Preliminary weekly data estimates last week's total output at 11.7 million bbl/day.
  • The US lost 8 oil rigs this week, bringing the total to 877. Canada gained 5 rigs, bringing the total to 20.
DEMAND
NEUTRAL
  • Weak manufacturing data out of China and the Eurozone this week renewed worries of a global economic slowdown, which could potentially dampen demand for crude.
SENTIMENT
NEUTRAL
  • Both Brent and WTI posted their first weekly gain in 4-weeks, rebounding from deeply oversold conditions.
  • Oil prices remain in contango, suggesting that markets remain oversupplied, at least in the short term.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$57.06▲9.350.47
 
86.29
WTI$47.96▲5.842.53
 
76.41
CDN LT$44.04▲17.820.83
 
69.32
C5+$45.59▲9.637.04
 
71.40
WCS$35.63▲20.112.59
 
56.21

Canadian crude prices continue to recover from last year's dismal performance, with Western Canadian Select (WCS) rising another 20% and Canadian Light posting a gain of 18%. The differentials on Canada's light and heavy benchmarks narrowed again this week, ending Friday at US$3.92 and $12.33/bbl, respectively.

Brent and West Texas Intermediate (WTI) also posted nice gains for the week, rising about 9% and 6%, respectively.

The US Energy Information Administration (EIA) reported a huge build in gasoline and distillate stockpiles. Despite the bearish news, gasoline prices posted a 3.6% increase. Heating oil also had a good week, rising over 6.5% from last Friday's close.

Above average winter temperatures is dampening demand for natural gas, sending Henry Hub prices tumbling almost 8% for the week. In contrast, AECO gas prices rose almost 2% from last Friday's close.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

JAN 4, 2019

US refineries run flat-out, sending product stockpiles higher

 
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)
EDITOR'S NOTE: WTI MANAGED MONEY CONTRACT DATA FROM THE CFTC HAS NOT BEEN UPDATED SINCE DEC 18 DUE TO THE SHUTDOWN OF THE US FEDERAL GOVERNMENT.
CURRENCIES & BONDS

This week's notable Canadian economic data:

  • The Industrial Product Price Index (IPPI) declined 0.8% in November, mainly due to lower energy prices. Gasoline prices fell almost 11%, the sharpest drop since January 2015. Excluding energy, IPPI rose 0.2%.
  • The Raw Materials Price Index (RMPI) also declined 11.7%, mostly due to a 25% drop in crude oil prices. Excluding energy products, RMPI fell 0.5% in November, bringing the annualized drop to 9.9%.
  • Statistics Canada reported no change in the country's jobs data, leaving the unemployment rate unchanged at 5.6%. Alberta reported the loss of 36,200 full-time positions during the month, offsetting 19,300 part-time gains. The province's unemployment rate nudged up from 6.3% to 6.4%, well above the national average.

South of the border this week:

  • Non-farm payrolls increased by 312,000 in December, the largest increase since February.
  • Annual wage inflation is tracking 3.2%, while the unemployment rate rose to 3.9% due to an influx of new people looking for work.
  • US Fed Chair Jerome Powell took a less aggressive stance on future interest rate hikes, calling inflationary pressures "muted." The news sent interest rates lower, further inverting the yield curve for short duration bonds.
  • The US dollar dipped another 0.2% for the week, but remains stuck on the low end of its recent trading range.

In currency markets this week:

  • Investors seeking safety once again fled to the Japanese yen. The yen rose another 1.7% this week, and is now up 5% from the lows of mid-December. The rate on 10-year Japanese bonds returned to negative territory for the first time since September 2017, falling to -0.03%.
  • A major improvement in Canadian oil prices also sent the loonie soaring 2%, ending Friday at 74.77 cents.
EQUITY MARKETS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

After a rocky start, most global markets managed decent gains for the first trading week of the new year. The Nikkei was the only notable exception, falling 2.3% due to currency headwinds.

The Russell 2000 Small Cap Index was the best performer in US markets, rising 3.2%. The Dow Jones Industrial Average (DJIA) rose 1.6%, while the S&P 500 gained 1.9%. In Toronto, the TSX rose 1.4%.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

After an ugly 2018, energy was the best performing sector this week, rising 5% on the S&P 500 and almost 6% on the TSX. Gains were seen across all energy subsectors, with US midstream stocks and Canadian producers leading to the upside.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU39.28▲3.835.53
 
55.47D   W
Imperial OilIMO35.03▲0.333.43
 
44.91D   W
Husky EnergyHSE14.80▲5.713.33
 
22.99D   W
MIDSTREAM
EnbridgeENB43.72▲3.737.36
 
51.04D   W
TransCanadaTRP51.54▲5.447.90
 
62.18D   W
Pembina PipelinePPL42.21▲4.737.60
 
47.84D   W
Inter PipelineIPL20.17▲5.018.60
 
26.37D   W
Keyera KEY27.04▲6.824.05
 
38.91D   W
Gibson EnergyGEI19.70▲8.115.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ34.64▲5.630.11
 
49.08D   W
Cenovus EnergyCVE10.30▲9.88.74
 
14.84D   W
EncanaECA8.33▲4.96.90
 
18.54D   W
TourmalineTOU17.69▲6.015.84
 
26.19D   W
Vermilion EnergyVET30.70▲9.726.67
 
50.46D   W
SERVICES
Pason SystemsPSI18.45▲3.716.05
 
24.57D   W
EnerflexEFX16.02▲2.513.55
 
18.72D   W
Mullen Group MTL12.36▲3.811.39
 
16.93D   W
ShawcorSCL18.05▲10.415.11
 
29.50D   W
Secure EnergySES7.05▲5.46.25
 
9.82D   W
REFINING & MARKETING
Parkland FuelPKI34.67▲1.426.70
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM71.15▲4.464.65
 
89.30D   W
ChevronCVX110.82▲2.0100.22
 
133.88D   W
MIDSTREAM
Kinder MorganKMI16.24▲6.214.62
 
19.83D   W
Williams CoWMB23.55▲9.620.36
 
33.67D   W
ONEOKOKE56.65▲6.950.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP63.75▲3.450.18
 
80.24D   W
EOG ResourcesEOG93.92▲7.382.04
 
133.53D   W
Occidental PetroOXY63.21▲4.556.83
 
87.67D   W
Anadarko PetroAPC46.26▲7.140.40
 
76.70D   W
Pioneer Natural ResPXD139.29▲6.7119.08
 
213.40D   W
SERVICES
SchlumbergerSLB39.09▲6.834.99
 
80.35D   W
HalliburtonHAL28.42▲7.424.70
 
57.86D   W
Baker HughesBHGE21.96▲2.420.09
 
37.76D   W
Ntl-Oilwell VarcoNOV26.73▲3.724.27
 
49.08D   W
TechnipFMCFTI20.88▲6.218.20
 
35.00D   W
REFINERS
Marathon PetroMPC61.65▲5.954.29
 
88.45D   W
Phillips 66PSX90.84▲6.978.44
 
123.97D   W
Valero EnergyVLO77.01▲4.868.81
 
126.98D   W
HollyFrontierHFC51.72▲1.242.42
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A60.55▲4.255.04
 
73.86D   W
TotalTOT54.46▲4.049.70
 
65.69D   W
BPBP40.03▲5.036.15
 
47.83D   W
EniE32.84▲4.629.75
 
40.15D   W
EquinorEQNR22.29▲5.519.95
 
28.93D   W
NEXT WEEK'S EVENTS

Tuesday:

  • Canadian international merchandise trade data (Nov 2018)
  • API Weekly Statistical Bulletin

Wednesday:

  • Interest Rate Decision from the Bank of Canada
  • EIA Weekly Petroleum Status Report
  • EIA Weekly Natural Gas Storage Report
  • Release of latest meeting minutes from US Federal Reserve

Friday:

  • 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
  • Equity markets post third week of gains, taking energy stocks along for the ride

    Equity markets post third week of gains, taking energy stocks along for the ride

    TSX energy sector posts first weekly gain since September

    TSX energy sector posts first weekly gain since September