TSX energy sector lags as investors digest fallout from Alberta's curtailment experiment
Oil prices all moved higher this week, with most benchmarks returning to the highs of last November. Western Canadian Select (WCS) posted its fifth week of solid gains, rising another 4% w/w on Friday. Canadian Light and Edmonton Condensate (C5+) also rose almost 7% this week, as discounts to WTI narrowed considerably.
For the month of January, oil prices averaged as follows (% change m/m):
- Brent: US$60.12 +4.2%
- WTI: $51.55 +5.2%
- C5+: US$48.52 +14%
- Canadian Light: US$47.37 +22%
- WCS: US$41.06 +32%
Henry Hub natural gas prices continue to be very volatile, falling 14% this week due to wild temperature swings in the US Midwest and East Coast. Alberta's AECO gas also declined 13% w/w, as the February contract expired on Thursday.
Natural gas prices averaged as follows for the month of January (% change m/m):
- Henry Hub: US$3.10 -21%
- AECO (near month): US$1.38 +7.9%
This week's Canadian economic data:
- After a 0.3% increase in October, real GDP edged down 0.1% in November. Declines were seen in wholesale trade (-1.1%) and manufacturing (-0.5%). Oil and gas extraction contracted 1.6% in November, while demand for drilling services rose 2.4%. Lower output from Canada's refining sector also contributed to the downside.
- The Industrial Product Price Index (IPPI) declined 0.7% in December, mainly due to lower energy prices. Prices for energy and petroleum products fell 7.4%, reversing all gains from the previous month.
- The Raw Materials Price Index (RMPI), rose 3.8%, due primarily to a 10% rebound in crude oil prices.
- Average weekly earnings were once again unchanged in November. Non-farm salaries are now up just 2% y/y, down from 2.5% in October.
This week's US economic news:
- The US Federal Reserve kept interest rates unchanged, and signalled intentions to be more "patient" with future rate hikes, backing off from its previous plan of normalizing rates.
- The US unemployment rate ticked higher, from 3.9% to 4.0%, due to the flood of civil servants that applied for benefits in January. Job growth surged again in January, with employers hiring at the fastest pace in almost a year.
This week in bonds and currencies:
- Global bond yields mostly posted losses, including the US, Canada and Eurozone. Japanese 10-year rates fell below zero again this week.
- Higher commodity prices helped boost the loonie and Aussie dollar by almost 1%.
- The pound sank almost 1%, after the UK parliament once again rejected the latest Brexit deal.
- The Euro rose 0.7%, while the US dollar ticked lower by 0.2%.
A sea of green in North American equity markets this week, as the threat of future rate hikes eases on both sides of the border. The S&P 500 rose 1.6% while the TSX rose almost 1%.
A lower pound helped boost London's FTSE over 3%, making it the best performing developed market for the week.
After one of the worst Decembers in history, equity markets staged a spectacular rally in January. For the month of January, the S&P 500 gained 7.9%, one of the best monthly gains in recent history. In Toronto, the TSX gained 8.5% m/m, erasing all losses from December.
Energy was the best performing sector in US markets this week, rising 3.2%. Heavy-weights ExxonMobil and Chevron were the biggest winners, along with large cap midstream names and refining stocks. Energy services continue to lag in US markets.
In Canadian energy markets, the sector declined 0.5%, despite higher prices for Canadian oil benchmarks. Larger-cap producers led to the downsides. Integrated names continue to be negatively impacted by Alberta's production caps.
|Suncor Energy||SU||42.37||▲0.0||35.53||55.47||D W|
|Imperial Oil||IMO||35.54||▼-3.9||33.43||44.91||D W|
|Husky Energy||HSE||15.64||▼-2.2||13.33||22.99||D W|
|Pembina Pipeline||PPL||46.89||▲4.5||37.60||47.84||D W|
|Inter Pipeline||IPL||20.88||▼-0.6||18.60||25.66||D W|
|Gibson Energy||GEI||20.24||▲4.5||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||35.00||▲0.3||30.11||49.08||D W|
|Cenovus Energy||CVE||10.06||▼-2.1||8.74||14.84||D W|
|Vermilion Energy||VET||31.96||▲3.4||26.67||49.67||D W|
|Pason Systems||PSI||20.48||▲0.5||16.05||24.57||D W|
|Mullen Group||MTL||12.09||▼-0.1||11.39||16.93||D W|
|Secure Energy||SES||8.05||▲1.3||6.25||9.02||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.29||▲2.6||27.36||47.45||D W|
|Exxon Mobil||XOM||75.92||▲5.9||64.65||89.25||D W|
|Kinder Morgan||KMI||18.35||▲3.4||14.62||18.67||D W|
|Williams Co||WMB||27.43||▲2.8||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||98.85||▼-0.3||82.04||133.53||D W|
|Occidental Petro||OXY||68.04||▲2.3||56.83||87.67||D W|
|Anadarko Petro||APC||48.45||▲3.3||40.40||76.70||D W|
|Pioneer Natural Res||PXD||143.01||▲2.0||119.08||213.40||D W|
|Baker Hughes||BHGE||24.35||▲3.7||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||29.91||▼-1.7||24.27||49.08||D W|
|Marathon Petro||MPC||65.47||▲2.2||54.29||88.45||D W|
|Phillips 66||PSX||94.21||▲1.3||78.44||123.97||D W|
|Valero Energy||VLO||85.26||▲3.7||68.81||126.98||D W|
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