Stocks and commodities rally as US and China close in on new trade deal

Stocks and commodities rally as US and China close in on new trade deal

This week's Energy Market Summary for the week ending Friday February 22, 2019:
  • Trump and China move closer to resolving trade spat ...
    ... boosting commodities and equity markets
  • TSX books ninth week of gains
  • AECO gas gets a 20% boost
  • Brent and WTI return to levels of last November
  • US output hits record high ...
    ... while Mexican output hits 30-year low.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
NEUTRAL
  • The US dollar declined 0.4%, reversing gains from the previous week.
SUPPLY
NEUTRAL
  • According to the Energy Information Administration, US crude production hit a record 12 million bbl/day last week.
  • According to Baker Hughes, the US took 4 oil rigs out of service this week, falling to 853. Canada lost 8 rigs, bringing the total to 144.
  • Mexico's Pemex produced just 1.6 million bbl/day of crude in January, the lowest output since 1990.
DEMAND
NEUTRAL
  • No new news on the demand front this week.
SENTIMENT
BULLISH
  • Brent and WTI have broken out of their recent trading ranges, returning to the levels of last November.
  • Traders continue to add long positions on Brent managed money contracts.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$67.12▲1.350.47
 
86.29
WTI$57.26▲3.042.53
 
76.41
CDN LT$51.01▲3.937.04
 
71.40
C5+$53.36▲4.320.83
 
69.32
WCS$44.46▲8.212.59
 
56.21

Oil prices got a lift across the board this week, rising in step with global equity markets. Both Brent and WTI have now returned to the levels of last November.

Canadian crude and condensate streams also got support from narrowing differentials. The discount on Western Canadian Select (WCS) contracted by US$1.70, ending Friday below US$13/bbl and lifting WCS by over 8%. The discounts on Canadian Light and Edmonton Condensate also narrowed, boosting each benchmark by about 4%.

In natural gas markets, Alberta's AECO gas gained 18% for the week, while Henry Hub rose 3.5%.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

FEB 21, 2019

CRUDE EXPORTS SURGE TO RECORD HIGHS AS OUTPUT HITS 12 MILLION BBL/DAY

 
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 REMAINS DELAYED BY SEVERAL WEEKS DUE TO THE JANUARY GOVERNMENT SHUTDOWN.
CURRENCIES & BONDS

This week's notable Canadian economic news:

  • According to Statistics Canada, 446,300 Canadians received regular Employment Insurance (EI) benefits in December, up 1.0% from the previous month.
  • After a 1.1% drop in November, wholesale sales rose 0.3% to $63.1 billion in December.
  • For the full-year 2018, wholesale trade rose 3.7% to $757 billion, marking the ninth consecutive annual increase.
  • Retail sales dipped 0.1% in December, due mainly to a 3.6% drop in sales at gasoline stations.
  • For the full year 2018, Canadians spent $605 billion, up 2.7% from the previous year. Sales receipts at gasoline stations rose almost 8% due to higher gas prices.
  • Yields on the Canadian 10-year were roughly unchanged, ending the week at 1.89%.
  • The Canadian dollar gained 0.8% this week, ending Friday above 76 cents.

This week's US economic news:

  • After a 1.0% gain in November, durable goods orders rose 1.2% in December.
  • Initial claims for unemployment benefits fell to 216,000 last week, down 23,000.
  • In minutes released from the latest FOMC meeting, Fed officials promised to show "patience" in future rate hikes and the unwinding of US$4 trillion held in treasures, despite a robust economy and strong labour market.
  • Shorter duration bond yields dipped lower on expectations of fewer rate hikes this year. Yields on the 30-year rose 2 basis points, ending Friday at 3.02%, and slightly steeping the yield curve.
  • The US dollar lost 0.4%, wiping out all gains from the previous week.

Across the pond this week:

  • Global bond yields mostly ended the week lower, including Germany, Japan and the UK. Japan's 10-year fell to -0.04%.
  • The pound sterling was this week's biggest gainer, rising 1.3% on hopes for a Brexit deal at the end of March. The Euro rose 0.4% while the yen was little changed.
EQUITY MARKETS

    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

Equity markets were enthused by news that the US and China appear to be moving closer to finalizing a trade deal.

The Hong Kong and Shanghai exchanges rose 3.3% and 4.5%, respectively, for the week.

In New York, the NYSE and NASDAQ exchanges both rose 0.7%. The Dow Jones Industrial Average and S&P 500 both gained 0.6%, marking the ninth consecutive week of gains for both indices. Materials and utilities led to the upside.

The TSX also booked its ninth week of gains, rising 1.1%. Mining and precious metals stocks were the best performers this week. 

European markets all rose about 1%, while the Nikkei rallied 2.5%. London's FTSE was the only notable exception, dipping slightly due to a strengthening pound.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

The S&P 500 energy sector posted a 0.5% loss, while the TSX energy sector rose 0.6%. Most Canadian subsectors averaged a gain for the week. US producers and energy service providers posted the biggest losses south of the border.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU44.92▲0.135.53
 
55.47D   W
Imperial OilIMO36.00▼-0.633.43
 
44.91D   W
Husky EnergyHSE15.90▲1.813.33
 
22.99D   W
MIDSTREAM
EnbridgeENB48.67▲2.737.36
 
49.70D   W
TransCanadaTRP58.72▲3.547.90
 
59.51D   W
Pembina PipelinePPL47.83▼-1.737.60
 
49.05D   W
Inter PipelineIPL21.14▼-0.818.60
 
25.66D   W
Keyera KEY31.06▲8.724.05
 
38.91D   W
Gibson EnergyGEI21.21▼-0.315.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ36.89▲0.130.11
 
49.08D   W
Cenovus EnergyCVE11.69▲1.88.74
 
14.84D   W
EncanaECA9.07▼-0.86.90
 
18.54D   W
TourmalineTOU20.24▼-0.515.84
 
26.19D   W
Vermilion EnergyVET33.01▲1.326.67
 
49.67D   W
SERVICES
Pason SystemsPSI20.71▲1.416.61
 
24.57D   W
EnerflexEFX18.56▲9.113.55
 
18.77D   W
Mullen Group MTL12.34▲3.611.26
 
16.93D   W
ShawcorSCL20.65▲0.215.11
 
28.89D   W
Secure EnergySES8.590.06.25
 
8.91D   W
REFINING & MARKETING
Parkland FuelPKI37.55▼-2.227.96
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM78.42▲0.964.65
 
87.36D   W
ChevronCVX119.39▲0.0100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI19.32▲2.814.62
 
19.47D   W
Williams CoWMB27.11▼-0.620.36
 
32.22D   W
ONEOKOKE67.87▲0.250.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP69.97▼-0.352.78
 
80.24D   W
EOG ResourcesEOG95.53▼-4.782.04
 
133.53D   W
Occidental PetroOXY65.93▼-1.956.83
 
87.67D   W
Anadarko PetroAPC43.69▼-3.440.40
 
76.70D   W
Pioneer Natural ResPXD142.13▼-2.2119.08
 
213.40D   W
SERVICES
SchlumbergerSLB44.36▼-1.334.99
 
75.43D   W
HalliburtonHAL31.32▼-1.724.70
 
54.91D   W
Baker HughesBHGE26.35▲2.020.09
 
37.76D   W
Ntl-Oilwell VarcoNOV28.48▼-4.524.27
 
49.08D   W
TechnipFMCFTI22.71▼-3.518.20
 
34.39D   W
REFINERS
Marathon PetroMPC65.02▼-0.254.29
 
88.45D   W
Phillips 66PSX97.36▲1.478.44
 
123.97D   W
Valero EnergyVLO85.32▲1.168.81
 
126.98D   W
HollyFrontierHFC55.52▼-4.142.42
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A62.67▲0.255.04
 
73.86D   W
TotalTOT56.83▲1.049.70
 
65.69D   W
BPBP42.46▲0.436.28
 
47.83D   W
EniE34.76▲1.529.75
 
40.15D   W
EquinorEQNR22.66▼-1.919.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday:

  • Shell releases LNG Outlook 2019

Tuesday:

  • API Weekly Statistical Bulletin
  • March contract expiry for Henry Hub
  • Q4/2018 earnings: Husky Energy, Civeo

Wednesday:

  • StatsCan Consumer Price Index (Jan 2019 data)
  • StatsCan Payroll, Earning and Hours (Dec 2018 data)
  • EIA Weekly Petroleum Status Report

Thursday:

  • StatsCan Industrial Product and Raw Material Price Indexes (Dec 2018 data)
  • US Q4/2018 GDP (initial estimate) and Q3/2018 GDP (third estimate)
  • EIA Weekly Natural Gas Storage Report
  • April contract expiry for Brent and March contract expiry for gasoline
  • Q4/2018 earnings: Encana, AltaGas, Storm Resources, Vermilion Energy

Friday:

  • StatsCan real GDP by industry (December) and Q4/2018
  • EIA Petroleum Marketing Monthly (Dec 2018 data)
  • 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
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