Oil prices take a pause for the week, but post third consecutive month of gains

Oil prices take a pause for the week, but post third consecutive month of gains

This week's Energy Market Summary for the week ending Friday March 1, 2019:
  • Crude benchmarks eke out another gain in February
  • AECO spot prices spike, as cold weather lingers
  • Low oil prices slash Canada's GDP to near zero
  • US oil output hits a record high, once again
  • Rig counts continue to decline, south of the border
  • OPEC production takes a hit in February ...
    ... as US sanctions start to bite.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
NEUTRAL
  • The US dollar was roughly unchanged for the week.
SUPPLY
NEUTRAL
  • OPEC production declined to about 30.5 million bbl/day in February, down over 500,000 bbl/day from January's level. Most of the declines came from Venezuela, Saudi Arabia and Iran.
  • Venezuela's oil exports have now plunged by 40% since the US imposed its latest round of sanctions, falling to just 920,000 bbl/day last month.
  • Russia's output dipped to 11.34 million bbl/day in February, down just 75,000 bbl/day from last October's levels. Last December, Russia made a pact with OPEC to reduce output by 230,000 bbl/day for the first six months of 2019.
  • According to the Energy Information Administration, total US oil output reached a record 12.1 million bbl/day last week.
  • According to Baker Hughes, the US took 10 oil rigs out of service this week. Canada also lost four rigs.
DEMAND
NEUTRAL
  • No new news on the demand front this week.
SENTIMENT
NEUTRAL
  • After a sharp rise in mid-February, both Brent and WTI gave back some of those gains this week. However, both benchmarks remain solidly above key support levels.
  • Delayed data released for WTI managed money contracts shows weakening bullishness among traders, with net longs dipping slightly in mid-February. US data remains delayed by 1 week due to the January government shutdown.
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

After a nice rebound in December and January, oil prices posted another month of solid gains in February. Crude benchmarks averaged as follows last month (USD/bbl, change from January average):

  • Brent: US$64.32 +4.21
  • WTI: US$54.98 +3.43
  • Canadian Light: US$50.12 +2.75
  • Western Canadian Select (WCS): 43.54 +2.48

The average discount on Canadian Light was just under US$5/bbl in February, up US$0.70 from January's differential. The discount on WCS rose about US$1 to an average of US$10.50 in February.

AECO spot prices spikes $4.30/GJ on Monday, as a blast of cold winter air lingers over the Pacific. Weather is expected to normalize towards the middle of month.

In natural gas markets last month:

  • Henry Hub averaged US$2.68/MMBtu in February, down US$0.42 from the January average.
  • AECO gas averaged US1.59/MMBtu in February, up US$0.21 from the January average.
 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

FEB 27, 2019

Crude stockpiles post a big drop while total output touches new record high

 
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

This week's notable Canadian economic news:

  • Statistics Canada reported a GDP growth rate of just 0.1% in the fourth quarter, bringing the annualized rate to 0.4%, much lower than expected. Aside from low oil prices, weakness in housing, business investment and consumer spending contributed to the downside.
  • Canada’s Consumer Price Index (CPI) declined from 2.0% in December to just 1.4% in January, primarily due to a 14% drop in gasoline prices. Excluding gasoline, CPI is up 2.1% on an annualized basis.
  • The Industrial Product Price Index (IPPI) declined 0.3% in January, mainly due to lower prices for gasoline and refined products. On an annualized basis, IPPI is up 1.0%.
  • The Raw Materials Price Index (RMPI) rose 3.8% in January, mainly due to higher crude prices. Excluding crude, RMPI edged up 0.1% for the month. On an annualized basis, RMPI is now up 5.5%.
  • After being little changed in November, average weekly earnings were once again unchanged in December. Over the past 12 months, earnings are up 1.8%. Employees in the oil and gas subsector saw a 4.3% decline.
  • The loonie sank almost a penny this week, on expectations that interest rates won't rise anytime in the near future. The Bank of Canada is expected to make its next interest rate announcement on Wednesday.

This week's US economic news:

  • US GDP rose 2.6% in the fourth quarter, down from 3.4% in Q3. For the full-year 2018, the US economy expanded 2.9%, just shy of the 3% target set by President Trump.
  • The yield curve (10 vs 2-year) steepened this week, as longer duration bond yields ticked higher.
  • The US dollar waffled again this week, ending Friday up just 0.1% from the previous week's close.

Across the pond:

  • Despite plenty of fiscal stimulus, factory activity in China contracted again in February, as exports continue to decline.
  • Bond yields moved higher in the UK, on hopes for an extension of the Brexit deadline. The pound rose 1.2% for the week.
  • The Euro rose 1% while the yen declined about 1%.
EQUITY MARKETS

    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

A mixed bag in equity markets this week, with Shanghai and most European exchanges posting gains, while London's FTSE and emerging markets dragged to the downside.

In North America, the NYSE was unchanged for the week, while the NASDAQ rose 1%. The S&P 500 rose 0.4% for the week, continuing the bull run that began in late December. Energy and technology were the best performing sectors south of the border.

In Toronto, the TSX rose 0.3%. Aside from materials and financials, most other major sectors ended the week higher.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

On the TSX, energy rose 1.7% with gains seen across most components. Husky Energy was this week's notable exception, falling almost 8%.

On the S&P 500, the energy sector rose 1.1%, with refining stocks dragging to the downside.

Bank of America Merrill Lynch (BAML) says US producers represent good value for investors, who should expect more share buybacks and dividend increases, in lieu of production gains. BAML's top picks in the sector are primarily shale players, including Anadarko Petroleum, Hess, Devon Energy and Concho Resources.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU45.47▲1.235.53
 
55.47D   W
Imperial OilIMO35.45▼-1.533.43
 
44.91D   W
Husky EnergyHSE14.68▼-7.713.33
 
22.99D   W
MIDSTREAM
EnbridgeENB49.51▲1.737.36
 
49.70D   W
TransCanadaTRP59.41▲1.247.90
 
59.81D   W
Pembina PipelinePPL48.91▲2.337.60
 
49.12D   W
Inter PipelineIPL21.66▲2.518.60
 
25.66D   W
Keyera KEY32.80▲5.624.05
 
38.91D   W
Gibson EnergyGEI21.48▲1.315.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ38.03▲3.130.11
 
49.08D   W
Cenovus EnergyCVE12.16▲4.08.74
 
14.84D   W
EncanaECA9.66▲6.56.90
 
18.54D   W
TourmalineTOU20.48▲1.215.84
 
26.19D   W
Vermilion EnergyVET33.90▲2.726.67
 
49.67D   W
SERVICES
Pason SystemsPSI20.44▼-1.316.61
 
24.57D   W
EnerflexEFX20.00▲7.813.55
 
20.38D   W
Mullen Group MTL12.58▲1.911.26
 
16.93D   W
ShawcorSCL20.85▲1.015.11
 
28.89D   W
Secure EnergySES8.60▲0.16.25
 
9.44D   W
REFINING & MARKETING
Parkland FuelPKI40.07▲6.727.96
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM80.00▲2.064.65
 
87.36D   W
ChevronCVX122.03▲2.2100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI19.74▲2.214.62
 
19.74D   W
Williams CoWMB27.43▲1.220.36
 
32.22D   W
ONEOKOKE65.87▼-2.950.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP68.93▼-1.552.78
 
80.24D   W
EOG ResourcesEOG96.42▲0.982.04
 
133.53D   W
Occidental PetroOXY67.55▲2.556.83
 
87.67D   W
Anadarko PetroAPC44.40▲1.640.40
 
76.70D   W
Pioneer Natural ResPXD144.46▲1.6119.08
 
213.40D   W
SERVICES
SchlumbergerSLB45.19▲1.934.99
 
75.43D   W
HalliburtonHAL30.93▼-1.224.70
 
54.91D   W
Baker HughesBHGE27.10▲2.820.09
 
37.76D   W
Ntl-Oilwell VarcoNOV28.79▲1.124.27
 
49.08D   W
TechnipFMCFTI22.36▼-1.518.20
 
34.39D   W
REFINERS
Marathon PetroMPC62.68▼-3.654.29
 
88.45D   W
Phillips 66PSX97.48▲0.178.44
 
123.97D   W
Valero EnergyVLO82.89▼-2.868.81
 
126.98D   W
HollyFrontierHFC52.03▼-6.342.42
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A62.32▼-0.655.04
 
73.86D   W
TotalTOT57.21▲0.749.70
 
65.69D   W
BPBP42.58▲0.336.28
 
47.83D   W
EniE34.39▼-1.129.75
 
40.15D   W
EquinorEQNR22.35▼-1.419.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday:

  • Morgan Stanley Global Energy and Power Conference kicks-off in NYC
  • Q4/2018 earnings: Gibson Energy

Tuesday:

  • API Weekly Statistical Bulletin
  • Chevron 2019 Security Analyst Meeting

Wednesday:

  • Bank of Canada Interest Rate Decision
  • EIA Weekly Petroleum Status Report
  • Q4/2018 earnings: Pengrowth Energy, Essential Energy Services, Kelt Exploration, Peyto Exploration

Thursday:

  • EIA Weekly Natural Gas Storage Report
  • Q4/2018 earnings: CNRL, Crescent Point Energy, Obsidian Energy

Friday:

  • StatsCan Labour Force Survey (Feb 2019)
  • Baker Hughes Weekly Rig Counts
  • Q4/2018 earnings: MEG Energy
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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