Oil prices take a pause for the week, but post third consecutive month of gains
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
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.
- 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.
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%.
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.
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.
|Suncor Energy||SU||45.47||▲1.2||35.53||55.47||D W|
|Imperial Oil||IMO||35.45||▼-1.5||33.43||44.91||D W|
|Husky Energy||HSE||14.68||▼-7.7||13.33||22.99||D W|
|Pembina Pipeline||PPL||48.91||▲2.3||37.60||49.12||D W|
|Inter Pipeline||IPL||21.66||▲2.5||18.60||25.66||D W|
|Gibson Energy||GEI||21.48||▲1.3||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||38.03||▲3.1||30.11||49.08||D W|
|Cenovus Energy||CVE||12.16||▲4.0||8.74||14.84||D W|
|Vermilion Energy||VET||33.90||▲2.7||26.67||49.67||D W|
|Pason Systems||PSI||20.44||▼-1.3||16.61||24.57||D W|
|Mullen Group||MTL||12.58||▲1.9||11.26||16.93||D W|
|Secure Energy||SES||8.60||▲0.1||6.25||9.44||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||40.07||▲6.7||27.96||47.45||D W|
|Exxon Mobil||XOM||80.00||▲2.0||64.65||87.36||D W|
|Kinder Morgan||KMI||19.74||▲2.2||14.62||19.74||D W|
|Williams Co||WMB||27.43||▲1.2||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||96.42||▲0.9||82.04||133.53||D W|
|Occidental Petro||OXY||67.55||▲2.5||56.83||87.67||D W|
|Anadarko Petro||APC||44.40||▲1.6||40.40||76.70||D W|
|Pioneer Natural Res||PXD||144.46||▲1.6||119.08||213.40||D W|
|Baker Hughes||BHGE||27.10||▲2.8||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||28.79||▲1.1||24.27||49.08||D W|
|Marathon Petro||MPC||62.68||▼-3.6||54.29||88.45||D W|
|Phillips 66||PSX||97.48||▲0.1||78.44||123.97||D W|
|Valero Energy||VLO||82.89||▼-2.8||68.81||126.98||D W|
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