Oil prices break to the upside as OPEC production slides

Oil prices break to the upside as OPEC production slides

This week's Energy Market Summary for the week ending Friday March 15, 2019:
  • WCS gains 6%, and closes in on US$50
  • EIA trims US supply forecasts for 2019 and 2020
  • IEA warns oil demand growth "skewed to the downside"
  • Venezuela takes more crude offline in February
  • Saudi Arabia vows more cuts in March
  • US/Cdn energy sectors rise 3%, led higher by producers.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
BULLISH
  • US sanctions imposed on Venezuela led to a prolonged power outage this week, further curtailing the country's ability to refine or export its crude.
  • The OPEC member reported another drop in production for the month of February.
USD INDEX
NEUTRAL
  • The US dollar gave back about 1% for the week, ending Friday just over 96.
SUPPLY
NEUTRAL
  • The Energy Information Administration (EIA) tweaked its 2019 and 2020 supply forecasts lower by about 1% to 12.3 and 13.0 million bbl/day, respectively.
  • According to Baker Hughes, the US took one oil rig out of service this week, bringing the total to 833. Canada lost 20 rigs, leaving 98 rigs in service.
  • OPEC output declined 221,000 bbl/day in February to 30.55 million bbl/day, primarily due to losses out of Venezuela and Saudi Arabia.
  • The cartel bumped up its 2019 non-OPEC supply forecast by 60,000 bbl/day, primarily due to higher output expected from Canada and Sudan.
  • Saudi Arabia said it plans to reduce output by another 500,000 bbl/day this month, to about 9.8 million bbl/day, well below its 10.3 million bbl/day quota.
DEMAND
NEUTRAL
  • According to the International Energy Agency (IEA), world oil demand growth remains robust, although the pace of growth is slowing, particularly in China. The IEA estimates that India's oil demand growth will equal Chinese demand by 2024.
  • OPEC kept its oil demand growth unchanged at 1.24 million bbl/day this year, but says growth "continues to be skewed to the downside."
SENTIMENT
BULLISH
  • Oil prices appear to be moving higher, with most benchmarks breaking out to the upside.
  • Traders continue to deleverage short positions on WTI managed money contracts, boosting net longs last week.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$67.16▲2.250.47
 
86.29
WTI$58.52▲4.442.53
 
76.41
CDN LT$53.82▲4.237.04
 
71.40
C5+$55.46▲4.320.83
 
69.32
WCS$47.88▲6.012.59
 
56.21

Crude oil benchmarks all posted nice gains this week, particularly WCS, which rose 6%, and WTI, up 4.4% for the week. Discounts for Canadian light and heavy crude were little changed.

Gasoline prices posted a second week of solid gains, rising over 3% from last Friday's close. Heating oil gave back 1.6% this week.

In natural gas markets, Henry Hub declined 2.4% w/w, while AECO retreated almost 6%.

The EIA boosted its full-year 2019 WTI forecast to US$56.13 a barrel, up 2.4% from its previous forecast. Brent was also boosted almost 3% to US$54.64.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

MAR 13, 2019

Gasoline stockpiles finally start to ease, falling another 4.6 million bbls last week

 
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:

  • After three consecutive months of declines, manufacturing sales rose 1.0% to $57.1 billion in January.
  • Canada's 10-year bond rates declined 4 basis points to 1.72%.
  • The Canadian dollar gained 0.5%, ending Friday just below 75 cents.

This week's US economic news:

  • CPI rose on an annualized basis of 1.5%, well under the Fed’s target of 2%. Core inflation ticked lower from 2.2% to 2.1%.
  • After a big decline in December, retail sales rose 0.2% in January. Sales of motor vehicles and fuel continue to drag to the downside.
  • Despite a good showing from the energy sector, industrial production posted a feeble 0.1% increase in February, with manufacturing contracting another 0.4% for the month.
  • The US Federal Reserve is expected to keep interest rates unchanged at their upcoming meeting this week. The US dollar declined about 1% this week, mostly due to strength in other foreign currencies.

Across the pond this week:

  • UK lawmakers rejected a "hard-Brexit" option, sending PM Theresa May back into negotiations with the EU. The pound had a very good showing this week, rising 2%. The Bank of England is also expected to keep interest rates unchanged at their next Monetary Policy Meeting on Thursday.
  • The Bank of Japan also reiterated its commitment to keep interest rates at zero. The Japanese 10-year declined to -0.04%.
EQUITY MARKETS

    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

Except for Australia, most global exchanges moved higher this week. 

In New York, the NYSE rose 2.4%, while the NASDAQ gained 3.8%. Except for industrials, which was hit hard by a steep decline in Boeing stocks, all sectors posted nice gains for the week.

In Toronto, the TSX rose almost 1%, led higher by energy and healthcare stocks.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

The TSX energy sector gained 2.8% this week, with producers and midstream stocks posting the best results.

The S&P 500 energy sector rose 3.2%, with producers and refining stocks leading to the upside.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU45.02▲3.035.53
 
55.47D   W
Imperial OilIMO36.39▼-0.433.43
 
44.91D   W
Husky EnergyHSE13.47▼-3.413.33
 
22.99D   W
MIDSTREAM
EnbridgeENB48.72▲1.137.36
 
49.70D   W
TransCanadaTRP60.20▲0.547.90
 
60.84D   W
Pembina PipelinePPL49.35▲0.737.60
 
50.04D   W
Inter PipelineIPL21.91▲1.118.60
 
25.66D   W
Keyera KEY32.50▲2.124.05
 
38.91D   W
Gibson EnergyGEI22.71▲2.115.79
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ37.00▲3.230.11
 
49.08D   W
Cenovus EnergyCVE11.69▲6.38.74
 
14.84D   W
EncanaECA9.67▲7.96.90
 
18.54D   W
TourmalineTOU20.81▲1.715.84
 
26.19D   W
Vermilion EnergyVET33.22▼-1.626.67
 
49.67D   W
SERVICES
Pason SystemsPSI20.15▲0.416.61
 
24.57D   W
EnerflexEFX19.95▲3.913.55
 
20.38D   W
Mullen Group MTL12.32▲4.211.26
 
16.93D   W
ShawcorSCL21.06▼-4.215.11
 
28.89D   W
Secure EnergySES8.27▲1.56.25
 
9.44D   W
REFINING & MARKETING
Parkland FuelPKI39.53▲3.127.96
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM80.15▲1.464.65
 
87.36D   W
ChevronCVX125.31▲3.0100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI19.87▲0.714.62
 
20.09D   W
Williams CoWMB27.56▲2.320.36
 
32.22D   W
ONEOKOKE66.85▲1.950.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP67.59▲3.353.38
 
80.24D   W
EOG ResourcesEOG88.85▲2.882.04
 
133.53D   W
Occidental PetroOXY65.47▲4.456.83
 
87.67D   W
Anadarko PetroAPC44.55▲5.940.40
 
76.70D   W
Pioneer Natural ResPXD135.67▲4.1119.08
 
213.40D   W
SERVICES
SchlumbergerSLB42.39▲2.734.99
 
75.43D   W
HalliburtonHAL27.97▲1.824.70
 
54.91D   W
Baker HughesBHGE27.85▲8.220.09
 
37.76D   W
Ntl-Oilwell VarcoNOV26.48▲2.424.27
 
49.08D   W
TechnipFMCFTI22.91▲9.218.20
 
34.39D   W
REFINERS
Marathon PetroMPC60.45▲5.154.29
 
88.45D   W
Phillips 66PSX98.52▲4.578.44
 
123.97D   W
Valero EnergyVLO85.08▲6.768.81
 
126.98D   W
HollyFrontierHFC52.20▲7.044.70
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A63.29▲4.155.04
 
73.86D   W
TotalTOT57.82▲2.149.70
 
65.69D   W
BPBP43.87▲3.836.28
 
47.83D   W
EniE35.28▲4.629.75
 
40.15D   W
EquinorEQNR22.48▲3.519.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday:

  • OPEC+ Joint Ministerial Monitoring Meeting in Azerbaijan
  • Alberta government delivers throne speech

Tuesday:

  • Federal government releases 2019/2020 budget
  • WPC2019 kicks-off in San Antonio, TX
  • API Weekly Statistical Bulletin

Wednesday:

  • 2019 Federal Budget
  • Saskatchewan government releases provincial budget
  • FOMC Meeting and Interest Rate Decision
  • EIA Weekly Petroleum Status Report
  • Last trading day for WTI April contract

Thursday:

  • StatsCan Wholesale Trade (Jan 2019 data)
  • StatsCan Employment Insurance (Jan 2019 data)
  • EIA Weekly Natural Gas Storage Report

Friday:

  • StatsCan Retail Trade (Jan 2019 data)
  • StatsCan Consumer Price Index (Feb 2019 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
  • Oil prices old steady despite fears of a global slowdown

    Oil prices old steady despite fears of a global slowdown

    Oil prices tick higher, but energy stocks take a beating

    Oil prices tick higher, but energy stocks take a beating