Oil prices old steady despite fears of a global slowdown

Oil prices old steady despite fears of a global slowdown

This week's Energy Market Summary for the week ending Friday March 22, 2019:
  • Inverted yield curve spooks traders
  • Canadian oil rig counts get slashed in half
  • Midstream stocks get a boost from falling interest rates
  • WTI briefly touches US$60 ...
    ... while WCS briefly peaks above US$50.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
BULLISH
  • Sanctions on Venezuela and Iran continue to dampen crude exports out of both OPEC members. OPEC cancelled its April compliance meeting, and will instead wait for more data on the impacts of US sanctions on total OPEC output.
USD INDEX
NEUTRAL
  • The US dollar took a steep tumble on Wednesday, but recovered nicely on Thursday and Friday, ending the week up 0.1%.
SUPPLY
NEUTRAL
  • Alberta raised its crude output quota by 25,000 bbl/day in both May and June, raising the production limit to 3.71 million bbl/day.
  • Canadian oil rig counts were slashed in half this week, ending Friday at just 49. In the US, oil rig counts fell for the fifth week in a row, dropping another 9 to end the week at 824.
  • US oil output recovered slightly last week, returning to its old record high of 12.1 million bbl/day.
DEMAND
BEARISH
  • Weak economic data out of Europe and a bearish outlook from the US Fed Chair this week cast more doubts on the health of the global economy.
SENTIMENT
BULLISH
  • WTI briefly touched US$60 on Thursday, posting its third consecutive week of gains.
  • Traders are clearly turning more bullish on WTI, adding more long positions and trimming back on short trades.
  • Long and short contracts for Brent were little changed last week.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$67.03▼0.250.47
 
86.29
WTI$59.04▲0.942.53
 
76.41
CDN LT$54.04▲0.437.04
 
71.40
C5+$54.04▼2.620.83
 
69.32
WCS$49.54▲3.512.59
 
56.21

WTI briefly touched US$60 on Thursday, while WCS peaked above US$50 for the first time since last July. The WCS discount narrowed by about US$1 to end the week at US$9.50 a barrel.

Brent was more subdued this week, giving back all the week's gains on Friday. The differential between Brent and WTI has narrowed from US$10 just a few weeks ago to less than US$8 a barrel on Friday.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

MAR 20, 2019

USGC stockpiles continue to shrink as region moves to export more crude

 
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:

  • The Consumer Price Index ticked up to 1.5% in February, as measured on an annualized basis. Housing costs contributed to most of the gains, while energy prices posted a 6% decline, mostly due to a 12% drop in gasoline prices. Ex-gasoline, Canada's inflation rate is tracking at 2.1%.
  • Wholesale sales rose 0.6% to $63.5 billion in January, with gains seen in five out of seven subsectors.
  • Retail sales fell another 0.3% in January, the third consecutive month of declines. Weakness in auto sales were mostly to blame. Receipts at gasoline stations dropped 0.4%, despite a 1.9% increase in sales volumes.
  • The number of Canadians receiving regular Employment Insurance benefits declined over 2% in January, falling to 435,600. Most provinces saw a drop, except Alberta, Saskatchewan and BC.
  • The federal government is projecting a $20 billion deficit for this fiscal year (2019–2020), falling to $10 billion by 2023–2024.
  • Canadian bond yields followed the US lower this week. The loonie sank almost 1%, ending Friday just below 74.50 cents.

This week's US economic news:

  • The US Federal Reserve reiterated its promise to be "patient" with future rate hikes and lowered its monthly bond sales cap from US$30 billion to US$15 billion. Fed Chairman Jerome Powell said "it may be some time" before jobs and inflation data requires an increase in interest rates. Economists are no longer expecting any rate hikes this year, and just one increase in 2020.
  • The yield curve inverted further this week, warning of a potential economic slowdown ahead. Yields on the 10-year dropped below the 3-month for the first time since 2007.

Across the pond this week:

  • Weak manufacturing data out of Germany sent the Euro tumbling on Friday, while German bund yields ended the week below zero for the first time since the fall of 2016.
  • Deal or no-deal continues in the UK, as the country tries to avert a hard-Brexit at the end of this month. The pound dipped 0.6% for the week.
  • Investors seeking safe-haven fled to the Japanese yen, which rose 1.4%. Yields on the Japanese 10-year sank to -0.07%.
EQUITY MARKETS

    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

Fears of a global slowdown spooked equity markets on Friday, wiping out all gains for the week. 

In the US, small cap stocks were the worst hit, falling over 3%. The broader S&P 500 Large Cap Index fell about 1%, with financials taking the biggest haircut.

In Canada, the TSX faired slightly better, declining just 0.3% for the week.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

Despite a sharp pullback on Friday, the TSX energy sector managed a 0.7% gain for the week. The SPX energy basket was roughly unchanged.

Lower bond yields helped boost midstream stocks on both sides of the border. TransCanada, Kinder Morgan, Pembina Pipeline and Gibson Energy hit new 1-year highs during the week. Independent refiners were the worst performers in US energy markets.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU45.19▲0.435.53
 
55.47D   W
Imperial OilIMO36.43▲0.133.43
 
44.91D   W
Husky EnergyHSE13.59▲0.913.33
 
22.99D   W
MIDSTREAM
EnbridgeENB49.17▲0.937.36
 
49.70D   W
TransCanadaTRP60.67▲0.847.90
 
61.17D   W
Pembina PipelinePPL49.61▲0.537.60
 
50.45D   W
Inter PipelineIPL21.78▼-0.618.60
 
25.66D   W
Keyera KEY31.14▼-4.224.05
 
38.91D   W
Gibson EnergyGEI22.87▲0.715.90
 
23.63D   W
LARGE CAP E&P
Cdn Natural ResCNQ37.02▲0.130.11
 
49.08D   W
Cenovus EnergyCVE11.77▲0.78.74
 
14.84D   W
EncanaECA9.43▼-2.56.90
 
18.54D   W
TourmalineTOU21.35▲2.615.84
 
26.19D   W
Vermilion EnergyVET33.60▲1.126.67
 
49.67D   W
SERVICES
Pason SystemsPSI20.07▼-0.416.61
 
24.57D   W
EnerflexEFX19.37▼-2.913.55
 
20.38D   W
Mullen Group MTL12.20▼-1.011.26
 
16.93D   W
ShawcorSCL21.46▲1.915.11
 
28.89D   W
Secure EnergySES8.32▲0.66.25
 
9.44D   W
REFINING & MARKETING
Parkland FuelPKI39.58▲0.127.96
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM80.48▲0.464.65
 
87.36D   W
ChevronCVX123.09▼-1.8100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI19.90▲0.214.62
 
20.44D   W
Williams CoWMB28.47▲3.320.36
 
32.22D   W
ONEOKOKE69.01▲3.250.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP66.07▼-2.256.05
 
80.24D   W
EOG ResourcesEOG93.68▲5.482.04
 
133.53D   W
Occidental PetroOXY65.24▼-0.456.83
 
87.67D   W
Anadarko PetroAPC43.23▼-3.040.40
 
76.70D   W
Pioneer Natural ResPXD140.56▲3.6119.08
 
213.40D   W
SERVICES
SchlumbergerSLB42.47▲0.234.99
 
75.43D   W
HalliburtonHAL28.73▲2.724.70
 
54.91D   W
Baker HughesBHGE27.16▼-2.520.09
 
37.76D   W
Ntl-Oilwell VarcoNOV26.63▲0.624.27
 
49.08D   W
TechnipFMCFTI22.66▼-1.118.20
 
34.39D   W
REFINERS
Marathon PetroMPC61.30▲1.454.29
 
88.45D   W
Phillips 66PSX95.98▼-2.678.44
 
123.97D   W
Valero EnergyVLO84.63▼-0.568.81
 
126.98D   W
HollyFrontierHFC50.61▼-3.046.75
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A62.88▼-0.655.04
 
73.86D   W
TotalTOT56.01▼-3.149.70
 
65.69D   W
BPBP43.95▲0.236.28
 
47.83D   W
EniE35.44▲0.529.75
 
40.15D   W
EquinorEQNR22.50▲0.119.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday:

  • Scotia Howard Weil 2019 Energy Conference kicks-off in New Orleans, LA
  • Finance Minister Bill Morneau delivers speech at Economic Club in Calgary, AB

Tuesday:

  • IEA releases Global Energy & CO2 Status Report
  • API Weekly Statistical Bulletin

Wednesday:

  • StatsCan Payroll, Earning and Hours (Jan 2019 data)
  • StatsCan international balance of trade (Jun 2019 data)
  • EIA Weekly Petroleum Status Report
  • Last trading day for Henry Hub April contract

Thursday:

  • US Q4/2018 GDP reading (third estimate)
  • EIA Weekly Natural Gas Storage Report

Friday:

  • StatsCan Industrial Product and Raw Material Price Indexes (Feb 2019 data)
  • StatsCan GDP by industry (Jan 2019 data)
  • EIA Underground Natural Gas Working Storage Capacity
  • Baker Hughes Weekly Rig Counts
  • Last trading day for Brent May contract.
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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