Oil prices tick higher, but energy stocks take a beating

Oil prices tick higher, but energy stocks take a beating

This week's Energy Market Summary for the week ending Friday March 8, 2019:
  • Weak Chinese trade data drags on commodities ...
    ... sending traders to treasuries, and US dollar
  • Low oil prices blow-out Canada's trade deficit ...
    ... sinking loonie below 75 cents
  • Oil prices move higher, but energy stocks sink lower
  • AECO gas prices recover over 6%
  • More oil rig come offline in US and Canada
  • TSX posts first major loss since mid-December.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
BEARISH
  • The US dollar rose almost 1% for the week, ending Friday above 97, on the upper end of its recent trading range.
SUPPLY
NEUTRAL
  • US oil rig counts declined for the third week in a row, falling by another 9 this week, to 834.
  • Canada lost 22 rigs, falling to 118 on Friday.
  • US production was reported unchanged last week at 12.1 million bbl/day.
DEMAND
NEUTRAL
  • Weak economic data out of China continues to undermine commodity markets.
  • However, Chinese crude imports remain strong at a near-record 10.2 million bbl/day.
SENTIMENT
NEUTRAL
  • Oil prices remain in uptrend, although momentum is clearly weakening.
  • Traders continue to pile on long positions for Brent managed money contracts.
  • Not much change in WTI net long positions, as both long and shorts continue to trend sideways.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$65.74▲1.050.47
 
86.29
WTI$56.07▲0.542.53
 
76.41
CDN LT$51.65▼0.737.04
 
71.40
C5+$53.17▲0.820.83
 
69.32
WCS$45.16▼0.612.59
 
56.21

Despite a decline on Friday, Brent and WTI managed gains of 1.0% and 0.5%, respectively, for the week.

Canadian Light and Western Canadian Select (WCS) declined about 0.7%, while Edmonton Condensate rose about 1%. Differentials were little changed.

Gasoline prices rose over 4%, due in part to a big decline in product inventories south of the border last week. Heating oil was roughly unchanged.

In natural gas markets, Henry hub rose 0.2%, while AECO gas posted a 6.2% gain.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

MAR 6, 2019

CRUDE STOCKPILES SURGE IN THE MIDWEST AND WEST COAST, REVERSING DRAWDOWNS FROM THE PREVIOUS 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:

  • According to StatsCan, lower oil prices dragged Canada trade deficit to a record $4.6 billion in December. Total exports declined 3.8% to $46.3 billion, the fifth consecutive monthly decline. Energy exports fell 22% to $6.4 billion, the lowest since July 2016.
  • Industrial capacity utilization fell from 82.8% in Q3 to 81.7% in the fourth quarter of last year. A slowdown in manufacturing and construction was mostly to blame. Oil and gas extraction, as well as power plants led to the upside.
  • Canada added 55,900 jobs in February, led mostly by growth in Ontario. Over the past 12 months, the country has now added 369,000 jobs. The national unemployment rate was unchanged at 5.8%.
  • The Bank of Canada kept interest rates unchanged this week, and warned the economy will likely be weaker than expected in the first half of this year. However, the BoC says it may still raise rates, eventually.
  • After last week's dismal GDP data, the loonie took another leg lower this week, ending Friday down 0.9% at 74.54 cents.

This week's US economic news:

  • The US economy added just 20,000 jobs in February, far short of the 180,000 positions that were expected.
  • The jobless rate declined from 4.0% to 3.8% during the month, due to the end of January's government shutdown.
  • Average hourly wages jumped to 3.4% on an annualized basis, the highest since 2009.
  • The US trade deficit widened from US$50.3 billion in November to US$59.8 billion in December, the largest deficit since late 2008. Exports contracted 2%, while imports rose 2%.
  • Despite the lacklustre economic data, the US dollar jumped almost 1% this week, mostly due to weakness in other global currencies.

Across the pond this week:

  • Chinese exports declined 21% y/y in February, the worst performance since 2016, blamed on trade wars with the US and a weakening global economy. Imports also fell 5.2%, raising doubts on the strength of the domestic economy.
  • ECB President Mario Draghi warned the European economy was in "a period of continued weakness and pervasive uncertainty," once again downgrading expectations for inflation and economic growth. The Bank's GDP growth forecast was cut from 1.7% to just 1.1% for 2019, while inflation is now expected at 1.2%, well below the ECB's 2% target. The central bank also announced a third tranche of cheap bank loans, to ensure sufficient market liquidity. The Euro declined 1.5% for the week.
  • UK Prime Minister Theresa May takes another stab at passing a new-and-improved Brexit deal through parliament next week. The British pound also ended the week 1.5% lower.
EQUITY MARKETS

    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

Aside from London's FTSE, most global markets ended the week lower, as money rotated out of stocks and into treasuries. 

In New York, the NYSE and NASDAQ both lost about 2.5%, while the S&P 500 declined 2.2%. In Toronto, the TSX fell 0.45%, its first weekly decline since the middle of December. 

Energy was the worst performing sector on both sides of the border, falling 4.6% on the TSX and almost 4% on the S&P 500.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

Among TSX energy names, select midstream stocks continue to outperform due to lower bond yields, with TransCanada and Pembina reaching 52-week highs during the week.

Most holdings with the SPX energy sector declined this week, with producers and energy services stocks posting the biggest losses. Kinder Morgan also hit a new 52-high during the week.

International oil majors listed on the NYSE also posted losses this week, due to a stronger US dollar.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU43.70▼-3.935.53
 
55.47D   W
Imperial OilIMO36.54▲3.133.43
 
44.91D   W
Husky EnergyHSE13.94▼-5.013.33
 
22.99D   W
MIDSTREAM
EnbridgeENB48.17▼-2.737.36
 
49.70D   W
TransCanadaTRP59.93▲0.947.90
 
60.61D   W
Pembina PipelinePPL48.99▲0.237.60
 
49.92D   W
Inter PipelineIPL21.67▲0.018.60
 
25.66D   W
Keyera KEY31.83▼-3.024.05
 
38.91D   W
Gibson EnergyGEI22.24▲3.515.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ35.85▼-5.730.11
 
49.08D   W
Cenovus EnergyCVE11.00▼-9.58.74
 
14.84D   W
EncanaECA8.96▼-7.26.90
 
18.54D   W
TourmalineTOU20.47▼0.015.84
 
26.19D   W
Vermilion EnergyVET33.77▼-0.426.67
 
49.67D   W
SERVICES
Pason SystemsPSI20.06▼-1.916.61
 
24.57D   W
EnerflexEFX19.20▼-4.013.55
 
20.38D   W
Mullen Group MTL11.82▼-6.011.26
 
16.93D   W
ShawcorSCL21.98▲5.415.11
 
28.89D   W
Secure EnergySES8.15▼-5.26.25
 
9.44D   W
REFINING & MARKETING
Parkland FuelPKI38.36▼-4.327.96
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM79.01▼-1.264.65
 
87.36D   W
ChevronCVX121.62▼-0.3100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI19.73▼-0.114.62
 
20.01D   W
Williams CoWMB26.93▼-1.820.36
 
32.22D   W
ONEOKOKE65.58▼-0.450.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP65.43▼-5.152.92
 
80.24D   W
EOG ResourcesEOG86.44▼-10.482.04
 
133.53D   W
Occidental PetroOXY62.71▼-7.256.83
 
87.67D   W
Anadarko PetroAPC42.07▼-5.240.40
 
76.70D   W
Pioneer Natural ResPXD130.36▼-9.8119.08
 
213.40D   W
SERVICES
SchlumbergerSLB41.29▼-8.634.99
 
75.43D   W
HalliburtonHAL27.47▼-11.224.70
 
54.91D   W
Baker HughesBHGE25.73▼-5.120.09
 
37.76D   W
Ntl-Oilwell VarcoNOV25.87▼-10.124.27
 
49.08D   W
TechnipFMCFTI20.98▼-6.218.20
 
34.39D   W
REFINERS
Marathon PetroMPC57.50▼-8.354.29
 
88.45D   W
Phillips 66PSX94.31▼-3.378.44
 
123.97D   W
Valero EnergyVLO79.75▼-3.868.81
 
126.98D   W
HollyFrontierHFC48.80▼-6.244.36
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A60.80▼-2.455.04
 
73.86D   W
TotalTOT56.64▼-1.049.70
 
65.69D   W
BPBP42.25▼-0.836.28
 
47.83D   W
EniE33.72▼-1.929.75
 
40.15D   W
EquinorEQNR21.71▼-2.919.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday:

  • IHS CERAWeek kicks off in Houston, TX
  • IEA releases Oil 2019 in Houston, TX

Tuesday:

  • UK Parliament votes on Brexit deal
  • API Weekly Statistical Bulletin

Wednesday:

  • EIA Weekly Petroleum Status Report

Thursday:

  • BoC Sr Deputy Gov Wilkins delivers speech in Vancouver, BC
  • OPEC Monthly Oil Market Report
  • EIA Weekly Natural Gas Storage Report

Friday:

  • IEA Monthly Oil Market Report
  • Baker Hughes Weekly Rig Counts
  • April contract expiry for WCS, Cdn Light, Edmonton Condensate and Synthetic Crude.
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 break to the upside as OPEC production slides

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