Markets take a February pause after spectacular January rally

Markets take a February pause after spectacular January rally

This week's Energy Market Summary for the week ending Friday February 8, 2019:
  • Oil prices sink as US dollar gains strength
  • Henry Hub touches 1-year low, despite record demand
    ... while AECO gas gains 36% so far in 2019
  • Venezuelan crude stuck floating at sea
  • US lawmakers take aim at OPEC
  • Saudis and Russians cut January output
  • Energy sectors drag on both Canadian and US markets.
WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • The House of Representatives’ Judiciary Committee unanimously passed the No Oil Producing and Exporting Cartels (NOPEC) bill, allowing OPEC to be charged under US anti-trust legislation. President Trump supported NOPEC in the past, but the bill is seen as unlikely to be passed into law.
  • Millions of barrels of Venezuelan crude were stuck in the Gulf of Mexico this week, after the Trump Administration blocked payments to state-owned PDVSA. The US imports about 500,000 bbl/day of Venezuelan crude, mostly heavy and mostly into the Gulf Coast. Those lost barrels are being displaced with crude from Colombia, Ecuador and Brazil, due to logistical constraints from Canada and Mexico, the two largest sources of US heavy crude imports.
USD INDEX
BEARISH
  • The US dollar gained over 1% for the week, returning to the levels of late 2018.
SUPPLY
NEUTRAL
  • Russia says it has made good on its promise to reduce output this year. The country's energy minister claims production decreased by 47,000 bbl/day in January, versus last October's level.
  • According to various media reports, Eastern Libyan forces have taken over the El Sharara oil field, and has called on the country's National Oil Company (NOC) to resume operations. NOC declared force majeure back in early December, taking 315,000 bbl/day offline.
  • Production out of Saudi Arabia declined 400,000 bbl/day in January, to 10.2 million bbl/day.
  • According to Baker Hughes, the number of oil rigs in service in the US increased by 7 this week, bringing the total to 854. Total US oil output was again unchanged this week.
DEMAND
NEUTRAL
  • No new news on the demand front this week.
SENTIMENT
NEUTRAL
  • Oil prices continue to move sideways.
  • Brent futures curves have flattened out over the next 6 months, indicating a relatively balanced market. WTI remains in contango, indicating a well-supplied market in the near term.
  • The number of long positions on Brent managed money contracts increased slightly this week. WTI data is still delayed due to the recent government shutdown.
OIL MARKETS
STREAM CLOSE %CHG L 52WK H
BRENT$62.10▼1.050.47
 
86.29
WTI$52.72▼4.642.53
 
76.41
CDN LT$49.07▼4.520.83
 
69.32
C5+$50.34▼5.037.04
 
71.40
WCS$43.09▼6.112.59
 
56.21

Most North American crude benchmarks, including WTI and Canadian Light, declined about 5%. Western Canadian Select (WCS) fell 6%, while Brent dipped a more modest 1% for the week. Oil prices remain stuck in a very narrow trading range since mid-January.

Henry Hub natural gas prices slid another 5% this week, ending the week at US$2.58/MMBtu, and touching a 1-year low. AECO gained 9% for the week, ending Friday at US$1.46/MMBtu. 

Heating oil prices were roughly unchanged while wholesale gasoline prices rose 0.7%.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

FEB 6, 2019

CUSHING STOCKPILES CONTINUE TO RISE AS US IMPORTS MORE CANADIAN 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)
EDITOR'S NOTE: WTI MANAGED MONEY CONTRACT DATA FROM THE CFTC HAS BEEN DELAYED DUE TO THE RECENT GOVERNMENT SHUTDOWN.
CURRENCIES & BONDS

Today's Canadian economic data:

  • Canada added 66,800 jobs in January, led by gains in Ontario and Quebec. The private sector added 111,500 new jobs, while the number of self-employed declined by 60,700. Alberta's employment rate fell for the second month in a row, raising the provincial unemployment rate to 6.8%. The national unemployment rate increased by from 5.6 to 5.8%, due to an increase in the labour participation.
  • Despite the stellar jobs report, yields on Canadian 10-year notes closed at 1.88, down 8 basis points from the previous week. The loonie also sank 1.4%.

Today's US economic data:

  • After widening for five straight months, the US trade deficit shrank over 11% to US$49.3 billion. Imports declined by 2.9%, mainly due to petroleum products.
  • The Trump Administration warned that there remains a "pretty sizeable distance" between the US and China, suggesting a trade agreement may not be reached before the March 1 deadline. US tariffs on US$250 billion worth of Chinese imports currently sit at 10%, but could rise to as much as 25% if no agreement is reached.
  • US bond yields declined across the board this week, with the near-end of the curve remaining inverted. Yields on 10-year bonds declined 7 basis points to 2.63%.
  • Despite lower yields, the greenback gained 1.2%, returning to the highs of late last year.

Elsewhere in the world:

  • The European Commission cut its Eurozone growth forecast from 1.9% to just 1.3% for 2019. The Euro declined almost 1%. Yields on German 10-year bunds were cut in half to just 0.09%.
  • The Bank of England also warned of weak economic growth, opting to keep interest rates unchanged this week. The UK economy is now expected to expand 1.2% this year, down from a previous forecast of 1.7%, the lowest growth rate since 2009. The pound sterling declined 1.4% for the week.
  • Australia's central bank hinted it may need to reduce rates due to a weakening economy. The Australian dollar and New Zealand kiwi fell over 2% this week.
EQUITY MARKETS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

A mixed bag in equity markets this week, with emerging markets and European markets mostly posting losses, while US indices were flat to slightly positive. The German DAX and Japan's Nikkei were the worst performing developed markets, declining over 2%. 

The Dow Jones Industrial gained 0.2%, while the S&P 500 was roughly unchanged. Utilities were the best performers south of the border, as traders turned defensive this week. Energy and materials were the worst performing sectors, due to falling commodity prices.

The TSX gained almost 1%. Energy was also the worst performing sector, falling over 2%.

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

Losses were seen across all subsectors. Producers were hit hard this week, particularly Encana (-10.1%) and Anadarko Petroleum (-13.6%). Midstream stocks were the least scathed due to lower bond yields.

TSX ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Suncor EnergySU42.81▲1.035.53
 
55.47D   W
Imperial OilIMO35.49▼-0.133.43
 
44.91D   W
Husky EnergyHSE14.95▼-4.413.33
 
22.99D   W
MIDSTREAM
EnbridgeENB47.92▼-1.037.36
 
49.70D   W
TransCanadaTRP55.21▼-0.247.90
 
59.51D   W
Pembina PipelinePPL47.09▲0.437.60
 
47.84D   W
Inter PipelineIPL20.93▲0.218.60
 
25.66D   W
Keyera KEY28.00▼-1.024.05
 
38.91D   W
Gibson EnergyGEI19.60▼-3.215.68
 
23.32D   W
LARGE CAP E&P
Cdn Natural ResCNQ34.14▼-2.530.11
 
49.08D   W
Cenovus EnergyCVE9.93▼-1.38.74
 
14.84D   W
EncanaECA8.06▼-10.16.90
 
18.54D   W
TourmalineTOU18.16▲2.315.84
 
26.19D   W
Vermilion EnergyVET31.14▼-2.626.67
 
49.67D   W
SERVICES
Pason SystemsPSI19.60▼-4.316.05
 
24.57D   W
EnerflexEFX16.75▼-3.813.55
 
18.72D   W
Mullen Group MTL11.51▼-4.811.26
 
16.93D   W
ShawcorSCL19.63▼-1.815.11
 
28.89D   W
Secure EnergySES7.71▼-4.26.25
 
8.91D   W
REFINING & MARKETING
Parkland FuelPKI37.18▼-0.327.36
 
47.45D   W
S&P 500 ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
INTEGRATED
Exxon MobilXOM73.98▼-2.664.65
 
87.36D   W
ChevronCVX117.58▼-0.7100.22
 
131.08D   W
MIDSTREAM
Kinder MorganKMI18.02▼-1.814.62
 
18.67D   W
Williams CoWMB26.88▼-2.020.36
 
32.22D   W
ONEOKOKE65.02▼-0.250.26
 
71.99D   W
LARGE CAP E&P
ConocoPhillipsCOP66.26▼-3.550.18
 
80.24D   W
EOG ResourcesEOG92.50▼-6.482.04
 
133.53D   W
Occidental PetroOXY64.96▼-4.556.83
 
87.67D   W
Anadarko PetroAPC41.84▼-13.640.40
 
76.70D   W
Pioneer Natural ResPXD135.71▼-5.1119.08
 
213.40D   W
SERVICES
SchlumbergerSLB42.78▼-4.034.99
 
75.43D   W
HalliburtonHAL29.70▼-7.524.70
 
54.91D   W
Baker HughesBHGE24.61▲1.120.09
 
37.76D   W
Ntl-Oilwell VarcoNOV28.35▼-5.224.27
 
49.08D   W
TechnipFMCFTI22.35▼-3.518.20
 
34.39D   W
REFINERS
Marathon PetroMPC62.72▼-4.254.29
 
88.45D   W
Phillips 66PSX93.52▼-0.778.44
 
123.97D   W
Valero EnergyVLO84.14▼-1.368.81
 
126.98D   W
HollyFrontierHFC53.95▼-2.342.42
 
83.28D   W
NYSE ADR ENERGY STOCKS
COMPANY TICKER CLOSE %CHG L 52WK H CHARTS
Royal Dutch ShellRDS.A62.90▲0.155.04
 
73.86D   W
TotalTOT55.16▼-0.349.70
 
65.69D   W
BPBP42.49▲2.836.28
 
47.83D   W
EniE33.00▼-2.729.75
 
40.15D   W
EquinorEQNR22.60▼-1.819.95
 
28.93D   W
NEXT WEEK'S EVENTS

Monday::

  • Credit Suisse Energy Summit continues in Vail, CO

Tuesday:

  • OPEC Monthly Oil Market Report (February 2019)
  • API Weekly Statistical Bulletin
  • Q4/2018 earnings: PrairieSky Royalty

Wednesday:

  • IEA Oil Market Report: February 2019
  • EIA Weekly Petroleum Status Report
  • EIA Weekly Natural Gas Storage Report
  • March contract expiry for WCS, Cdn Light, Synthetic Crude and Edmonton Condensate
  • Q4/2018 earnings: Cenovus Energy, Marathon Oil Corp, Williams Co., Teck Resources

Thursday:

  • BP Energy Outlook: 2019 Edition
  • Q4/2018 earnings: TransCanada, Inter Pipeline, Precision Drilling

Friday:

  • Funding expiry for US federal government
  • Baker Hughes Weekly Rig Counts
  • Q4/2018 earnings: Enbridge
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
  • TSX energy sector lags as investors digest fallout from Alberta's curtailment experiment

    TSX energy sector lags as investors digest fallout from Alberta's curtailment experiment

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