Energy stocks fail to respond to higher oil prices, as global headwinds persist

Energy stocks fail to respond to higher oil prices, as global headwinds persist

WHAT'S MOVING OIL PRICES THIS WEEK
GEOPOLITICS
NEUTRAL
  • No new news on the geopolitical front this week.
USD INDEX
BULLISH
  • Falling bond yields pulled the US dollar lower by 0.7% w/w on Friday.
SUPPLY
BULLISH
  • The Alberta government has ordered its oil producers to cut output by 325,000 bbl/day in January, a reduction of about 8.7%.
  • OPEC+ have agreed to reduce output by 1.2 million bbl/day starting in January, as measured from October levels.
DEMAND
NEUTRAL
  • No new news on the demand front this week.
SENTIMENT
NEUTRAL
  • Oil prices rebounded sharply this week, the first meaningful increase since the beginning of October.
  • After falling below US$60 last week, Brent managed to hold above its key support level for the entire week.
  • As of last Tuesday, Brent traders continue to be bearish, taking more longs off the table and adding more shorts.
  • Note, managed money contracts for WTI have been delayed to Monday due to last Wednesday's federal holiday.
CURRENCIES & BONDS

This week's Canadian economic data from Statistics Canada:

  • About 94,000 new jobs were created in November, mostly full-time positions, split almost evenly among Quebec, Alberta, Ontario and BC. The national unemployment rate declined 0.2 basis points to 5.6%. Alberta's unemployment rate tumbled from 7.3% to 6.3%, but remains the highest outside of Atlantic Canada.

  • Canada's exports declined 1.2% in October, mainly due to lower crude prices. Imports declined 0.6% due to lower vehicle imports. The national trade deficit widened from $891 million in September to $1.2 billion in October.

  • Bank of Canada Governor Stephen Poloz warned of many "negative" headwinds that threaten the Canadian economy, ratcheting down expectations for future rate hikes. The list of concerns include the recent slump in the oil patch, slowing trade with China and uncertainty over business investment. Poloz says the economy still has room to grow without sparking inflation. The bank kept its rate unchanged at 1.75% this week.

This week's notable US economic data:

  • After rising by 237,000 in October, the US Labor Department reported 155,000 new jobs created in November, far short of expectations. The unemployment rate was unchanged at a 49-year low of 3.7%. Average hourly earnings rose 0.2%, reducing the annualized increase to 3.1%.

  • The US trade deficit widened for the fifth month in a row, rising from US$54.6 billion in September to US$55.5 billion in October, the largest since October 2008. Exports declined 0.1%, while imports rose 0.2%.

An inverted US yield curve rattled global markets this week, pulling bond yields lower around the world. The rate on 5-year treasuries ended Friday at 2.70%, slightly below 2-year notes, which closed at 2.72%.

The "official" yield curve, defined as the difference between 10 and 2 year bonds, remains positive but flattened considerably this week, falling to 0.13%. Inverted yields curves warn of slowing economic activity, often leading to a recession. The last time the yield curve fell below zero was in January 2006 (10 vs 2-year), about one year before the last recession.

Yields in the UK, Japan, Germany and Canada also declined this week. Canada's 10-year rate fell to 2.08%, well below the US 10-year rate of 2.85%.

The Aussie dollar was the worst performer in currency markets this week, falling 1.5% due to falling iron ore and copper prices. The Euro, yen and Swiss franc gained almost 1%. The loonie fell sharply on Thursday but recovered on Friday, ending the week 0.3% lower.

SUPPLY & DEMAND UPDATES

Alberta announced plans to reduce the province's output by 325,000 bbl/day starting in January. The province says the cuts would include output from the oil sands and conventional crude, but not condensate. About 150,000 bbl/day of "less economic" barrels have already been curtailed in the province, which will count towards the total goal.

OPEC and friends have agreed to remove 1.2 million bbl/day of crude from oil markets in the new year, as measured from October’s output. The cuts will be spilt 800,000 bbl/day for OPEC members and 400,000 bbl/day for non-OPEC producers, with Russia accounting for more than half of those volumes. Individual quotas for each country were not disclosed. This latest round of cuts will be in effect for six months.

According to the US Energy Information Administration (EIA), crude exports surged above 3 million bbl/day last week for the first time in US history.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

DEC 6, 2018

Gulf Coast crude stockpiles sink 9 million barrels as exports surge to new record highs

 

According to Baker Hughes, 10 oil rigs were taken out of service in the US this week, bringing the total to 877. Canada also lost 17 rigs, falling to 102. In the natural gas sector, 13 new rigs were put into service on both sides of the border.

OIL MARKETS
USD/BBL
% CHG W/W
52-WK
BRENT
WTI
C5+
CDN LT
WCS
61.67
52.61
43.87
42.80
32.66
58.71
50.29
37.04
20.83
12.59
86.29
76.41
71.40
69.32
56.21

Canada's heavy and light oil differentials to WTI narrowed again this week in response to lower output from Alberta and improved demand from the US. The discount on Western Canadian Select (WCS) narrowed by U$8.50, to about US$20/bbl, while the discount on Canadian Light narrowed by US$13 to US$9.80/bbl. The Edmonton Condensate (C5+) discount also declined by over US$3.50, falling to less than US$9 on Friday.

Gasoline rose almost 6% for the week, while heating oil gained about 3%. In natural gas markets, Henry Hub declined over 2% while AECO gas fell 30%.

CRUDE OIL FUTURES CURVES
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ MONTH 3   █ MONTH 5 (VS NEAR MONTH)
MANAGED MONEY: FUTURES & OPTIONS
BRENT
WTI
█ OIL PRICE (USD/BBL)   █ LONG   █ SHORT █ NET LONG (1000 BBL CONTRACTS)
EQUITY MARKETS
    TSX SECTORS
52-WK
    SPX SECTORS
52-WK

Falling bond yields and renewed concerns over US/China relations rattled equity markets this week. The NYSE declined just over 4% while the Nasdaq gave back 5%. The S&P 500 and Dow Jones Industrial declined about 4.5%.

European markets also ended the week about 4% lower while the TSX declined 2.7%. Utilities and precious metals were the only winners in North American equity markets this week. 

ENERGY SECTOR PERFORMANCE
TSX ENERGY SUBSECTORS
SPX ENERGY SUBSECTORS

The TSX energy sector had a volatile week but recovered on Friday, ending the week 0.2% lower, its tenth consecutive weekly decline. Heavy-weights Canadian Natural Resources and Cenovus Energy were the only large-cap producers to end the week in the positive. Many small-cap E&P names hit new multi-year lows during the week.

The S&P 500 energy basket declined over 3% for the week, with services stocks and refiners suffering the worst losses.

TSX ENERGY STOCKS
TSX BULLISH INDICATORS
TOP 5
  • Crescent Point (CPG +8.4%)
  • Cdn Natural Res (CNQ +7.3%)
  • Trican Well Svc (TCW +6.6%)
  • Cenovus Energy (CVE +3.5%)
  • Freehold Royalties (FRU +2.2%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • TSX BEARISH INDICATORS
    BOTTOM
    5
  • TORC O&G (TOG -9.1%)
  • Gibson Energy (GEI -8.3%)
  • Precision Drilling (PD -8.2%)
  • Peyto Exploration (PEY -8.2%)
  • PrairieSky (PSK -7.4%)
  • 12-MO LOWS
  • Keyera (KEY -4.4%)
  • Encana (ECA -4.5%)
  • Tourmaline (TOU -3.4%)
  • Shawcor (SCL -5.3%)
  • Secure Energy (SES -1.4%)
  • PrairieSky (PSK -7.4%)
  • Altagas (ALA -2.3%)
  • Seven Generations (VII -3.8%)
  • ARC Resources (ARX +0.4%)
  • Parex Resources (PXT -1.6%)
  • Whitecap Res (WCP -4.9%)
  • Peyto Exploration (PEY -8.2%)
  • TORC O&G (TOG -9.1%)
  • Paramount Res (POU -4.1%)
  • Precision Drilling (PD -8.2%)
  • Nuvista Energy (NVA -6.2%)
  • Kelt Exploration (KEL -3.9%)
  • CES Energy (CEU -4.7%)
  • Tamarack Valley (TVE -2.7%)
  • Advantage O&G (AAV -6.7%)
  • 10-YR LOWS
  • Tourmaline (TOU -3.4%)
  • PrairieSky (PSK -7.4%)
  • Altagas (ALA -2.3%)
  • Seven Generations (VII -3.8%)
  • ARC Resources (ARX +0.4%)
  • Peyto Exploration (PEY -8.2%)
  • Precision Drilling (PD -8.2%)
  • Advantage O&G (AAV -6.7%)
  • DEATH CROSSES
  • Gran Tierra (GTE -4.8%)
  • Birchcliff Energy (BIR -6.5%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Suncor EnergySU41.88▼-2.240.49
     
    55.4722D   W
    Imperial OilIMO37.46▼-5.333.43
     
    44.9130D   W
    Husky EnergyHSE16.13▼-2.215.30
     
    22.9921D   W
    MIDSTREAM
    EnbridgeENB42.43▼-2.837.36
     
    51.0474D   W
    TransCanadaTRP53.54▼-1.748.92
     
    63.2973D   W
    Pembina PipelinePPL43.26▼-3.437.60
     
    47.8463D   W
    Inter PipelineIPL20.92▼-2.120.68
     
    27.9230D   W
    Keyera KEY27.83▼-4.427.67
     
    38.9119D   W
    Gibson EnergyGEI19.58▼-8.315.68
     
    23.3283D   W
    LARGE CAP E&P
    Cdn Natural ResCNQ35.83▲7.332.08
     
    49.0832D   W
    Cenovus EnergyCVE10.16▲3.59.03
     
    14.8419D   W
    EncanaECA8.55▼-4.58.46
     
    18.543D   W
    TourmalineTOU17.78▼-3.417.34
     
    26.1915D   W
    Vermilion EnergyVET31.23▼-5.530.55
     
    50.4613D   W
    SERVICES
    Pason SystemsPSI19.20▼-3.716.05
     
    24.5742D   W
    EnerflexEFX15.98▼-2.013.55
     
    18.7277D   W
    ShawcorSCL18.49▼-5.318.35
     
    29.5010D   W
    Mullen Group MTL12.35▲0.412.04
     
    16.9321D   W
    Secure EnergySES7.10▼-1.46.72
     
    9.8231D   W
    REFINING & MARKETING
    Parkland FuelPKI36.88▼-5.825.13
     
    47.4584D   W
    S&P 500 ENERGY STOCKS
    SPX BULLISH INDICATORS
    TOP 5
  • Devon Energy (DVN +0.6%)
  • EOG Resources (EOG +0.3%)
  • Cabot O&G (COG +0.3%)
  • Helmerich & Payne (HP +0.2%)
  • Noble Energy (NBL +0.2%)
  • 12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • SPX BEARISH INDICATORS
    BOTTOM
    5
  • TechnipFMC (FTI -9.1%)
  • HollyFrontier (HFC -9%)
  • Cimarex Energy (XEC -8.2%)
  • Ntl-Oilwell Varco (NOV -7.2%)
  • Diamondback (FANG -7%)
  • 12-MO LOWS
  • Concho Res (CXO -6.1%)
  • Schlumberger (SLB -4.6%)
  • Halliburton (HAL -5.6%)
  • Ntl-Oilwell Varco (NOV -7.2%)
  • Baker Hughes (BHGE -5.1%)
  • TechnipFMC (FTI -9.1%)
  • Valero Energy (VLO -4.9%)
  • Pioneer Natural Res (PXD -3.2%)
  • Apache (APA -6%)
  • Noble Energy (NBL +0.2%)
  • Diamondback (FANG -7%)
  • Cimarex Energy (XEC -8.2%)
  • 10-YR LOWS
  • Baker Hughes (BHGE -5.1%)
  • DEATH CROSSES
  • ONEOK (OKE -2.3%)
  • HollyFrontier (HFC -9%)
  • Marathon Oil (MRO -3.8%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    INTEGRATED
    Exxon MobilXOM77.64▼-2.372.16
     
    89.3059D   W
    ChevronCVX115.49▼-2.9107.54
     
    133.8858D   W
    MIDSTREAM
    Kinder MorganKMI16.35▼-4.214.69
     
    19.8355D   W
    Williams CoWMB24.48▼-3.323.54
     
    33.6743D   W
    ONEOKOKE59.99▼-2.351.28
     
    71.9946D   W
    LARGE CAP E&P
    ConocoPhillipsCOP65.91▼-0.450.08
     
    80.2458D   W
    EOG ResourcesEOG103.61▲0.396.54
     
    133.5342D   W
    Occidental PetroOXY66.54▼-5.362.47
     
    87.6725D   W
    Anadarko PetroAPC52.06▼-1.646.80
     
    76.7014D   W
    Concho ResCXO122.41▼-6.1117.74
     
    163.1133D   W
    SERVICES
    SchlumbergerSLB43.04▼-4.641.87
     
    80.353D   W
    HalliburtonHAL29.68▼-5.629.24
     
    57.863D   W
    Ntl-Oilwell VarcoNOV29.81▼-7.229.73
     
    49.086D   W
    Baker HughesBHGE21.66▼-5.121.05
     
    37.762D   W
    TechnipFMCFTI21.00▼-9.120.98
     
    35.002D   W
    REFINERS
    Marathon PetroMPC61.56▼-5.560.64
     
    88.4519D   W
    Phillips 66PSX90.35▼-3.488.99
     
    123.9721D   W
    Valero EnergyVLO75.99▼-4.975.55
     
    126.985D   W
    HollyFrontierHFC56.85▼-9.042.42
     
    83.2818D   W
    NYSE ADR ENERGY STOCKS
    ADRs BULLISH INDICATORS
    12-MO HIGHS
  • None
  • 10-YR HIGHS
  • None
  • GOLDEN CROSSES
  • None
  • ADRs BEARISH INDICATORS
    12-MO LOWS
  • Royal Dutch Shell (RDS.A -1.8%)
  • Eni (E -1.6%)
  • 10-YR LOWS
  • None
  • DEATH CROSSES
  • Equinor (EQNR -0.9%)
  • COMPANY TICKER CLOSE %CHG L 52WK H RANK  CHARTS
    Royal Dutch ShellRDS.A59.31▼-1.857.65
     
    73.8612D   W
    TotalTOT54.33▼-2.353.37
     
    65.6938D   W
    BPBP39.51▼-2.136.15
     
    47.8340D   W
    EniE31.75▼-1.631.18
     
    40.1533D   W
    EquinorEQNR23.18▼-0.919.91
     
    28.9337D   W
    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
  • RANK:
  • BASED ON STOCKCHARTS TECHNICAL RANK (SCTR)
  • REFLECTS RELATIVE STRENGTH AMONG OTHER ENERGY STOCKS (PERCENTILE RANKING)
  • RISING RANK (↑) REFLECTS INCREASING RELATIVE STRENGTH
  • FALLING RANK (↓) REFLECTS DECREASING RELATIVE STRENGTH.
  • Canadian energy sector posts ninth week of losses

    Canadian energy sector posts ninth week of losses

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