Alberta’s oil production cut
On December 2, Rachel Notley, Premier of Alberta, announced a reduction of 8.7% or 325,000 barrels per day of raw crude oil and bitumen in Alberta’s production. After a significant reduction in the storage, authorities might lower the production cut to 95,000 barrels per day in December 2019. On December 3, the gap between the WTI and WCS (Western Canada Select) price contracted by ~$4 per barrel.
So far, the average gap between the WTI and WCS price has widened more than 50% in the fourth quarter—compared to the previous quarter.
The fall in the utilization of the Midwest Refinery Operable Capacity last month might have widened the gap between these two grades of oil apart from pipeline constraints. Canadian oil accounts for 99% of Midwest refiners’ input. Midwest refiners consume 63.9% of the total Canadian oil input to US refiners. Canadian oil exports to the US account for 99% of its total oil exports.
Upstream stocks that could be impacted
Devon Energy (DVN) has significant exposure to Canadian heavy oil production. On December 3, Devon Energy rose 6.4%—the highest among the upstream stocks that form the S&P 500 Index (SPY). ConocoPhillips (COP) is another US upstream stock that could to benefit with contraction in the WTI-WCS spread.
On December 3, HollyFrontier (HFC) fell 5.8%. In PADD 2 (Petroleum Administration for Defense Districts) or the Mid-Continent, HollyFrontier has its highest crude charge capacity of 300,000 barrels per day. Phillips 66 (PSX) fell 1.5% in the last trading session. Phillips 66 also has refining assets in the Mid-Continent.
In the week ending November 30, Tesla (TSLA) stock turned positive again. The stock rose 7.6% last week after falling 8.0% the previous week.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.