CANADA EQUITIES: BMO On Fourth of Six Factors Driving The Local Stock Market - Energy and Resources A "Major" Source of Strength


A story about TSX outperformance is never complete without a chapter on the energy sector and, true

to form, it has been a "major" source of strength, Bank of Montreal (BMO.TO, BMO) notes.

BMO notes Canadian energy stocks have jumped 18% so far this year and more than 35% from the late-2012 low. Recall, it says, that the latter period marked extremes in the discount to WTI received by Canadian producers. But since then, it says, additional pipeline capacity (e.g., southern leg of Keystone XL) has helped alleviate supply backlogs and boosted Canadian oil prices . BMO adds a surge in crude shipments by rail has also helped, and, as an added bonus, has made Canadian rail stocks among the best performers on the

year. Meantime, gold stocks have rebounded 25% on the year after deeply underperforming the metal in 2013.

Sustainability factor? BMO says "moderate." It adds: "The resource sectors are always somewhat of a wildcard. However, deep discounts for Canadian crude appear behind us for now, while Middle East tensions could easily drive prices higher. Longer term, the Canadian energy sector still faces a challenge if more meaningful pipeline capacity is not put in place."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

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