Investor Relations

Energy Market Commentary August 18, 2016: Nasdaq Advisory Services

Thursday, August 18, 2016

Sector Commentary

The energy sector is setting up for a flat open, with modest support from fractionally higher WTI crude oil prices being offset by weakness in equity futures. Brent oil prices are back below $50 per barrel after eclipsing that level overnight, which marked a 6-week high. Meanwhile, micro-driven news flow continues to remain light as earnings season has passed and corporate updates will remain scarce until the fall conference circuit kick starts next month. Though the sector, particularly E&Ps, may continue to benefit from recent tailwinds from factors including a sector upgrade from Bank of America Merrill Lynch on Tuesday, as well as consistent capital inflows into the sector that have been present since the start of the third quarter.

In the commodity markets, oil grades are converging, with Brent front-month lower by a few basis points while WTI crude oil prices have regained the $47-mark and are higher by over half a percent. Weighing today is news that Saudi Arabia may seek to reach record output for August, after eclipsing 10.67 million barrels in July, as it seeks to meet the peak summer cooling demand within its borders. The kingdom is also strategically aiming to max out production ahead of next month’s meeting in Algiers among OPEC members to discuss a potential cap on total output. However, many market participants remain highly skeptical of any meaningful impact on production levels given the recent history on the group’s behalf of unwillingness to coordinate and stabilize prices. Following the release of the stronger jobs data in the US, WTI prices have advanced further.

Meanwhile, natural gas futures prices are waning between even levels and slight declines ahead of this morning’s weekly EIA inventory report. Consensus calls for a build of 27 bcf. Moderating forecasts for the remainder of August have weighed on prices, which has combined with expectations that the start of the winter heating season in November will coincide with all-time highs on stockpiles.

U.S. INTEGRATEDS

(Late Wednesday) Reuters - ExxonMobil put off plans to shut its Baton Rouge, Louisiana refinery after it managed to start a liquefied petroleum gas processing unit in the adjoining chemical plant.

INTERNATIONAL INTEGRATEDS

Press Release - The Board of Royal Dutch Shell announced the Reference Share Price in respect of the second quarter interim dividend of 2016, which was announced on July 28, 2016 at $0.47 per A ordinary share and B ordinary share and $0.94 per American Depository Share.

U.S. E&PS

Press Release - Continental Resources announced that it has signed a definitive purchase and sale agreement with an undisclosed buyer to sell non-strategic properties in North Dakota and Montana for $222 million.

Press Release - Devon Energy announced the early tender results for its previously announced tender offers to purchase for cash up to an aggregate principal amount of the debt securities that would not result in the aggregate amount that all holders of the Notes are entitled to receive, excluding accrued and unpaid interest, for their Notes that are validly tendered and accepted for purchase in the Maximum Tender Offers, exceeding the Aggregate Maximum Repurchase Amount.

OIL SERVICES 0731

Press Release - National Oilwell Varco announced that its Board of Directors declared the regular quarterly cash dividend of $0.05 per share of common stock, payable on September 30, 2016 to each stockholder of record on September 16, 2016.

(Late Wednesday) Press Release - U.S. Silica Holdings announced that it has completed the acquisition of the NBR Sand unit of New Birmingham.

MLPs & Pipelines

Morgan Stanley downgraded Enterprise Products Partners to ‘Equal Weight’ from ‘Overweight.’

TD Securities upgraded Inter Pipeline to ‘Buy’ from ‘Hold.’

Morgan Stanley upgraded Kinder Morgan to ‘Overweight’ from ‘Equal Weight.’

Morgan Stanley downgraded Magellan Midstream Partners to ‘Underweight’ from ‘Equal Weight.’

Stifel Nicolaus and Company initiated coverage of Phillips 66 Partners and Shell Midstream Partners with a ‘Buy’ rating.

MARKET COMMENTARY

U.S. stock index futures were lower after the number of Americans filing for unemployment benefits fell more than expected last week, reinforcing views of labor market strength that could encourage the Federal Reserve to raise interest rates soon. Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 262,000 for the week ended Aug. 13, the Labor Department said on Thursday. Claims for the prior week were unrevised. Economists polled by Reuters had forecast initial claims slipping to 265,000 in the latest week. Claims have now been below 300,000, a threshold associated with a strong labor market, for 76 straight weeks. New York Fed President William Dudley, an influential policymaker at the U.S. central bank, said on Tuesday it was "possible" to hike rates at the Fed's Sept. 20-21 policy meeting. The dollar hit a seven-week low against a basket of major currencies, while gold steadied. Brent reversed gains after earlier trading briefly above $50 a barrel for the first time in six weeks.


Nasdaq Advisory Services Energy Team Nasdaq's Advisory Services Tamar Essner
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