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Energy Summary for April 14, 2020

2020-04-14 20:25 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for May delivery dipped briefly below $20 before closing down $2.30 to $20.11 on the New York Merc, while Brent for June lost $2.14 to $29.60 (all figures in this para U.S.). The market continued to doubt the effectiveness of the recently announced OPEC+ production cuts in the face of the demand destruction caused by the COVID-19 pandemic. Oil prices are close to where they were at on April 1, the day before they started rallying sharply on rumours that OPEC+ would hold an emergency meeting to discuss output cuts. The actual outcome of the meeting fell short of the rumours. Here in Canada, Western Canadian Select traded at a discount of $17.00 to WTI, up from a discount of $18.06. Natural gas for May lost seven cents to $1.65. The TSX energy index lost 1.07 points to close at 64.19.

On a day like today, energy investors must take signs of hope where they can get them. One sign arrived courtesy of ExxonMobil, the largest U.S. oil producer (and the parent company of Canada's Imperial Oil Ltd. (IMO: $17.32)). Exxon raised $9.5-billion (U.S.) today by selling five series of notes expiring from 2023 to 2051. This comes just four weeks after Exxon raised $8.5-billion (U.S.) through a separate debt offering. The intriguing difference lies in the borrowing costs: Exxon had to pay a hefty premium to get the deal done four weeks ago, issuing the bonds with coupons ranging from 2.992 to 4.327 per cent. (For context, this was about 60 basis points higher than the debt issued at the same time by PepsiCo, even though PepsiCo has a lower rating among credit rating agencies.) The new offering, by contrast, is being done at 1.571 to 3.452 per cent -- still not as good as pre-COVID-19 levels, but much better than a month ago. As well, Exxon thought it would raise just $9-billion (U.S.) but raised $9.5-billion (U.S.), indicating strong investor demand. Reuters took all of this as "a sign of how investor confidence is gradually returning" to the energy sector.

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