Canadian WCS oil price: Canadian oil price differential expected to remain under $20 for the foreseeable future, well into 2016. A couple reasons for this
- Enbridge is expanding the capacity of a key pipeline in Wisconsin: from 400,000 bpd to 1.2 million bpd. That will have a positive effect on the oil and gas industry in the US NW (three-fifths of oil output in ND is shipped by rail). Enbridge has also proposed the Sandpiper Pipeline which will add 225,000 bpd to Minnesotia plus another 375,000 bpd to Wisconsin.
- BP and Marathon refineries in the US are being upgraded to handle more heavy crude from Alberta.
- Glut of supply in Wisconsin may be relieved when portions of the Keystone pipeline come online (southern leg of Keystone running through Cushing, Oklahoma became operational January 22).
- Trans Mountain pipeline from Edmonton to Burnaby tripled capacity from 300th to 890th barrels per day.
Despite several factors working in its favor, over the last few weeks the price of gold hasn't really moved in either direction, as investors were anticipating a tapering to the Fed's $80 billion monthly bond buying program (put downward pressure on commodity prices). When it finally happened on January 29 ($10b/mo) gold went up as is to be expected (no more tapering in the short term). I have some concerns about Fed tapering.. The Fed claims that economic activity picked up in recent months -> this should cause money to flow out of commodities and into equities... however that doesn't appear to be happening (soft jobs growth in December). If you're concerned about interest rates rising in response to Fed tapering don't be: The Fed has explicitly stated that it will maintain a policy of record low interest rates (gold does well when interest rates go down).
Counteracting this and lifting the price of gold is
- Currency crisis in emerging markets specifically Turkey, South Africa, Argentina - safe haven investing favors gold, US security notes
- Financial liquidity problem developing in China; banks aren't lending and that's making it worse
- Less US monetary stimulus is wreaking havoc on currencies in South Africa and Turkey where account deficit problems are forcing interest rate hikes.
With regards to gold there are other factors at play, an important one being the torrid pace at which the Chinese continue to buy it.
- Net imports of gold from China to Hong Kong up 33% in calendar year 2013 to 1108.8 tons. In December alone shipments were up 55% !! That despite the price nosediving last year; for calendar year 2013 gold fell by 28% to finish at a six-month low of USD 1182.
- Gold exports from China-> HK 34.8t in December up 17% from the previous year.
Stock Analysis for January/February 2014
- Facebook revenue up 63% to $2.59b beating analyst expectations of $2.33b. 53% of revenue now comes from mobile advertising (680-> 945 million mobile users).
- Foxconn to invest $10b over next 5 years to develop manufacturing centers in the US.
- Boeing 4Q quarterly profit up 26% -> $1.23 billion. Plans to deliver 720 commercial aircraft in 2014 up 10%. Shares fell slightly on the day due to a modest outlook for next year.
- Google to sell Motorola device unit to Lenovo for $2.91 billion. Last week Lenovo agreed to buy a part of IBM's server business for $2.3 billion. Unless Google is able to flip Motorola's remaining patents to another player, the Motorola deal doesn't look great on paper (paid $12.5b for the company back in May 2012). Despite this, news of the deal pushed the stock higher.