Oil Breaking Bad (Some More)

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Includes: BNO, DBO, DNO, DTO, OIL, OILK, OILX, OLEM, OLO, SCO, SU, SZO, UCO, USL, USO
by: Danielle Park, CFA

West Texas Crude is down another 2% so far this morning, back to levels seen last in November 2016. The song remains the same: slow global demand and gushing supply all over the planet. Data on Friday showed a record 22nd consecutive week of increases in U.S. oil drilling rigs, not to mention leaping production across the OECD, China and select other non-OECD countries. Canada's dirty Western Canadian Select is trading in the low 30s.

As charted below, Suncor (NYSE:SU) shares (in red) have traditionally traded in close correlation with WTIC (grey). Now Suncor's stated plan 'A' to to lever up exposure to 'oil prices as they recover' is coming up for another review. Time to diversify into sustainable energy production and storage yet? Evolve or die?

Debt and over-capacity in antiquated fuels are likely to continue suppressing income and stability not just for oil cos, but the Canadian economy and the banks that have funded them. Canada has been firing on two cylinders for years now: oil and housing. Both are set up for an extended rough patch.

Disclosure: No positions

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