Last week crude oil prices plummeted 11%, the worst week for energy prices in U.S. dollars since late 2014.
- The sharp decline in energy prices is weighing heavily on the U.S. energy sector. Due to an accounting rule set by the Securities and Exchange Commission, Chesapeake Energy Corp. (N:CHK) will erase the equivalent of 1.1 billion barrels of oil from its books. The rule prevents businesses from presenting oil reserves that will not be drilled within the next five years. With oil prices so low, drilling operations have stopped, effectively reducing the assets that can be claimed by these companies.
- On Friday the International Energy Agency said that as 2015 comes to a close it sees a potential drop in the demand for oil. The agency also predicted that, with oil trading at less than $50 per barrel, energy companies will be making many more cuts.
- The number of active drilling rigs, published weekly by Baker Hughes, has fallen again. The indicator slipped by 21 rigs last week, to 524. Even though this figure has been on the decline for over a year, we are still waiting to see significant signs of a drop in oil output in the U.S.
- The price of diesel in New York in CAD/litre has reached its lowest level since 2009, and on Friday the 2016 calendar year could be budgeted at under $0.50/litre. Even if the markets are panicking, we are still recommending trading small volumes when you budget your next few months of consumption.
Have a good week!
Philippe Shebib