DJ Energy & Utilities Roundup: Market Talk

The latest Market Talks covering Energy and Utilities. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0800 GMT - The FTSE 100 Index rises 0.5%, or 38 points to 7049 as gains for oil and financial stocks offset losses for consumer-goods shares. BP and Royal Dutch Shell are both up more than 1% as the price of a barrel of Brent crude increases 0.6% to $81.72 after OPEC left its output plans unchanged. Lloyds Banking Group, Standard Chartered, Aviva and NatWest are among the biggest risers in the financial sector. Reckitt Benckiser and Unilever are among a handful of fallers. Asia markets closed mixed and the Dow fell Monday. "Another bearish session for Asian markets overnight, with markets feeding off the negativity in the U.S. yesterday," IG analysts say. (philip.waller@wsj.com)

0631 GMT - Even as Chinese power producers scale up renewable energy sources like wind, coal-fired electricity generation isn't likely to go away soon, according to S&P Global Ratings. This is because "wind power, which is intermittent by nature, requires a ramping up of power storage facilities and enhancing of grid distribution capabilities," it says. Coal-fired power units with high efficiency and low emissions are likely to continue playing an essential part in ensuring grid stability even when clean energy makes the bulk of contributions, the rating firm says. (yongchang.chin@wsj.com)

0253 GMT - India's upstream natural gas companies are likely to benefit from the country raising its domestic gas price by 62% to $2.90/MMBtu, Fitch Ratings says. The higher price applies for October to March and would support the profitability and investment spending of companies like Oil & Natural Gas Corp. and Oil India, the ratings company says. This should help them improve their credit profiles and may allow for more capacity expansion, it says. The companies should be able to pass on costs to end users, since prices of competing oil-based fuels are also rising due to the recent oil-price increases, Fitch adds. (yongchang.chin@wsj.com)

0023 GMT - Oil is higher in early Asian trade, supported by the OPEC+'s decision to raise November crude production by just 400,000 barrels a day, less than what markets were expecting, Commonwealth Bank of Australia says. "Markets were expecting a larger increase, with some estimates around 800,000 b/d, given forecasts of a deepening deficit in oil markets," it says. "OPEC's outlook suggests further reductions in global oil stockpiles. That's a problem given that oil inventories are already low." Front-month Brent and WTI are each 0.1% higher, at $81.36/bbl and $77.69/bbl, respectively. (yongchang.chin@wsj.com)

2156 GMT - AGL Energy's planned separation of its retail business from its coal-fired power generation assets won't provide either with significant capacity for growth, UBS says. That's because both companies--AGL Australia and Accel Energy--will have constrained balance sheets. UBS now sees a lower risk that more equity will be needed before the demerger happens, as AGL has scrapped its special dividend and will underwrite its dividend reinvestment plan. However, the bank says its "refreshed credit analysis still does not expect either AGL Australia or Accel Energy to have balance sheet capacity to support any material growth investments following the demerger." (david.winning@wsj.com; @dwinningWSJ)

1941 GMT - The Canadian government has triggered a 1977 treaty that governs pipelines crossing its border with the United States in the ongoing dispute over Enbridge's Line 5. The state of Michigan has threatened to close the pipeline. Gordon Giffin, former Ambassador to the US, who is Canada's lawyer in the dispute, wrote a letter to Michigan judge Janet Neff. He argued that by invoking the treaty and requesting formal negotiations with the United States, Canada has taken the issue out of the court's hands. Michigan's government has essentially walked away from a court-ordered mediation with Enbridge after several fruitless sessions this past summer. President Biden's government has tried to stay out of the dispute and leave it to the courts. Canada's action today means the White House can no longer ignore the problem.(vipal.monga@wsj.com; @vipalmonga)

1847 GMT - Natural gas prices close the session up 2.6% at $5.766/mmBtu amid higher global prices, and after a bullish buying frenzy in crude-oil and gasoline markets spilled over into natural gas. "While the weather data for the US remains exceptionally bearish for the next 15-20 days for a string of numerous larger than normal builds, global prices are higher today," say analysts at NatGasWeather.com. "Huge daily swings continue in the nat gas markets and today it was higher to briefly take out $6 before selling back off." (dan.molinski@wsj.com)

1451 GMT - Amplify Energy slides as a Southern California oil spill threatens to end a nine-session winning streak. Analysts at Roth Capital move to the sidelines, downgrading the shares to neutral from buy and suspending their $6.20 price target as they await information from Amplify about the extent of the spill, the estimated clean-up costs and any insurance coverage. Amplify shares had risen 50% through Friday since closing at $3.83 on Sept. 20. But the spill of an estimated 126,000 gallons of oil at the company's platform off the Orange County coast has polluted beaches and threatens wildlife and wetlands in the area. Amplify down 43% to $3.27 after falling as low as $2.79 early in the session. (colin.kellaher@wsj.com)

1405 GMT - American consumers likely saw a jump in their grocery bills over the weekend, and things will probably get worse as financial markets see a Monday morning surge in crude-oil and fuel prices that often trigger broadly-higher prices across the economy. AAA says prices are back to a seven-year-high of $3.20 a gallon, and Tom Kloza at Oil Price Information Service says "momentum exists [for pump prices] to go slightly higher thanks to OPEC-plus and US E&P discipline." WTI crude is now in position to close at its highest since the start of the oil bust seven years ago, up 3.3% at $78.38. (dan.molinski@wsj.com)

1405 GMT - Euro corporate hybrid bonds, which blend debt- and equity-like characteristics, are set to bounce back after recent stock market volatility drove their credit spreads wider, says ING. "Corporate hybrids have substantially underperformed with 10 basis-point widening last week, coinciding with the fall in equities," credit strategists at the bank say, adding that hybrid paper is now sitting eight basis points wider on the month. They see value in hybrids, particularly in the more defensive sectors such as utilities and telecoms, and see tightening potential in BB- and B-rated hybrid bond spreads relative to stock prices, they say. (lorena.ruibal@wsj.com)

1333 GMT - US benchmark oil prices surge toward their highest level since 2014, up 1.6% at $77.09 a barrel as an OPEC-plus meeting gets underway. Over the weekend, expectations were somewhat mixed as to whether OPEC may keep output additions unchanged or begin bringing extra barrels into the market as demand rises and Delta variant fears are reduced. But as analysts at BOK Financial say, "The choppy trade in front of the OPEC+ meeting this week now looks to have settled on OPEC+ leaving expected production numbers in place." The global benchmark Brent climbs 1.9% to $80.75. (dan.molinski@wsj.com)

1246 GMT - Oil and gas exploration and production companies have had a very good year amid soaring energy prices, and Goldman Sachs analysts say their shares could remain a winning bet for new investors. "Corporate returns are improving and on track to be double-digit after a highly challenging period from 2015-2019," they say. "Our top through the cycle Buy ideas (on a combination of valuation, capital returns and asset quality) among US independents remain: Pioneer, Devon and Diamondback. That said, for investors with a long-term constructive view, we also see significant total return upside to Hess and Occidental (also Buy), where we believe the asset quality and deleveraging potential, respectively, are underappreciated by the market." ( dan.molinski@wsj.com )

(END) Dow Jones Newswires

October 05, 2021 04:20 ET (08:20 GMT)

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