Trans Mountain Seen Boosting Canadian Oil Prices: Potential Beneficiaries Among Oil Stocks and ETFs
U.S. West Coast refiners are replacing their heavy Iraqi oil imports with cheaper crude from Canada as the newly expanded Trans Mountain pipeline reshuffles trade flows across the Pacific.
California and Washington are set to import about 150,000 barrels a day of Canadian crude by tanker in June — a seven-fold increase from average volumes, according to preliminary Vortexa data.
Refiners in the US Midwest have long benefited from discounted Canadian oil, partly because of a lack of pipelines.“With (TMX) now complete, we anticipate differentials will remain narrow for years while Canadian egress remains unconstrained,” Meg Energy Corp's Vice President of Marketing Erik Alson said on a conference call.
Other oil producers have also said they expect the pipeline to improve conditions for Canadian companies. According to Bloomberg, the Canadian Oil stocks have seen an average year-to-date (YTD) increase of 18.9%. $ARC Resources Ltd (ARX.CA)$, $Suncor Energy Inc (SU.CA)$, and $Imperial Oil Ltd (IMO.CA)$ have all seen increases of over 25% year-to-date, while $Cenovus Energy Inc (CVE.CA)$ has seen a year-to-date increase of 23.91%.
In addition, the high dividends of oil stocks are also a reason that attracts investors
$Enbridge Inc (ENB.CA)$'s dividend yield is at 7.41%, and Enbridge has increased its dividend by 3.1% this year. Analysts believe the company can maintain this growth rate in the medium term. The dividend yield for Enbridge's primary peer, $TC Energy (TRP.US)$, is 7.29%. $Whitecap Resources Inc (WCP.CA)$, the major beneficiaries of the expanded TMX, also has a dividend yield close to 7%.
However, if you think that picking individual energy stocks is very time-consuming, then track energy stock ETFs might be a good alternative.
iShares S&P/TSX Capped Energy Index ETF provides market-cap weighted exposure to 28 Canadian energy stocks by passively tracking the S&P/TSX Capped Energy Index. About 46% of the ETF is concentrated in its top two holdings: Canadian Natural Resources and Suncor Energy. XEG has risen 20% so far this year.
BMO Equal Weight Oil & Gas Index ETF provides equal-weighted exposure to 11 large-cap Canadian energy stocks by passively tracking the Solactive Equal Weight Canada Oil & Gas Index. Each stock is afforded around 9–11% exposure, ensuring a more balanced portfolio.
Horizons S&P/TSX Capped Energy Index ETF provides market-cap weighted exposure to Canadian energy stocks by passively tracking the S&P/TSX Capped Energy Index. This ETF has seen a year-to-date increase of 21.42%.
Source: Bloomberg, Financial Post, The Motley Fool
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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