Oil prices rebounded Friday from steep declines but the shares of Calgary-based oil and gas companies continued to fall to new depths.
ICE Brent crude for September delivery rose $2.12 to settle at $109.37 US a barrel on Friday and West Texas Intermediate futures crept up 25 cents to settle at $86.88. On Thursday, Brent plunged $5.98 and WTI was off $5.30.
In spite of the commodity price gains, Calgary oil producers, oilsands producers, gas explorers and service companies alike lost market value.
Savanna Energy Services Corp. was down 7.7 per cent, PetroBakken Energy Ltd. was off 7.1 per cent, Athabasca Oil Sands Corp. lost another 6.5 per cent, Husky Energy Inc. and Canadian Oil Sands Ltd. each fell three per cent, while Encana Corp. was down 2.9 per cent.
The S&P/TSX Energy Index fell 5.9 per cent Friday, leaving it at 2776.78.
"This is the sign that the outlook for the global economy really has changed," said Douglas Porter, deputy chief economist with BMO Capital Markets. "Personally, I was waiting for things like copper and oil prices to crack as a sign that investors really were starting to doubt the global outlook, and that's what we saw this week."
He added that he thinks oil prices are still strong enough to allow Alberta companies to proceed with their growth plans.
"While we've had a serious correction in oil prices, they are still close to where they started the year, down a little bit now, but still at relatively healthy levels, especially when you look at Brent, not so much WTI," said Porter.
Despite that oil prices lost some ground late this week, the desire on behalf of explorers and producers to have new wells drilled is not expected to let up, according to BMO Capital Markets oil and gas research analyst Michael Mazar, who covers the major drilling companies.
"Our view is that the sell-off has gotten overdone," Mazar said.
Ensign Energy Drilling Services Inc., a drilling company Mazar follows, predicted Friday a hike in what it costs energy firms to drill of one-fifth by next winter over the same period a year earlier, driven by high demand for rigs and increasing labour costs.
"None of what we've seen in the last couple of days is supported by crude oil supply and demand fundamentals," Mazar said. "We're really talking about a blip and we should see support once we get past some of these problems."
BMO's view was supported Friday by its competitor Scotiabank, which predicted in a report Friday that despite slower U.S. economic growth, solid demand and high prices for commodities - thanks to favourable conditions in the higher-growth developing nations - will support resource-related developments, trade and investments across Canada.
Scotia Economics downgraded its 2011 gross domestic product growth forecast for the United States (from 2.5 per cent to 1.8 per cent), Canada (from 2.7 per cent to 2.6 per cent) and Mexico (4.4 per cent to 3.9 per cent) over poorer U.S. economic performance.
For the week, U.S. crude fell nine per cent, its biggest weekly decline since early May, while Brent slumped 6.3 per cent, having touched a nearly six-week low of $104.30 on Thursday.
Trade was volatile Friday, with investors jittery over European finances and the U.S. economy. Wall Street stocks vacillated, but ended the day almost unchanged after rallying on news that Italy had pledged to speed up austerity measures in return for help with funding from the European Central Bank.
Iran's OPEC governor said OPEC ministers will meet if prices keep falling.
"Brent and U.S. refined products are seeing a relief rally, while (U.S. crude) remains more detached from the world markets," said Tom Bentz, director at BNP Paribas Commodities Futures Inc in New York.
U.S. gasoline and heating oil futures rose on Friday on Brent's strong rebound and news that a fire caused by a heating unit on one crude unit had shut Valero Energy Corp's 180,000-bpd Memphis, Tennessee refinery.
Brent and U.S. oil had initially rallied immediately after the U.S. Labor Department said non-farm payrolls increased by 117,000 last month, above market expectations, as private employers stepped up hiring.
"A quick glance at the latest jobs report shows it is positive, better than expected. But whether the market will be able to stem its downslide after the recent stream of negative economic data remains to be seen," said Gene McGillian, analyst at Tradition Energy in Stamford, Conn.
Italian Prime Minister Silvio Berlusconi added to the market's collective sense of relief by saying Italy would accelerate cuts to aim for a balanced budget in 2013 and press ahead with welfare and labour market reforms.
News of an Iranian pipeline explosion that shut flows of up to 40,000 barrels per day lifted oil prices from early lows. But Iran, the secondlargest OPEC producer after Saudi Arabia, later said it was pumping oil at full capacity.
dhealing@calgaryherald.com rpenty@calgaryherald.com With files from Reuters
