Canadian Oil & Gas Equities May Have Finally Bottomed Out

By Zvi Bar:Canada supplies more oil and gas to the United States than any other foreign nation, but Canada has more gas than it supplies to the United States. Several Canadian oil and gas companies have come under intense selling pressure over the last few weeks. Some pressure is a result of a bottleneck issue, with pipelines to the United States already at or near capacity, and regulatory hurdles making pipeline expansion difficult.

By Zvi Bar:During the last few weeks, as the recent market strength has stalled and corrected, several Canadian oil and gas companies have come under intense selling pressure. Much of this negative pressure comes from a bottleneck issue, where many Canadian energy companies were designed to service the U.S. market through already tight pipelines. Another key issue is that many Canadian energy equities contain significant natural gas exposure.

By Zvi Bar:Basic materials and natural resources were some of this week’s worst performing investments, both in commodity and equity form. Foreign investments in nations whose currencies are backed by commodities suffered a double whammy, or perhaps a triple, as individuals exited commodities and equities, while fleeing into U.S. dollars. Nonetheless, many believe oil and gas continue to be good investments, as oil hovers above $80 a barrel.

Zvi Bar submits:While the recent commodity appreciation has become more volatile, many fiduciaries continue to believe commodity allocations will act as a currency inflation hedge. Additionally, commodity supply shortages and growing global demand for most things should assist other inflationary pressures in increasing commodity prices.

By Zvi Bar:Canada is the largest foreign supplier of energy to the United States. 2011 was a year of considerably diverging equity performance for Canadian oil and gas companies traded within the United States. Several Canadian petroleum companies appreciated in the double digits, some while also providing above-average dividends. Others depreciated by a comparable level.

By Zvi Bar:2011 was a year of considerably diverging equity performance for Canadian oil and gas companies traded within the United States. Several Canadian petroleum companies appreciated in the double digits, some while also providing above-average dividends. Others depreciated by a comparable level.

Canadian Natural Resources Ltd. is betting the Keystone XL pipeline will eventually get the go-ahead and believes the deep discounting on Canadian oils caused by pipeline bottlenecks is already on its way out. Even if it’s wrong about Keystone XL, the large heavy oil producer said it will push ahead with other transportation options before dialing down its oil growth plans, backing up what the U.S. State Department said last week in its environmental assessment of the proposed pipeline from Alberta to the U.S. Gulf — that Canada’s oil will be produced, no matter what.

By Zvi Bar:Basic materials and natural resources were some of September’s worst performing investments, both in commodity and equity form. Foreign investments in nations whose currencies are backed by commodities suffered a double whammy, or perhaps a triple, as individuals exited commodities and equities while fleeing into U.S. dollars. Since the beginning of the fourth quarter, though, several of these investments have begun to outperform the broader market as oil prices move back up.