FILE PHOTO: Rows of steam generators line a street at Cenovus Energy’s SAGD (SAGD) project, Christina Lake, 120 miles south of Fort McMurray, Alberta, Canada, Aug. 15, 2013. REUTERS / Todd Korol
November 2, 2020
By Maiya Keidan
TORONTO (Reuters) – Hedge funds increased bets against Canadian energy companies in the run-up to Tuesday’s US presidential election, regulatory filings verified by Reuters showed.
Market participants have speculated that energy stocks could fall if Democratic Party candidate Joe Biden wins the race against incumbent President Donald Trump.
Biden has put forward a number of environmental plans that include the desire for a “transition from the oil industry”. These words ricocheted off across Canada as the world’s fourth largest crude oil producer and main exporter to its southern neighbor.
“There is a feeling that there is a greater chance of Biden winning,” said Rob Romero, portfolio manager at Connective Capital.
“I think Biden would encourage more interventionist policies in the economy, favoring renewable energies that could challenge the demand for Canadian energy.”
“For example, gas and liquid pipeline projects would receive less support and environmental enforcement would be increased.”
The number of short trades as a percentage of the total trading volume for Imperial Oil Ltd.
Cenovus Energy Inc.
This compared with 35.6% for Imperial Oil between September 16 and October 1 and 27.1% for Cenovus and 20.4% for Canadian natural resources over the same period.
The energy sub-index <.SPTTEN> has fallen 55% since January 1st.
Hedge funds typically practice short selling by borrowing a stock from an institutional investor such as a pension fund and selling it back at a lower price when stocks go down, buying in the difference.
A Biden win is expected to benefit the cannabis sector as Vice President Kamala Harris has promised the Democratic Party will decriminalize marijuana at the federal level. Some investors expect such a move to benefit U.S. weed companies more than Canadian manufacturers.
The number of short trades as a percentage of total trade increased at Canada’s second largest marijuana producer, Aurora Cannabis Inc.
Biden has also pledged to revoke President’s approval for Keystone XL, a TC Energy Corp. heavy oil pipeline
However, short trades at TC Energy recently fell from 36.6% in the previous month to 21.2%.
(Reporting by Maiya Keidan, additional reporting by Jeff Lewis; Editing by Marguerita Choy)
This article originally appeared on www.oann.com