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Cenovus, with its growing bitumen production and ownership in two U.S. refineries should be benefiting the most in the stock market from the improved conditions, said TD, which rates it as a “buy”.

Todd Korol/Reuters

U.S. investors have winnowed down their positions in some companies in the Canadian energy sector, adding to already-heavy pressure on stocks that should be getting a lift from recently improved crude prices.

The effect, which appears to be driven by lingering fears over Canada's ability to add new export pipeline space as a route to higher oil prices, is most pronounced at Cenovus Energy Inc., the oil sands producer, TD Securities analysts said.

TD analyzed the impact of the "tidewater access" issue on bigger-name stocks since it first came to the fore in early 2011 as worries grew over regulatory delays stalling major new pipelines from Alberta and out of the glutted Cushing, Okla., oil storage hub, to the U.S. Gulf Coast and elsewhere.

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The bottlenecks caused deep discounts in the prices of West Texas Intermediate light oil to international benchmark Brent and Western Canada Select heavy blend to WTI. In recent months, those differentials have tightened considerably with increased rail shipments and smaller-than-expected production volumes from the Alberta oil sands.

WTI sold for $28 (U.S.) a barrel under Brent in October, 2011. That discount was just $3.40 on Tuesday. Western Canada Select sold at $16.40 a barrel under WTI on Tuesday, compared with $40 under in January, according to Net Energy Inc.

Cenovus, with its growing bitumen production and ownership in two U.S. refineries should be benefiting the most in the stock market from the improved conditions, said TD, which rates it as a "buy". Instead, it is the worst performing large-cap independent year-to-date.

One of TD's theories about the company's performance is that a 7.1 per cent drop in U.S. ownership since January, 2011 has hurt the shares. "We contend that some of the total return under-performance since then has to be explained by U.S. fund outflows," the analysts said.

Suncor and Penn West Petroleum Ltd. have also shed U.S. money in the past 21/2 years, according to the research.

Not all of the sector's woes can be blamed on American investors scurrying for the exits, however.

Their ownership of Encana Corp. and Talisman Energy Inc. has increased through the period, and those companies have not generated big share gains, even following recent appointments of new chief executives.

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U.S. investors hold about 47 per cent of Encana's shares, up from 40 per cent in early 2011, and they control about 41 per cent of Talisman, up from roughly 37 per cent. Neither is a heavy oil producer, however.

The report also showed that U.S. energy companies have left their Canadian counterparts in the dust. Witness the S&P Oil & Gas Exploration and Production Select Industry Index in the United States, which between Jan. 1, 2011, and June 30, 2013, outperformed the S&P/TSX Composite Oil & Gas Exploration and Production Index by 41 per cent on a total return basis.

(Jeffrey Jones is a Globe and Mail Business Reporter.)

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