WTI $97.19 +76c, Brent $105.78 -26c, Differential $8.59 -$1.06, NG $5.38 +47c
So, where do we start? There are a whole lot of factors influencing the oil price at the moment none of which make up a big story but all working in their own way. Last night saw WTI continuing to do well (note the fall in the differential as expected) as US factory orders figures came in better than feared and the API released its inventory data. The headline figure of a small build, 384/- barrels, was lower than consensus which was 2.25m but the interesting number was the fall in stocks at Cushing of 1.6m barrels which encouraged the WTI bulls. One other modestly interesting piece of news came out, following a freedom of information request it transpires that the US Government has authorised ‘limited’ exports of crude to Europe, in this case 2 cargoes to the UK and 2 to Italy. Now this is very early day stuff as that whole debate about US exports will run and run, especially in an election year, but the market is structurally inefficient and weighted against the US producers who want markets opened up and towards refiners who want to keep a glut of crude keeping prices low whilst they can export product.
At the Fed it is Lacker v Evans amongst other rivalry as the hawk plays the dove, Lacker wants further tapering and interest rate rises within a year, Evans wants a more accommodative policy and is worried about low inflation and accordingly wants rates to remain on hold until 2016.
Cuadrilla announced yesterday that they had decided where the sites for the first two wells in Lancashire would be and will be requesting licences to drill and to frac. As one might expect the usual crowd of ill informed nimbys appeared on the media usually having driven from their centrally heated homes in big cars. I’m not going to go through the usual arguments but someone should tell them that apart from the fact that the system has been working for 50+ years it might just be the best and ironically the cleanest way to heat and power the country on the off chance that the whole thing works!
Renewable energy is usually touted as the way forward but firstly, as Neil O’Brien of Alkane Energy said last year, you can have green energy or you can have cheap energy but not both. One minute people are expecting lower utility bills due to the ‘cost of living problem’ ( Balls, Millipede) and the next they are protesting against the very fuel that might produce cheaper, cleaner energy. Secondly it is worth taking a look at the environmental damage done by wind farms and I am not referring to what they look like. If the RSPB knew how many birds including rare species died in wind farms around the world they would be apoplectic…
Two things following the BP figures yesterday which as we said could have been much worse that they were. On the buy back front, again as expected, we know that the company will continue to operate in the market until 2016, yesterday as usual they bought 7.4m shares and after the recent fall got some of them at 463.95p, interestingly if you look at the chart 464p is a big support level.
Secondly Bo decided to stick his oar in the debate over Scottish independence, probably something he will regret but he should be praised for doing what most other industrialists have been reluctant to do. I suspect that after a quiet day doing the full year results, what the press office really wanted was to then put in a shift telling all the reptiles that ‘the views expressed were personal to Mr Dudley and not of BP’. ( a huge investor in what are deemed to be Scottish waters)
There are a few rumours (more than usual) doing the rounds and I get the feeling that the temperature may well be about to rise a few degrees. Just to clarify my position I think that it might be a good year for companies operating over there but not without the usual problems on the way. Genel has come back a long way with all the recent worries about not being able to sell the crude that is currently filling the pipeline, as I said on TipTV last week I think that there is still huge upside here and that below 1000p it is a bargain. As for Gulf Keystone the price stays the same despite plenty of potentially good news on the horizon and I am hearing from a number of sources that a bid might be being warmed up. Either way the MOL situation interests, as Akri-Bijeel once for sale, now on the back burner could be a key asset in the shake-up and also my friends at Taqa are on the move. For Petroceltic it too will be a big year and I know that Hess are optimistic about their prospects. That just leaves Exxon and Chevron and a few other majors!
Caza Oil & Gas
The market just aren’t getting this story at the moment although the company couldn’t do much more to spread the word. Today they have issued a 4th quarter production update and an operational update on the Bone Springs drilling programme in south east New Mexico. 4th Q is up 32% on the previous quarter and up 67% on 4Q 2012 making the company cash flow positive. Since the company changed its targets from gas to a more liquids diet things have gone from strength to strength, a 155% increase in net daily production since Q3 2012 is most impressive. With five wells coming up I can see things only getting better for Caza and the value locked up is substantial.
This is where the stock price anomaly seems wrong as the shares are trading at a massive discount to potential value with no seemingly obvious reason. I am led to believe that a former founder has been selling anytime there has been any bounce in the stock but that can only go on for so long, also there are some people who haven’t as yet, realised that Caza has changed so much. Either way Caza remains full of value and I am convinced that at some time the price will move to another, higher level.
Firstly I should apologise for an omission, I failed to mightily congratulate Britain’s Davis Cup team on their magnificent victory over the USA last weekend. Probably rather overshadowed by the Superbowl the performance takes them to a match against Italy.
Last night I’m afraid that my prediction that Fulham would lose to Sheffield Utd in the cup was just too easy a prediction, never mind they have an easier one at the weekend as they travel to Old Trafford…And as the club owners exercise their rights, another manager gets the sack, this time the unlucky Michael Laudrup at Swansea, what price two welsh clubs to go down this season…?
To the astonishing decision of the ECB to dump English Kev from the team which is one of the most disgraceful betrayals of a professional sportsman ever seen in international cricket. Long term readers know that I have a massive despisal of bodies who run sport such as the IOC the FA. FIFA the RFU etc. and to that list, if it wasn’t already on it you can add the ECB. These organisations are usually staffed by overpaid, over expensed punters who are in it only for the freebies and the tickets in the West car park, on occasions I seem to remember lavish gifts being dished out as Olympic venues are close to being chosen. KP may be a difficult bloke to work with but weren’t also Botham, Flintoff, Warne, Warner,Gayle, most of Australia etc etc etc and if this decision is for anything other than form which is temporary then it would be a drop, not a permanent drop. Maybe the ECB already have a new coach lined up who has made a condition the KP is out of the way, either way a very sad day for English cricket all round.
And Bob Crow head of the RMT, returns from holidaying in Barbados and Rio to oversee the two day tube strike in London. On a salary of £145,000 and still living in a council house he shouldn’t have a problem getting a cab, that is if he hasn’t got a driver paid for by the union!