WTI $99.69 +56c ; Brent $111.20 +35c ; Natural Gas $2.55 -8c

Good morning

Lots going on today as ever, in international news the China GDP figure came out higher than analysts’ forecasts but probably exactly in line with government forecasts at 8.9% for the 4th quarter of 2011, marginally down on the previous 9.1% but not in hard landing territory yet.

In Nigeria the government averted a national strike after cutting the price of petrol after having withdrawn the subsidy on January 1st. The President, Goodluck Jonathan has also promised to tackle corruption in the oil sector, good luck Jonathan…

Saudi Arabia has confirmed what we have been saying for some time that their target price for oil is around $100. Given their increased domestic spending and commitments made by the King I feel that this is realistic and with their ability to increase and decrease production as appropriate it is eminently achievable. As never before the Kingdom is a true swing producer and in the face of most market disruptions can, over the long term, influence prices.

It is worth taking a look at the article in the FT today on China Gas which echoes a lot of our own sympathies on that specific situation and indeed on the Chinese gas market in general. Suffice it to say that natural gas demand is growing at 20% per annum and China Gas distributes to 140 cities something that Sinopec covets. Need I say any more than I implore you to consider tucking away some Fortune Oil which is as clean a play as one could find in the London market for investors to gain from this huge money making opportunity.

In company news Chevron have had a nasty fire on a jack up rig operating offshore Nigeria, two crew members are still missing and the company is attempting to shut in the well. As if Chevron needed any further grief with offshore safety and leakages….it never rains but it pours.

Anadarko as operator, along with Cove Energy, has announced a successful appraisal well on Lagosta-2 offshore Mozambique. Already a huge discovery this should push the estimated reserves in the offshore area 1 to the top end of the 15-30tcf in the Rovuma basin. The Cove price has this morning risen by 11% to 137p but with the company in play we feel the realistic takeout level will be well in excess of 150p.

Afren have also had a good morning and another stock we really like at the moment, it has made a discovery on its Okoro East well, finding 549 feet of net pay which should lead to a decent oil in place number and of course being close to Okoro is good for logistics. Subject to testing, which might up the number for the well, we expect to increase our expectations for the company and our recommendation remains positive, we think Ghana and Kurdistan is in for nothing.

San Leon has announced that it has processed some of the 3D seismic data from Duressi in Albania which is very encouraging giving a number of new prospects on the licence. With 100% of the block the company has received a number of approaches and has accordingly opened the data room to potential partners.

Nighthawk have raised £2.9m through the placing announced on December 28th, although they might have raised more, that part was flexible and they are now fully funded for the ‘reworking’ of Jolly Ranch over the next few months. The Nighthawk journey has been incredibly tortuous and we are clearly now in the final stage of trying to make the dream happen, so will it work? The acreage is substantial and the drilling history awful, if the new team out there can find meaningful amounts of oil and more importantly make it flow then the world is indeed their lobster. I would wait until we see the whites of the eyes and if necessary leave the first doubling of the price for someone else, after all buying at 6p when it’s going to 30p is almost as good.

Nighthawk 5 Year chart

Nighthawk 5 Year chart

And finally as it’s the first day of the first test match against Pakistan in that cricketing capital of Dubai, one might have expected to see an abject performance and that is exactly what has happened, a truly dreadful batting collapse by England like days of old has led one to believe that this match has been thrown!

Almost and finally………..Attached is a clip from the Jeff Randall show on Sky News on the recent situation from a few days ago, don’t get nightmares…….!