WTI $98.84 +1.93 ; Brent $117.73 +1.63 ; Natural Gas $2.49 -6c
Well, the oil price continues to mark up as a number of small events have an impact on short term direction. Colder weather in Europe has meant less gas supply from Gazprom, in Italy power companies are now burning oil as fuel which needs political approval, unrest in Nigeria has stepped up and the API stats showed an unexpected draw of 4.5 m barrels. This was against a forecast of a build of 2.4m barrels and I therefore rest my case on the quality of Wall Street analysts and their forecasting ability, couldn’t hit a donkeys tail with a banjo as they say. Talking of forecasters who couldn’t tell you what happened in the past, the IEA, fresh from months of bringing down oil demand numbers yesterday increased their numbers for this year and next, they also warned about the short term supply due to non Opec countries lagging expectations, if I was them I would advise my clients to buy back some of their strategic reserves they were spoofed out of ten dollars a barrel below this level last summer……
On to BP and it is surely time to stop spending so much time on them, it’s time for them to deliver the goods. I spent, along with around 100 other buy and sell side analysts, the best part of five hours with the company yesterday in their revamped annual investor strategy meeting, my conclusions are as follows. On the operational side the company is without doubt putting together a strategy that will ensure, certainly in the upstream department, a credible and interesting programme in the short and medium term. Downstream I am still concerned that they are far too bullish and reliant on some asset sales and refinery upgrades and although they have some quality assets have a rather rosy view of fuel sales particularly in Europe. Whatever happens to this, the progress that BP are going to make short term is still dependent on the court case, due to start in 21 days’ time on the 27th of February. Our view is that it is more likely than not that they will cut a deal and avoid a potential 18 months or more in court, with the associated costs and management time. This is also linked to the dividend decision which yesterday provoked around five different reasons for the rise, some of them risible (Dudley ‘we thought our shareholders had had a tough time’ – when was that ever a reason for spending money?) some of them slightly more plausible. I think that they increased the dividend because they are very close to cutting a deal on the court case and if they are then they shouldn’t have done it – period. Finally I need to make one last comment on the management, unsurprisingly the Chairman wasn’t noticeable yesterday which if he didn’t attend was inexcusable, maybe he was on Volvo duty….The management at senior operational level quite impressed me but I’m afraid that at the very top they are distinctly lightweight, Chairman, CEO, CFO were either not there or not good enough.
Our recommendation on BP has been a buy since last summer and we remain buyers of the stock as I believe there will be a settlement out of court and that will give us an opportunity to re-assess the situation then, let’s hope we are right otherwise we will be taking money off the table so fast you won’t even notice it.
In other news today it appears that Total have signed up and are about to announce a presence in Kurdistan which is yet another reason for ensuring that you have exposure to that area. You don’t need me to add any more to my existing views about the area but I remain keen on Gulf Keystone as you might expect and also it looks like Genel is starting to pick up after their analysts visit, it is worth looking at Petroceltic as well at these levels.
The Falklands is yet again in the news as the Argentinian Government has accused the British of ‘militarisation’ of the area after sending a warship down there as part of a regular sortie. Apparently HMS Dauntless is well equipped to deal with anything and more than might be thrown at it which is probably why the Argentines Government is acting in this way. Our views on Rockhopper remain indefatigably bullish and we still think that there will be excitement in Borders and Southern and FOGL now drilling has commenced.
And finally I must I’m afraid say that the funeral of Andrew Darke is confirmed as being held next Monday, 13th February at 1.30 pm at St Mary’s Church, Church Road, Barnes, London and afterwards at the Richmond Golf Club.