WTI $102.93 +10c; Brent $118.75 -2.83 ; Natural Gas $2.02 +4c

Good morning

The oil price falleth and not before time as the glut of oil on the market begins to take on the various bulls around the market place. The Brent price this morning fell again to $118.03 before rallying to $118.97 which is really interesting (OK so it’s not that interesting) because on the chart, as shown yesterday $118.70 is a crucial support level and if it were to fall through that then $110 here we come.

In international news it wasn’t a very good day for Spain, it was a costly day in the bond market and then though Repsol they had $5bn worth of YPF filched from them by the Argentines who feel that they can do what they like with companies investing in their country. I don’t know what the translation into Spanish of the phrase Entente Cordial is but I fear that if there was one there isn’t any more. Looking at other companies affected by this in London, there is a knock-on for BP for whom the schoolboy error year of 2011 is now coming home to roost as the failure to close the Pan American deal last autumn has left them with $7bn worth of assets in Argentina and the market just got a bit worse as a seller. There is a modest amount of production for BP in Argentina, around 140,000 b/d and a short billion barrels of oil which is between 4-5% of sales and stocks but less profitable than most of BP’s other world-wide assets but $7bn doesn’t grow on trees.

(Ironically President Petroleum, an explorer in Argentina has suffered more than BP which is a bit wrong way round)

For BP, another regrettable aspect in the schoolboy error category was confirmed yesterday when in a grand signing ceremony outside Moscow, Rosneft and Exxon cut the deal that BP might have cut themselves if they had taken the trouble to read the TNK shareholder agreement or understand the basics of Russian politics.

Afren has this morning announced a ‘significant’ oil discovery at the Simrit-2 exploration well in Kurdistan, indeed having reached predicted TD the company report that preliminary analysis indicates that the well has encountered 409m of net pay in three reservoirs of which 312m is light oil. There is no oil water contact in the target reservoirs and as there are still strong hydrocarbon shows the operators indeed to drill another 100m to test additional zones of prospectivity. Clearly the company’s pre-drill expectations for the block have already been exceeded and they consider the well to be ‘transformational’ which for a company like Afren is indeed an indication of some substance. As big fans of Kurdistan this is obviously music to our ears and as buyers of Afren, for which we consider the KRG is effectively in for free, we remain very positive, indeed the modest 7.4% rise this morning is rather parsimonious.

Afren 1 year chart

After the farm out deal between SacOil, NIGDEL and Energy Equity Resources the 30 November 2010, in order to fulfil the obligations under the Profit Sharing Contract of the oil concession OPL 233 in Nigeria acquired, SacOil announced today announced that it has successfully procured a USD$25 million Performance Bond issued by Ecobank Nigeria PLC (the cash collateral in the amount of USD$10million is delivered in favour of Ecobank). The Bond is payable to the Nigeria National Petroleum Corporation. Energy Equity Resources has the obligation to repay to SacOil its 50 per cent share of the Bond together with interest and costs associated with the cash collateral and the procurement of the Bond prior to the commencement of an agreed work program on the Concession. SacOil looks an interesting bet at the moment although things do move incredibly slowly out there!

SacOil 1 Year chart

SacOil 1 Year chart

And finally Wigan have continued on the run that looks like it might get them out of jail again this year, last night they added Arsenal’s scalp to ones of Man U and the mickey mousers, they should have had Chelsea’s too if more refereeing incompetence hadn’t got in the way!

Also as I know that we have Charlton fans out there, congratulations on their title at the weekend!