WTI $102.04 -1.97; Brent $122.37 -2.61 ; Natural Gas $2.14 -5c

Good morning

The oil price fell sharply yesterday as the EIA stats showed a substantial build of 9m in crude which had been foreshadowed by yesterday’s API numbers. Coming after last week’s 7.1m rise the two weeks combined were the worst two week figure since March 2001. Stocks are now at the top of the seasonally adjusted range and it was interesting to see that over 6m of the 9m barrels were accumulated in the Gulf, an area which would indicate higher imports, probably from Saudi Arabia. On the subject of the Kingdom it is interesting to see that they have issued lower prices to their Asian and European customers for May listings which bears out what they have been saying about limited demand out there. Finally the boffins at the University of Colorado tell us that this year will be a mild year for hurricanes so a limited effect on the oil price.

We took a bearish stance on the oil price at $127 a little while ago and although it hasn’t fallen as much as we might have expected the fundamentals are all still lined up to force the price down, accordingly we remain cautious, at least while refineries are in a seasonal maintenance period!

In company news Shell have two pieces out on the wires this morning. Firstly they are apparently in talks with PetroChina and Hess to explore the shale oil deposits in the Santanghu Basin in Xinjiang region of the country, an area which has been drilled already with mixed results. Secondly they have been linked with the building of another Gas to Liquids (GTL) plant, this time in Louisiana, USA. This would be a copy of the plant currently successfully operating in Qatar which I have actually visited. The idea of building one in the US actually has some appeal, gas prices in the states are very low and having built one plant already Shell would be able to build another quicker and cheaper than the last one, I assume. Accordingly, especially with the high liquids prices in the US we consider that this would indeed be a good move.

Madagascar Oil has announced that it has resolved its issues with the Government surrounding the exploration blocks and the forward work programme has been approved. This now frees up MO to kick on with its plans and the grim recent history should be past. Our recommendation on this stock has been suspended for ages and maybe when the company does some presentations it may be worth having another look and considering the situation but not until then.

Madagascar Oil 1 Year chart

Madagascar Oil 1 Year chart

Solo Oil has today announced that it has terminated discussions with Obtala Resources regarding the acquisition of Ilakon Limited which holds the rights to the Mina El Carmen block in Argentina. Looking at the chart it appears that something needs to happen……………..

Solo Oil 1 Year chart

Solo Oil 1 Year chart

Kentz Corporation is up a little this morning after the events of yesterday in which the sellers of 12 million shares agreed to not sell any more shares for six months and then sold 3 million more six hours later. It is very good that there was such strong demand for the shares that the placing was increased but I must have read a different RNS yesterday morning, mine didn’t say 12 million, up to 15 million shares. Anyway the fundamentals behind the company are still sound and even if a little bit of short term performance has been lost, the long term story is still very much in place. I expect to see a second half of significant contract growth as the pipeline of opportunities which currently stands at over $10bn turns into contracts.

Finally in company news Bayfield Energy has announced that it has spudded its second well in Trinidad and Tobago which follows its first recent well which was suspended as a discovery.

And finally…………..as we head for the Easter weekend I hope you all have a great time, over here we have Heineken Cup rugby, the famous Oxford and Cambridge boat race as well as a lot of football matches of which Arsenal v the noisy neighbours is probably the most interesting and more danger at the foot of the table. In the cricket a masterful big century from Kevin Pietersen has put England usefully ahead, let’s see if the tail wags!

The big event is the Masters which I’m sure will keep people on their toes for the next four days, no predictions here, this one is far too close to call!

Finally as I am away for a few days the blog will be back shortly……