WTI $104.61 -88c, Brent $108.26 -38c, B/WTI Diff – $3.65 +60c , Natural Gas $3.56 -8c
Good morning
It’s a big week for results again this time the big guns come out. Over here we have BP and Shell on Tuesday and Thursday respectively and Eni (Thursday)and Galp (today) report this week too. Over the pond we have Phillips 66 on Wednesday, Chesapeake, ConocoPhillips and Exxon on Thursday and Chevron on Friday. The US supermajors are at the top of very strong recent trading and at the top of five year trading ranges so expectations are high.
It’s worth reading the leader in the FT today as they assess the relationship between the west and Iran as the inauguration of President Rohani takes place at the end of the week. Now is certainly the time for the US to show that they can follow the good work in other parts of the region and get some diplomacy going.
Oil Price
– Resistance is low….
Both WTI and Brent failed to break out of near-term resistance levels and worries about demand growth, primarily in China and Japan outweighed the shorter-term supply shortages I mentioned last week. It should be remembered that these supply shortages are likely to dissipate after the maintenance season finishes and demand from US refiners during the driving season comes to a halt. We still feel that the fundamental risk is to the downside albeit taking some time to deliver.
BP
As we know BP announce second quarter figures tomorrow where consensus is around $3.4bn but that is probably not the headline figure that the market will be looking at. The recent court appearances by the company, in which it sought to limit what is saw as bogus claims following the Macondo disaster have no, so far, been successful and the $7.8bn set aside may have to be increased. The total write-off so far is $42bn which may have to be increased if they lose either of this appeal or the next two rulings in the New Orleans court rooms. The ongoing buy-back following the TNK-BP disposal will last for another year so the shares are supported by this massive cash injection, without that I would remain pretty nervous.
BG (60%)/Ophir(40%)
The Mkizi-1 well in block 1 Tanzania has come in as a gas discovery. With 33m of total net pay and high reservoir quality, all three intervals exhibited excellent porosities and permeabilities. The mean recoverable resource estimate are in-line with pre-drill estimates of 0.6 TCF. So, yet another success for the consortium, 9 in a row and still 100% in country, Dougie keeps his target price of 710p for Ophir and we remain positive ahead of further drilling in the 2nd half.
President Energy
An operational update this morning from President’s Argentina operations where old wells PE-7 and PE-8 are being hydraulically stimulated in the Puesto Guardian Concession. PE-7 is demonstrating good flow rate potential and the oil cut is expected to increase as the injected water is removed. The PE-8 well shows promising initial indications and will be taking the rig from PE-7.
I continue to believe that there is proper value in President although as I have said before one will need the patience of Job to be around when it appears!
We have the new CEO of Northern Petroleum in shortly so tomorrow I hope to able to share with you the thoughts of Keith Bush in the new, post-Musgrave era………….
And finally…
England have tinkered slightly with their squad for the next Ashes test which starts at Old Trafford on Thursday. In addition to Graeme Swann they have included Parmesan Tony, I suspect just in case the track looks like a right turner. Finn and Onions are left out for Tremlett and Taylor will cover for Kevin Pieterson in case of injury.
Meanwhile back in the Aussie camp, David Warner was involved in a distasteful altercation with Thami Tsolekile on the pitch in a match in South Africa, causing the umpire to call a halt to the game. Accordingly he has now been flown back to the UK to be ready to play on Thursday, looking forward to it will be bar owners all over Lancashire rubbing their hands together and topping up the cellars.
Lewis Hamilton wins in Hungary in a performance even he wasn’t expecting and apparently Alonso wants to join Red Bull although that would scare the living daylights out of Vettel………………….
So, Gareth Bale looks like he is off to the sun, a short £100m is just too much to turn away for Mr Levy, just think, they can now nick Suarez from under Arsene’s nose now……
And in their preparation for Division One football, Gillingham travelled to lowly Woking on Saturday and lost 0-3 to the conference minnows, oh dear………………
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