WTI $100.67 -1.62 ; Brent $110.44 +83c ; B/WTI Diff – $9.71 +1.56 ; Natural Gas $3.76 -1c
The US Government finally passed the appropriate legislation to approve borrowings and extend the debt ceiling so Halloween, Thanksgiving and Christmas can all be enjoyed on the never never at least until February. Now we are back to tapering talk and with all the time wasted I guess that that’s a 2014 thing now.
China GDP grew by 7.8% in the 3rd quarter, in line with expectations whilst monthly retail sales in September rose 13.3% year on year. Both these figures have allayed worries about the Chinese economy, at least for the short term, I have already read articles in grown up newspapers suggesting all is still not well, but then they have had to put up with Osborne and Bojo this week.
The underlying in oil markets is weak at the moment led by WTI hit this week by a big stock build, partly as refineries draw less during mid-season maintenance and switching product grades from gasoline to heating oil markets. WTI flirted with $100 last night and could easily do the same again at any time, look at the chart $100 is pretty critical.
As for Brent, it has stayed a little steadier but this market is also well supplied and all I am hearing is that Opec in general and Aramco specifically is pumping for dear life. Iraq is almost back from summer maintenance down south and whilst the Nigerians are still way behind optimum exports the Libyans have managed to at least hold 750,000 b/d. The crucial level for Brent crude is $106 ish and isn’t troubling the scorers on that front yet but rule nothing out, as I have highlighted above, the WTI/Brent differential has widened to nearly $10 which isn’t really sustainable and may be reduced by selling of Brent, it wont be by buying WTI at the moment.
Continuing the expansion of Rosneft through JV’s and project sharing today Rosneft have confirmed the industry gossip that they are to set up a JV to ‘pursue upstream projects in East Siberia’.
Just an update really as I covered this a few days ago after I had MD Paul Atherley in for a chat. News today is that the asset demerger is continuing with energy assets and around $35m of cash going into Leyshon Energy. Interestingly, Leyshon have now said that it plans to list only on Aim and not ASX as well as previously announced, very wise as Aussie retail is whispering death and best avoided. Quite how this is to be done escapes me at the moment but wait until the circular is out before taking a position.
As I said, Paul Atherley has got a fantastic team together with a couple of appointments imminent and these guys are dealmakers in the proper sense of the word, when things start happening here you are most definitely want to be aboard, don’t say you haven’t been warned!
Mediterranean Oil & Gas
A Q3 operational update from MOG which has had a pretty rough time lately particularly with respect to Guendalina field where production was dramatically cut back although it’s still doing 35,000 scuffs a day and apparently total field reserves are ‘unaffected’.
At Ombrina Mare ERC have finished the CPR and have given them contingent oil reserves of 9.8MMstb (1C), 25.1MMstb (2C) AND 62.8MMstb (3C) as well as gas of 3.5Bcf (1C), 6.5 Bcf (2C) and 12.8 Bcf (3C). This will start to get under way next year when appraisal drilling takes place, I hope…………………..
Onshore Italy the Faseto exploration well is expected to start well site preparations next month, no spud date announced yet.
Given that I am not a big fan of Italy, the focus on Malta by the company is very much the right call, the more they can do in areas like this the more I like it. They are partnered with Cairn in a new Exploration Study Agreement offshore Northern Malta, in blocks 1,2 and 3. In Area 4,MOG are on track to spud the offshore Hagar Qim well with partners Genel Energy in Q1 2014.
All in all this is slightly better news for MOG and readers know that despite its heavily Italy weighted portfolio, I am hoping that it can buck the trend especially in Malta and create more value for investors. This will only happen if the management, like so many others invested in Italy, realise that every move out of the bureaucracy ridden country is a step in the right direction.
Fortune Oil – From DFT – DY/JS
Fortune has signed a US$300m loan agreement with a term of three years and a margin of 2.75% over LIBOR. This will be used to repay the existing US$180m syndicated loan and will provide the company with additional working capital as well as financing new investment.
We expect Fortune will focus on downstream gas opportunities in China now the FGIH sale has completed. The potential returns from this area could significantly exceed this cost of borrowing and the additional flexibility is highly positive. The facility was materially over-subscribed, highlighting Fortune’s ability to deliver solid growth over the next three years.
MonkeyGate continues as Roy Hodgson is getting increasingly aggravated about the furore over the half time stand up session he did on Tuesday night. If I were him I would be more worried about who it was in the dressing room that leaked it to the Sun…
The real football returns at the weekend with some interesting if not too high profile games. Not sure Norwich expect much at Highbury or Cardiff at Stamford Bridge but Villa might hope for something at home to Spurs and Southampton will fancy their chances at the Theatre of Dreams. Best game might be the Hammers at home to the noisy neighbours.
In the Heineken Cup the big match is the Sarries V Toulouse which is tonight and being hosted at Wembley and has already sold more than 50,000 tickets. There are many other fantastic ties after last week’s amazing opening fixtures.
Cricket saw another famous victory as Pakistan beat South Africa in a test match this morning, first loss for the South Africans for 15 matches.
And last day at the office today for Paul Tucker who narrowly missed out on the top job at the Bank of England, I met him last year and he will have felt hard done by but is going to Harvard which he will enjoy.