WTI $95.44 -$2.98, Brent $107.78 -$3.02, Differential $12.34 -4c, NG $4.32 +9c
A bit of year end rebalancing in crude markets led to a bit of a shake out in the oil price yesterday, nothing unusual about it and very little going on in the physical market I understand. Later today we will get the EIA inventory figures which should show another draw and also Big Ben Bernanke is speaking at a press conference which always spooks the market. Other worries swirled around the transportation of Bakken crude after the train crash I mentioned yesterday, apparently it is more flammable than other crudes.
A few thoughts on oil prices as we enter 2014 and in the next week or two I will address stocks to buy or avoid…
On the supply side I am not too worried, as the year unfolds I expect to see production up and with the release of stocks that have not been available to the market recently there may be a fair amount of crude around. It was interesting to see the Russian Oil Minister saying yesterday that production last year rose 1% to a record 10.51m b/d which puts them slightly above Saudi Arabia and still over 2m b/d above the fast-rising US domestic supply. It is worth noting that the Russian export figure is significantly less flexible than that of the Saudis who with other members of Opec have in recent years helped out the markets in times of shortage. Elsewhere I expect a potentially large amount of crude to be fighting for the modest extra demand, Iraq will supply more from its southern fields and of course the KRG is expecting to start its progress to exporting 1m b/d with almost immediate effect. Iran is back at the negotiating table on Monday and with current exports sanctions limited at below 1m b/d will want to be on best behaviour and be able to turn on the taps again. Amounts they could produce vary, it wont be the 4m b/d from the old days but 2.5m b/d might be a possibility and will produce a headache for Opec sometime later in the year. Libya and Nigeria will at some time this year also potentially have possibly a combined 2m b/d if they put their mind to it.
On the demand side the usual suspects will be, as is often the case, hard to predict, growth in China will probably be solid and I believe that if the price falls they will consider significantly adding to their stockpiles. Global GDP growth might be, say 3% led by the USA and Europe which will provide good if unspectacular growth in crude demand. One thing that should be borne in mind for the longer term is the invasion into the market of alternative fuel options particularly for freight transport, remember the 50 bn miles the Americans drive every month. Overall their is little doubt that with OECD and non OECD economies picking up, demand is assured but at the moment fairly tentative.
Accordingly, notwithstanding any global geo-political blow-ups the world market looks reasonably well supplied with oil as we look at 2014 and accordingly I see the risk as being on the downside, maybe $10 a barrel and maybe the differential to drift back below $10.
Another bit of what I would describe as good news for Fastnet this morning as they announce that Kosmos has secured a rig to drill the Foum Assaka ( FA-1) exploration well offshore Morocco in the first half of 2014. Fastnet is carried by SK Innovation for this after the really smart but also unappreciated farm-out they announced on December 18th. With exciting onshore as well as offshore Morocco and the Irish acreage to be drilled Fastnet is well and truly on my radar screen for this year and I am promised a meeting with the company very shortly after which I will comment in more detail. Either way the 6% fall in the share price this morning is odd, I shall put it down to flaky selling in a quiet market which probably covers it but is certainly unjustified – watch this space.
Its the magic of the 3rd round of the FA Cup this weekend as the big boys come in for the first time. No doubt about the tie of the round as Spurs go to The Emirates to play the Gooners, but a number of other all Premier League clashes such as Norwich vs Fulham and Man U vs Swansea where Moyes probably wishes he had been drawn away from the Theatre of disappointments…
The baby-faced assassin has arrived at Cardiff, the option of a Premier League job overriding having to work for Mr Tan, or maybe money talked, either way there are many better people to work for and I would sell months in the job for Ole, I suspect he is just using Cardiff as a stepping stone to a better job in the Prem…
The cricket wasn’t a total nightmare but dropping Root for Carberry was a schoolboy error particularly as the incompetent selectors then dropped the only other decent spinner in the party, the gong for Miller in the honours list must have gone to his head.
Back on Monday when I expect everyone to be back on deck, I am doing the CNBC squawkbox first thing so will report back after that..