WTI $105.97 -39c, Brent $114.26 +81c, Diff $8.29 +$1.20, NG $4.66 -5c
As the latest battle in Iraq centres on the Baiji refinery, attention turns to Washington where Barry is mulling over his options. Although he has ruled out direct action, discussions with Iran continue behind the scenes and these apparently include whether or to back or sack al-Maliki, I have heard that certainly Iran would prefer to keep him in place as a puppet. Oil companies are keeping up the ‘business as usual’ mantra but all are withdrawing non-essential staff from the region. Talking to a number of experts it seems that the view I shared a few days ago may be the way forward, at least for the time being. That view is that the south of the country will likely remain largely un-approached by the insurgents leaving them in the middle ground in the Sunni strongholds.
That leaves Kurdistan in what looks like a very strong position as it has secured its borders and apparently at the invitation of Baghdad secured Kirkuk and surrounding territories, again as I said before the insurgents are unlikely to take on the Peshmerga. Export facilities through Turkey by pipeline and truck will be unaffected, indeed the building of further pipeline capacity continues and volumes will increase all the time and whilst it is a difficult time for the country as a whole the KRG could be big beneficiaries out of all this. It is noticeable that the usual ‘noise’ from the Iraqi oil Ministry has rather died down and now the offer of sharing receipts from oil exported northwards is starting to look rather more appealing. Finally I suspect that all participants in Kurdistan stand to gain, with new pipeline capacity there will be space for the heavier crudes from Shaikan for example, those companies with gas fields are going to find a willing buyer in Turkey for whom gas is far more valuable than oil and with the correct protocols and independent monitoring of the proceeds Baghdad will have few qualms about their new friends in the north sending them cheques on a regular basis.
Briefly, having prattled on about all that, oil prices moved independently yesterday. Brent was higher on Iraq and broke through the $113.50 resistance and looks headed for the next level of $115. WTI though was weaker although has bounced a bit this morning. This was down to the inventory stats, having seen a big draw in the API numbers on Tuesday the market had a fit of the vapours on seeing a draw of only 579/- barrels from the EIA which leaves the differential expanding towards $10 again.
Yet more announcements from Shell, BvB is being a very busy boy, isn’t he? Yesterday they announced that it is to float its Midstream Partners US pipeline subsidiary which is very good news, inside the business it is worth very little, outside much more. Also it has announced that it is floating its Philippines subsidiary although value here may be small beer. Overall they are racing towards the $15bn target for disposals and will be miles ahead of the 2016 deadline, this is far quicker than the market was expecting. My buy recommendation, put out on the day of the profit warning remains firmly in place, keep going well, keep buying Shell.
Lamps has announced a contract from Petrofac this morning, it will fabricate and deliver 29 modules for the Upper Zakum field development in Abu Dhabi. Whilst this is not a huge contract for the company it ticks a number of boxes, PFC is a Tier 1 client which is good and it reduces, albeit slightly, the reliance on jack-ups in the order book. No change in guidance post this but an all round good feeling, investors should look at this high quality company which is now properly financed and able to increase its addressable market, all round the Gulf NOC’s will be looking to drill more and to do that you need rigs…
Platanillo-15 well comes in a success with 439 b/d of 30.6° API crude oil and will go straight to commercial production. In Ecuador the pipeline will come on-stream in the second half of this year cutting massively operating costs and increasing margins. The chart looks really interesting here and whilst it has some lower peaks the uptrend looks good, Zak Mir took a look at it for me and see what he thinks on TipTV this morning at 10. I am hoping to have a meeting with John Wardle soon and I’m sure I will come out still positive, watch this space…
In the ‘you couldn’t make it up’ category I note the comments of the Head of Upstream at Total reported widely this morning. Upset at the sanctions against Russia ( for whom Total will depend on an increasing part of its profits…) he says ‘as Russia’s LNG projects rely on US technology can we request co-operation not confrontation please’? Call me old fashioned but I’ve heard that before somewhere………….
The World Cup continues to dominate and last night was no exception, Spain, the current holders have lasted just two games in this competition after being beaten by Chile 0-2 with only a dead rubber now to play. Elsewhere the lowlight was 10 man Cameroon going down 0-4 in disgrace as Assou-Ekotto even managed to find time to head-butt his own team mate in injury time!
Having said all that tonight is pretty much make or break night for England as they take on Uruguay and really need to win against Suarez and his mates, edgy stuff eh?
At Royal Ascot it is Gold Cup day, La Reine has a runner in Estimate which although won it for her last year has had a troubled run up to this years race so expectations are not high, bonne chance though as George Bush might say…
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