WTI $93.97 -71c, Brent $103.02 -$1.66, Diff $5.65 -95c, NG $3.97 +1c
Oil price – Picnic time for oily bears…
The oil market really is well supplied at the moment with everybody who can sell crude doing so, even the speculative traders who normally punt the market with other peoples money have disappeared from the scene. At the risk of repeating the same old story on a daily basis all the pointers are directing the prices lower. Economic stats from China this morning were bearish as output growth unexpectedly slowed as did money supply growth.
All the reporting agencies are producing stuff at the moment, its almost too much to assimilate but further to the IEA report they expect US oil supply to rise by 1.2m b/d this year and have trimmed global demand growth to 1m b/d, result misery. The EIA short term energy outlook is also out, they forecast Brent to be $107 in the second half of this year, falling to $105 in 2015. They also forecast a tighter differential of WTI to Brent than in previous years. They also have US crude production at 8.5m b/d in July which is the highest since April 1987 and forecast 9.3m b/d next year which would be the highest since 1972. To make matters worse for international exporters, the share of total U.S. petroleum and other liquids consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. The EIA expects the net import share to decline to 22% in 2015, which would be the lowest level since 1970. On the subject of statistics the API numbers last night showed a build of 229/- barrels of crude oil against expectations by Wall Street’s finest of a draw of 2.2m barrels…
So, as I say at the top, although the 2H of this year is looking a bit bearish it may look like a picnic compared to 1H 2015 which at the moment is showing signs of continued oversupply, the December meeting of Opec may well turn out to be quite tasty..
Petrofac has won another contract in Malaysia, an EPCC award by PRPC, aka Petronas for a refinery package in Pengerang, Johor province. This $500m+ lump sum contract is bread and butter stuff but reminds us that Malaysia is a ‘core’ country for Petrofac and Petronas a ‘key’ client. Figures due from PFC on 26th August.
President has announced the Jacaranda well result this morning and with the price down 25% you should correctly assume that it was a duster. However I listened into the conference call with the management and they did a pretty good job of making a dry hole sound like the successful start to a new oil and gas province. I will make some comments now but I am seeing the company tomorrow so I should have a better idea after that as to what to do with the shares.
The major disappointment is that there was no seal on the top or at the side of the sands which themselves looked ‘excellent’. The company point out that the key to all this is the source rock and what they found was a ‘thick and prodigious’ 800m section of live Devonian source rock which confirms their proof of concept for the play and de-risks the remaining two wells in the campaign. As a ‘sighting shot’ as the company describe it, this well does indeed exhibit evidence that they were looking for and I am tempted to agree that to write it off at this stage would be ridiculous as with SE Bolivia on one side and NW Argentina on the other, the Pirity Basin could still be very much alive. The next well will be on Lapacho which is a 400km area with several large structures and will spud in September and drill for around 60 days or less.
The President chart doesn’t look pretty and today’s fall takes it back into the mid 20’s which is starting to reflect failure in Paraguay which is probably a bit premature. Subject to tomorrow’s meeting I am tempted to give this one another try and double the bet down here, it is after all very early days in this province and if it were to work the upside is still very substantial.
A quick word on EnQuest which has results this morning. With production in-line and forward guidance intact all looks fine at the company and with revenue of $504m, EBITDA of $284m and cash flow of $318m the numbers stack up well. The only fly in the ointment is that the FPSO sailaway on Alma/Galia is now ‘weather dependent’ according to the company. Apart from that all is ok and while there is little in the way of excitement the shares are trading at the lower end of what is a pretty narrow trading range.
I mention Talisman only because it might give a read through, albeit pretty vaguely to other companies operating in Kurdistan. The Canadian company has announced that it is to go ahead with the sale of all or part of its Kurdistan portfolio of assets. They say that this is ‘not affected’ by the conflict in the region which sounds like estate agent speak for ‘don’t worry about the new motorway next door’ and Talisman have still removed most of its personnel from the area just in case…
At the European Championships the heroine is Jo Pavey who has come away with the 10,000 metres gold medal in a devastating performance doing even better than the C Games.
This afternoon sees the first semi-final of the women’s rugby World Cup and pitches England up against Ireland. Quite who is favourite here I’m not sure, current form would favour Ireland who beat hot favourites and holders New Zealand in the previous round but if England could recover their form it will be close…
And England’s women cricketers are on duty as well with the first Test match against India starting today at the wonderful ground created by Mr J.P. Getty late of this patch…
One cant ignore the football I suppose with the Premiership starting on Saturday. Mr van Gaal has appointed Wayne Rooney as club captain and Louis got his first win at the Theatre of Dream last night as Utd beat Valencia 2-1. In Cardiff, a Utd reject scored two goals for Real Madrid as they beat Sevilla 2-0 in another meaningless ‘super’ cup. Talking of meaningless cups it was the Clueless Cup last night where you wanted to be at Dagenham and Redbridge (did I really say that?) where there was a twelve goal thriller as they drew 6-6 with Brentford, actually it was an eighteen goal thriller as the Bees won 4-2 on pens.