WTI $94.45 -$1.09, Brent $101.83 -94c, Diff $7.38 +15c, NG $3.82 -3c
Yesterday was all about the ECB and the rate cut and bringing in asset backed security purchases. Not that any of this has much influence on the oil price, we knew European demand was flat all the time, the biggest effect was that the Euro tanked particularly against the dollar making it dearer to buy crude oil.
Today is all about the USA, it non-farm payroll day and a figure of around 225,000 would be in line and yet another above 200,000 number. Yesterday in the US the EIA inventory stats were better than the API numbers with a draw of 905/- in crude oil but more importantly the gasoline draw was 2.3m barrels showing that demand, if only temporarily has picked up. As I say regularly, September is a difficult month in which to draw comparisons as refiners are starting to reduce run rates ahead of October maintenance and consequent fall in demand for crude oil in that time, watch this space.
Finally there is more quality crude on the market, Buzzard has restarted and the Libyan acting Oil Minister said yesterday that exports were at 725/- b/d now and would be 800/- by the end of the month and 1m b/d by the year end. Another thing to watch is the Brent support at $101.50 odd, it has bounced of this level a number of times, falling through it and staying there would be very dangerous indeed.
I suppose that it was always likely that BP would lose the clean water battle to some extent but the worst came out yesterday. The Judge said that the company ‘acted with gross negligence and wilful misconduct’ and its employees acted ‘recklessly’. Coming a bit out of the blue also got the market going and the shares unsurprisingly fell sharply, down 6% and the low at the end of the day into the bargain. This is hardly a surprise as at $3,400 per barrel times by 4.2m barrels the bill is a tasty $18bn against a set aside contingency of $3.5bn.
Readers will know that I have been highly critical of BP’s litigation psyche and from now on this is only going to get worse. As predicted the company is appealing the judgement and like the Exxon Valdez situation the case will go on for years, maybe decades and hang over BP’s head for a generation. On the bearish side it means that management time will be wasted on all this and the legal fees are already colossal, running into billions of dollars. However the final bill won’t be as high as the number above due to mitigation etc and higher courts will probably moderate the language and fines on the company. I still have an overall number of around $58bn in my head for the whole thing which is more than the company have accounted for and I will be interested to see how they account for this little process. BP has been over generous with the dividend for a company that thinks it is bigger and better than it is, cash flow will be tight and may require another process of asset sales over and above current thinking and that is before looking at how energy sanctions on Russia may affect the value of their holding in Rosneft. At 457p BP is hardly expensive and the yield is compelling but holders should be aware of my views of management, it takes something special to get do an across the board double of getting on the wrong side of both America and Russia…
The Gulfsands/ADX drama continues, approval today by the Tunisian authorities for Chorbane is offset by a legal wrangle. Gulfsands appear a tad upset by ADX comments about the missing $1.5m which is more than covered by legal claims by GPX apparently another one that could run and run…
I was out all day yesterday after publishing the blog so I have only read in the trade press about the Aminex reserves situation, certainly I haven’t seen any announcement of a formal upgrade. Apparently there is an increase of estimates of in-place reserves at Ntorya of gas-condensate by 70% to 1.9TCF, I may have to look at the new corporate presentation on the website! I like Aminex and think that Jay is doing all the right things.
Also news from Tullow today that they have sold their Netherlands gas assets to AU Energy for $81.1m, in line with existing strategy.
I did a CEO interview with Keith Bush of Northern Petroleum yesterday and you can watch it on this link.
The last one dayer in the cricket today before a T20 next week and hopes are not high, sentiment in the squad is clearly appalling and Captain Cook’s grim mood is clearly spreading like the plague through the team.
No proper footy at the weekend as England prepare for a euro clash with Switzerland, I see Woy got very irked when questioned about the fact that against Norway his side only had two shots on target, one of which was a penalty, fair questioning if you ask me!
Rugby is back and I mean Union not that other rubbish. The Premiership starts tonight with Saints v Gloucester and tomorrow sees Sarries v Wasps and London Irish v Quins amongst others.
Roger Federer really wont go away! Two sets down and facing two match points he makes a Lazarus-like recovery and wins in five sets…
All eyes on the Italian Grand Prix at Monza and whether the Mercedes brats will play nicely together, in a way I’m sure everyone is secretly hoping for more dodgems only made funnier by the lack of sense of humour from Teutonic team bosses!