WTI $77.91 -77c, Brent $82.86 -9c, Diff $4.95 +68c, NG $4.40 +21c
There are many differing influences on the oil price and today is no exception, take your pick from the Opec monthly data, the post match conference, Non Farm Payroll (expect 235/- but consensus rising according to Guru Marcus Ashworth), the effect of the Republican victory on the upcoming nuclear talks with Iran and of course Libya to name but a few. The Opec monthly cut forecast for the call on their crude quite dramatically, by 2017 there might only be a need for 28.2m b/d or even less, primarily down to US shale production which they expect to lessen crude oil imports. For the longer term Opec is still expecting significant call on their crude oil, by 2040 they see demand being 39.5m b/d…..
This weekend sees the resumption of nuclear talks with Iran to be held in Oman. I suppose the interesting thing will be is whether they Iranians feel that even if John Kerry walks away from the meeting with a commitment from them that he will be able to carry it with the new Senate or the House. For the oil price there is no doubt, as i have mentioned before, if there is a deal on Nov 24 then the Iranian delegation walk into the meeting with another million b/d in their back pocket, not helpful. Re Libya the rebels have apparently reopened the El Sharara oilfield and it will be business as usual, not sure about that but watch that space. Finally at the post Opec press conference there were a number of questions to the Secretary General about the current situation to which he answered that Opec were ‘concerned but not panicking’ which probably means that they havent got a clue what to do.
A quick word on UK retail petrol prices after two politicians yesterday called for oil companies to bring prices down ‘like a stone not a feather’. This really does show just how naive these guys can be and unless the major retailers have found some secret way of hiding profits then it shows thickness on a totally epic scale. I’m not going to go into it in any detail as it is such a simple thing but petrol cannot go down just like oil prices. Firstly you have to look at the price of oil in terms of £ per barrel not in dollars, secondly the total tax take in duty and VAT is well over 60% per gallon and the last time I looked the politicians hadn’t expected to cut their take with the falling oil price, thus limiting the potential fall. I’m afraid that although the oil companies and major supermarket chains are a legitimate target this time it just doesn’t work, the politicians just dont get it.
Natural Gas prices
Talking about things going under the radar the natural gas price is actually up 24% in the last 9 working days which is quite astonishing. It is like the old days when the market didn’t realise that in the Autumn and Winter the temperature goes down and demand for gas increases. The EIA statistics for gas storage actually make fascinating reading as record summer injections have taken place after that very cold winter left stocks at an 11 year low, in April stocks were 826 BCF which is half of the level at the same time in 2013. The efficiency of the gas storage market is legendary though and nowadays there is less need for stocks although last winter showed just how well the system works. However, in recent days natural gas prices have been pushed up sharply as some commentators think that another cold winter would place too much of a strain on the system and a shortage would ensue, i’m not sure I agree and am quite surprised by the recent rise.
I put out a tweet and a flash blog this morning about Cairn Energy as although they havent announced anything I am hearing rumours that the SEN-1 well may be a significant discovery. What set me off was the fact that Far, their Australian partner had gone into a trading halt ‘pending an announcement’. This means that they have to say something by Tuesday at the latest and whether it be a discovery or a duster it will be meaningful to the company and the share price. It should be noted that Cairn and definitely Conoco will probably say that whatever the result of the well it will not be that meaningful on its own but to Far it would be, (Remember a few weeks ago when Serica and San Leon had to announce preliminary results of the Genel Morocco well for the same reason?) they cant take the risk. For what its worth I think that it might well be another significant discovery making Senegal the latest African country to find meaningful hydrocarbons. The well is shallower that the FAN one and if they have found, say a bigger column, maybe 35m + then it will be better and cheaper than the first making fast development a definite option.
I have said a number of times lately that I think Cairn is worth putting on the buy list, I am desperately trying to get a meeting with the company but understand that while all this is going on that is a non-runner so I will go it alone so to speak. Without an idea of long term strategy for Africa, the North Sea and indeed in Ireland within the portfolio it is difficult to judge what Cairn’s commitment to Senegal might be as they are operator and 40% holder here. If it looks like a big play and it might just be Conoco will probably want to up their stake so all eyes on Cairn as I dont see Far being a seller. All this is wild conjecture and we must wait until there is a formal announcement, I may be well wide of the mark but have a hunch I am not, if so, tucking away a few Cairn down here is probably quite a good call, after all even after a modest rise today we aren’t far from the long term lows. More on Monday or Tuesday I hope…at least from Australia as Cairn might stay schtum…
For some reason the market was expecting an update from Tullow today but I notice that it has now been scheduled for next week. Tullow have been talking to whoever will listen down at an industry shindig down in Cape Town and the price has picked up so I think that we all know already what’s in the envelope for next Wednesday!
Faroe has announced that it has received two licences in the UKCS in the 28th round. Both licences are adjacent to existing prospects, one being near Lowlander the other being near Perth. Whilst such announcements do not a share price change it is common sense to snap these up and as usual Faroe are doing just the right thing. As long as the oil market is like this Faroe aint going anywhere but it is one of the best value in the sector and will go into that famous bucket list I have been talking about.
In the Boropa Cup last night Spurs won away at Tripolis, Everton predictably (by me and Nigel Seeley at TipTV) won to nil against Lille and Delia Smiths Celtic got a draw ad Astra…
In the Prem this weekend the standout fixture is the visit of the silent Chelski fans to a noisy Anfield, home of the HubCap Stealers who may decide to play a 1st eleven as this match is more important than going to the Bernabéu…West Ham take on Villa in the Claret and Blue derby and the Saints should beat Leicester. Man U host the Eagles and the Super Hoops host the noisy neighbours, Sunday is Boresville Arizona.
Its the first round of the FA Cup when the sponsors try to makes us think its interesting but i’m afraid it doesn’t come alive until January when the big boys come in…
But what a weekend for rugby fans with the international circus coming to Europe. Highlight is probably the visit of the All Blacks to Twickenham who are apparently 8 points over to beat England. Its well worth looking at yesterdays TipTV sport section to hear the views on all the games but Wales host Australia, Ireland have South Africa in a very difficult fixture and Scotland take on Argentina at Murrayfield. France should beat Fiji easy enough but Tom Howell thinks that Samoa might turn over Italy so have a look at that.
Finally it’s the Brazilian Grand Prix on Sunday and with only two races but three lots of points, all is very much still to play for, a DNF is not an option for anyone here.
I hope I havent missed anything big, there’s a good card at Sandown Park and plenty more sport for all to watch including the NFL at Wembley, i hope my US correspondent is back this weekend!