WTI $48.65 +72c, Brent $51.15 +5c, Diff $2.50 -57c, NG $2.87 -7c

Oil price

Yesterday the oil price just wasn’t quite sure which way to hang and right up to the end of trading Brent might not have had its first up day of the year. Also, WTI flirted with support levels hitting $46.83 at one stage. As I have said before this is no time to be clutching at straws but if you want a couple here they are.

The preliminary data from China looks like it might confirm my view that the country is not only increasing its purchases of crude but buying for strategic reserves as well. December numbers will show that the price fall might have been much worse if it wasn’t for such buying. Secondly and this is the shortest of straws, tomorrow sees the index re-balancing which will involve forced buying of mainly Brent oil.

WTI outperformed Brent yesterday and narrowed the differential into $2.50 after the EIA inventory stats showed a draw of 3.1m barrels, those analysts must still be recovering from their New Years Eve hangovers as yet again they got the sign wrong in predicting a build of 900/- barrels. More interestingly the gasoline and distillate stocks rose massively by 8.1m barrels and 11.2m respectively as refiners are running flat out on cheap oil. Quite what this will do to margins i’m not sure but surely it has to bring them down and with such a glut of product prices at the pump may fall even further. When the majors report 4q figs in the first week of Feb, margins will protect them a bit, this may not be the case in the 1st quarter of this year.

Sundry

Europa Oil & Gas has announced an effective profit warning which won’t come as a surprise as like most others in the sector it has fixed costs and lower receivables. Whilst the company is excited about the future, short term guidance is lowered and the shares have fallen somewhat this morning. With work needed on WF-9 deemed to be inappropriate at the present time EOG is shutting this well in, the powers that be in Saudi Arabia will be pleased to note that their policy is starting to work as this takes 8 whole barrels a day off world markets…

Velocys has noted that CompactGTL has had permission refused to appeal against its recent court win on patent 509 although it appears that it can appeal on patent 508. The Court is in the process of determining the level of damages due to Velocys.

And President has given some figures regarding its production in Louisiana which it describes as being a ‘solid cash generator’ for the group although we are all aware that the excitement and potential upside lies South of the Border  as they say.

And finally…

Lots of cricket going on around the world with a run fest in Sydney for the Aussies and certain Indians. England Saxons are touring South Africa under captain Jonathan Trott, at least the team knows that when on tour over there they can stay with their families…

Fernando Torres made his re-debut for Athletico last night in their Cup win over Real, some things never change, he didn’t score and was subbed in the second half…

And the press are full of talk about Lionel Messi moving to England with both Chelski and the Noisy Neighbours in the race. It’s a race I would want to be in, with a total cost of around £250m plus tips the words sheer and lunacy come to mind.