WTI $43.88 -96c, Brent $53.44 -$1.23, Diff $9.56 -27c, NG $2.72 -1c
The trend is weaker and it aint getting any better any time soon, at least that’s how the market feels. I still contend that we have to try out the lows before making any meaningful upward progress and the market fundamentals are not on the side of the bulls at the moment.
Stocks again will dominate with inventories expected to rise again in the API and EIA stats today and tomorrow, the refinery maintenance season is fully underway giving little chance of a demand tug. Yesterday WTI saw an intra-day low of $42.85, not seen for many years and Brent was also poor hitting a low of $52.50 before expiring weakly at $53.44. It is worth noting that the chartists are getting very worried about Brent, the short-term base of $53.13 nearly fell yesterday and there has been a crossover of the Kijun and Tenkan which apparently doesnt bode well. Failing to hold these levels is bearish with the next base as low as $45.19, you have been warned…
The Opec monthly report didn’t help much either, their non-Opec supply numbers are unchanged and they dont expect any fall in US shale production until the end of this year meaning that the June meeting is likely to be a rollover. Libya is apparently back up to 500/- b/d and the chatter about an Iran nuclear deal is ever present although I feel that there are hurdles there. Retail gasoline prices in the USA fell last week for the first time since the bottom on 26th January although only down 3.4c a gallon at $2.45.
Another red-letter day for Sound as it receives Environmental Impact Approval from the Lombardy Regional Government for an exploration well on its Badile prospect. Sound has proved adept at making progress within the Italian regulatory system and this not only opens up the largest and most strategic asset in its portfolio but makes it more ready for a farm-out. The company carries a best case estimate of 178 Bscf which could be as much as 50p a share on top of existing production and other exploration prospects.
If all goes to plan one might expect drilling on Badile at the end of this year or early next and if a farm-out were to happen of course the asset is de-risked further and costs would be mitigated. Elsewhere Nervesa drilling is getting under way and I am looking forward to visiting the site when the company hosts a visit in early May, again a chance to deliver another meaningful asset and provide value for shareholders. I say that because it is perfectly clear that the Sound management team, from top to bottom, concentrate on increasing and maximising shareholder value using the levers within its portfolio whilst also looking at external opportunities Dont expect this to be the last piece of news from a company deservedly at the top of the bucket list performance table.
Bowleven – The money is in the bank…
I have been waiting for this moment for some time, not because I didn’t believe it would happen but because there are so many opportunities for deals to falter at the final hurdle in these markets. No number of Presidential decrees or posting of stuff can take the place of hard cash which has today appeared in an Edinburgh account.
The Etinde farm-out has thus been completed and $165m of cash has been received after BLVN sold a 40% stake to LUKOIL and NewAge for $250m. The $165m of cash will be augmented by $5m of working capital, up to $40m in carry for 2 Etinde appraisal wells, $15m of cash on completion of the appraisal and $25m of further cash at Etinde FID. This leaves the company with a 20% stake and plenty of exploration upside in Cameroon which given how excited VOG are might be very profitable. Although it is appropriate to be wary of a Scotsman with a full wallet it is worth noting that the market cap of Bowleven, even after this news, is only £110m so the scope for making money on the shares still exists, looking forward to a one to one with Kevin and Kerry before long – still in the bucket list.
Alliance Trust – The curse of Dav-oh
On a separate note I couldnt help noticing that AT has some local difficulties, which is rather odd because I thought that if you spent so much of the company’s time and money at the WEF you should at least be immune from enemy action….
Reported in the FT today by Ed Crooks, apparently the US Government has accused BP of ‘misinterpreting data’ by saying that the Gulf of Mexico has recovered faster than expected post Macondo.
Plucky Bradford City finally made their exit from the FA Cup last night as Reading beat them 3-0 and progress to a semi-final against the Gooners.
In the Prem Swansea couldnt hold the HubCap Stealers who edged through 0-1 but enough for Brendan to say that they might finish 2nd… After their awful 0-4 drubbing at the weekend (a fan e-mailed me to say that Sunderland had developed ‘no-touch’ football) Gus Poyet was relieved of his position yesterday and the Maccams have already made a new appointment. Richard Avocado comes in fresh from a top position as coach of Serbia and will hope that the Black Cats can start with a much needed win against the Hammers on Saturday…
Tonight in the Champions League the Gooners visit Monaco with the uphill task of turning over a first leg deficit of 1-3 but anything can happen as we all know.
And the Cricket World Cup gets to the vinegar strokes tomorrow as the first quarter-final takes place between South Africa and Sri Lanka at 3.30 am.
Hi Malcy. You said all along the ‘stability’ in the oil price was a dead cat bounce. Good call.