WTI $53.29 +$1.38, Brent $58.43 +50c, Diff $5.14 -88c, NG $2.53 +2c
Onwards and upwards very gently as the oil price ticks up modestly for the fifth day in a row, May Brent expires today so traders would like it to finish well, above $59 would be helpful. Part of the resilience is down to the weak dollar but a shed-load of stats are mainly bearish if one is honest about it. Take the Chinese GDP number, I actually had consensus at 6.9% so in my eyes it was OK I look forward to seeing what the guru Marcus Ashworth says in his blog today. If the GDP number is bearish, and it is the lowest since 2009, then the industrial production number at 5.6% is a disaster and with retail sales up only 10.2% what is the place coming to? I joke obviously but it is worth looking at the implied oil demand which in March was up 7.6% at 10.53m b/d, I have to say that I could live with that growth as regardless of GDP worries demand for oil is solid and as I said before, more cars, more air miles and 100 new airports on the way.
Elsewhere the EIA estimate that US shale will fall by 45/- b/d in May to 4.98m b/d and by 60/- b/d in the 2nd quarter which isnt much but will be the first monthly decline in four years. They also said that the USA would cease to be a net importer of oil sometime between 2020 and 2030, possibly earlier.The IEA monthly is out today and it says that Opec production in March was 31.02m b/d against a call expected to be 29.5m b/d which itself is actually up around 80/- b/d on previous forecasts. Iran joined Libya in asking for a 5% cut in Opec production and the Russians again mentioned that they might help which I dont believe, 5th June in Geneva still looks to be a waste of jet fuel…
A trading update from Hunting this morning and given that most oil service companies are finding it difficult to give guidance at the moment these updates will become more interesting. Unsurprisingly the company report market conditions to be ‘volatile’ and with rig counts falling and capital expenditure being reduced or reviewed it was a poor quarter with operating profit down around 60%. The company are cutting costs themselves mind and employee levels are down 20% so far this year as action is taken in appropriate areas.
What is interesting is that the capital investment programme that the company has embarked on in the last few years completes this year in Texas, Maine and South Africa and I would wager that all will flat out before long. The outlook is indeed unclear but the company is confident that industry investment and activity levels will recover, as they say ‘ we sell a broad range of high value products to all major global regions’ and their investment in South Africa, the Middle East and in Singapore will ensure that the Group ‘capitalises on the market recovery’. With a strong balance sheet showing no significant change to their financial position I tend to feel that Hunting is one of the best placed to take advantage of market conditions improving although I would be the first to admit that we may be a a little way away from that happening. Examples of this are that there appears to be little sign of a slow down in Gulf of Mexico investment where Hunting has strong relationships, Asia and the Middle East are resilient and the opening of South Africa on 29th May will probably herald big business on that continent.
Having bounced 48% from the recent lows I thought that the shares might lose some of that today even though I have been more positive on most about the company recently. As it is the stock is up on the day as I write and that says a lot about forward looking thinking, I wouldnt be trading out of the stock just now, it may be a bumpy ride but this is one for the long term and if GE had any sense which they patently dont, they would be looking at the likes of Hunting to be buying at around the bottom of the cycle.
Europa Oil & Gas
Results today and as usual they themselves are largely irrelevant to the process, there is £3.6m of cash on the balance sheet and news flow has been mainly positive this year. Kosmos say that the Irish prospect inventory is of 1.5bn barrels of gross mean un-risked resources which is what the company call building the very high reward component of the portfolio. With Wressle being significantly positive and Kiln Lane rather disappointing they have onshore matters to build on and they have been active in the 14th round into the bargain. We can expect a CPR on the UK and Irish licences this year and eventually the company managed to farm-out the Tarbes Val d’Adour permit in France showing some progress over there. Things aren’t looking too bad for Europa, in the short term there is about enough to pay the bills and longer term there is much to get excited about, I am slowly getting a better feeling about the prospects in Ireland but it will be a long haul. Activity from Kosmos is obviously important but watch out for increased corporate activity from a number of Irish players and dont forget that there are a number of big companies in the area who have yet to come out to play.
After my rather tongue in cheek remark yesterday (referring to the T5 possible reverse into GKP I said that Tullow hadn’t been huge in Kurdistan) a little birdie got in touch with me with an interesting story. Apparently Aidan (Heavey) had Taq Taq as far back as 1987/88 and has photographic evidence into the bargain but just found it a bit more challenging then than it is today, we live and learn!
The cricket was actually quite good, England had a top order and lower order collapse but the middle men have put enough on the board to ensure a likely victory although the selectors are as usual looking like lemons. In the domestic game County Champions Yorkshire cruised though their fist game without two of their best players who were in the West Indies but warming the bench or more likely the beach…
I had a comment last week about Raheem Sterling who I had incorrectly quoted as being grumpy, apparently the word should have been greedy but either way I now reckon he is plain Dopey….
PSG v Barca tonight which might have been Chelski v Noisy Neighbours, check, should have written no way might have been…
And with 11 days to go I would like to thank again those who have donated to Netty’s marathon effort, particularly to PW who gave yesterday, thank you very much, you know who you are and it is really appreciated.