WTI $39.31 +$1.07, Brent $43.21 +52c, Diff $3.90 -55c, NG $2.68 +3c

Oil price

Crude prices rallied a touch yesterday with a variety of reasons being proffered, the weak dollar as the Jackson Hole meeting starts today to decide on when interest rates are to rise seemed as good a start as any. If you believe that the dollar strength has run its course for the time being we may be near the bottom. Elsewhere the reports of the Whiting refinery coming back onstream earlier than expected would have boosted WTI and demand for local crude. The big news of course came by way of the API inventory stats, analysts had been going for a build of around 1m barrels so we shouldn’t have been surprised to see a draw of 7.3m barrels, watch out for tonight’s EIA numbers to frank the form.

I have been taking a look at what might change in the oil market now that we are back down at the lows, this week’s news from China has potentially changed things if you believe that their economy is faltering, a view I dont necessarily share. However what it might do is to precipitate some change in policy from Opec and give the cartel a chance to ‘suspend’ its latest drive for market share. There is no doubt that even the Saudis are feeling the pinch as is reported in a number of papers at the moment. To save face I can see that some sort of deal may be cobbled together, it would need to be wrapped appropriately of course but Opec rescues the world sounds quite nice.

The fundamentals remain weak, current strategy has been premised on someone blinking first, some people thought it would be the US shale operatives but it was never going to be them, particularly when costs fell by up to 40% and banks preferred to roll with the debts rather than put them into Chapter 11. Worries about overproduction from the Opec heavyweights continue as they fight to dominate the cartel before Iran returns to the fray, nobody is backing off at the moment it seems. Last week the Saudi Foreign Minister visited Moscow and whilst discussions were of a general nature they definitely revolved around oil. Conventional wisdom states that Russia cannot afford to cut production, but as a leading investment manager suggested to me recently, if by cutting output modestly, total revenue might actually rise, particularly if done as part of a concerted effort. What says that in answer to the recent calls for an emergency meeting, the Saudis acquiesce, agree an Opec cut back as a temporary measure and invite Russia to attend as an observer at which stage they add a meaningful token as a gesture to the Middle East? Flights of fancy maybe but at some stage someone will blink and current problems in China may be a precursor to action from Opec, an unholy alliance maybe but stranger things have happened…

Cape- Redhall gives you wings…

Another good set of figures from Cape as Joe Oatley and team get to grips with the company. As is the case with any service company at the moment the conditions are described as challenging but with revenue, profit, cash flow and EPS all up in the period this is undoubtedly a cracking set of figures. Add to that an order book up 24% at £800m at its highest for four years and you get a maintained dividend that might not have been imaginable last year. As one might expect not all geographies are firing on all cylinders, the UK North Sea is seeing pricing pressure and project downscaling but elsewhere the UK looks ok particularly with good contract wins from BP and Exxon.  Azerbaijan is good as is most of the MENA area with the KSA and Qatar demand high and Kuwait prospects ‘moving forward’. Asia is pretty mixed led by an awful Aussie iron ore market but that was more than offset by the Wheatstone project ramping-up and good performances by the Thailand and Philippines businesses.

Cape has surely turned the corner and the progress made is tangible and substantial, the balance of the business is sound and the focus on operational efficiency belies the nature of the market which is  a credit to the management. Despite weaknesses in the North Sea and in iron ore a number of divisions have stepped up to the mark and margins are stable and may yet increase in some areas. Yielding over 6% on a maintained 14p dividend which I dont consider a burden, this stock is surely too cheap and a lock away despite the traumas of the sector.

Andes Energia

This stock has been a favourite for a long time and today has announced that it has raised $9m in a placing and subscription to fund its drilling campaign and $10m to pay off a bond, all at 25p. Andes has an exciting work programme over the next two years in the Vaca Muerta and elsewhere in South America in which it is partnered by some industry heavyweights and is worth keeping on the radar screen.

Aminex

Its been a hard graft but it does look like Aminex are close to delivering first gas from Kiliwani North ‘within the current quarter’ after a long wait. They say that the Kiliwani North GSA is expected in the ‘near future’ and if all goes well they will get under way with the appraisal programme at Ntorya. As I said recently I am hoping to get an update with Jay before long and will report back after that.

Sundry

Schlumberger has announced that it is acquiring Cameron in a $12.74bn cash and shares deal. The bid at $66.36 a share is a 56.3% premium to last nights close, the shares have fallen by 42% in the last year. There will be more deals like this and on the day that Transocean passed the dividend will surely start to sort the men from the boys in the oilfield services sector.

If my maths are correct it is deadline time for the Tethys Petroleum potential  bid by Nostrum, after due diligence expired yesterday with a two day limit by tomorrow morning all will be revealed…

Faroe have announced that Shell has spudded the Portrush exploration well in the Norwegian North Sea in which they have a 20% stake. It is only 10 km away from the Fjord field in which Faroe has a 7.5% stake and is one of only a number of exciting prospects that it will drill in the next few months.

IGas has announced that its new CFO will be Julian Tedder, an experienced E&P operator and in todays AGM statement appears plenty upbeat  about prospects which is probably appropriate given how much more interesting life must be looking now.

More problems in Morocco for Circle Oil for whom nothing seems to be going right at the moment. This time they appear to have had problems on the KSS-A onshore Morocco and ‘unexpected lithology above the primary objectives’ meant the well was P&A’d. I now know why my meeting with the company was cancelled and hasn’t been rescheduled…

And finally…

Not a good night for Celtic as they went down 2-0 to Malmo and will not qualify for this years Champions League, maybe the jam tarts next year… Tonight it’s the second leg for Man Who who travel to Club Brugges 3-1 up from the first leg which was a bit flattering.

The big boys are now all in the Clueless Cup and in last nights draw the tie of the round turned out to be the Gooners going to old enemy Spurs. Other notable fixtures are Villa v Birmingham in another local derby whilst the Tractor Boys will go to the Theatre of Dreams and unlucky Maccams drew the Noisy Neighbours out of the hat…

Ahead of tomorrows squad announcement from Stuart Lancaster it appears that Danny Cipriani hasn’t made the cut and will miss the World Cup.

And at the World Championships both Usain Bolt and double doper Justin Gatlin have qualified for tomorrows 200m final, only one of those is worthy of note…