WTI $43.98 -62c, Brent $47.54 -45c, Diff $3.56 +17c, NG $2.06 -22c
Another drifty day for crude oil, the fundamentals say that we still have a glut and one that isnt going to change anytime soon. Analysts forecast a stock build of 3m barrels in the API stats tonight although the product situation is far from clear. At the moment crude oil stock build is offsetting supply side contraction and will weigh on oil prices to a large extent. On stocks, it is worth mentioning the natural gas price, nearly back down to $2 as we come to the end of the injection season but thee is a significant surplus so only an early and very cold winter will bring support to Henry Hub.
Regulars who know I watch the retail gasoline market in the US are now getting in before the stats, a blog reader resident Florida, mailed me to say that he filled up at the weekend at less than two bucks a gallon! Indeed last nights numbers bear him out, whilst the US overall was down nearly 5 cents a gallon at $2.29, the Gulf Coast was indeed $1.95, the cheapest in the land.
The 5th Plenum in China continues and not to be outdone the FOMC meets this afternoon and tomorrow but with no press conference called no change is likely, I mean we cant do anything without the press can we?
BP kicks off the results season and beat the whisper by a little, underlying RC profit was $1.8bn just under half last year’s number owing to the fall in the oil price. As expected there was a strong downstream performance with the quarter showing more than doubled profits from this time last year although the company signalled to expect reduced margins in the fourth quarter.
As one might expect the company announced steadily lower cash costs as the business restructures which will bring charges of $2.5bn between end 2014 and 2016. The word of the day is ‘organic’ as the company says that it will balance its ‘organic’ sources and uses of cash by 2017 at $60 Brent in order to sustain and even grow the dividend. On capex, ‘organic’ capex will be $17-19bn pa between now and 2017, at the higher end of that range this year. They point out that capex expectations were previously $24-26bn last year and still $20bn in 2Q this year which is a bit smoky to me. Gearing is right at the top of the desired range at 20% and funnily enough that is the new target, having paid $11.5bn in Macondo payments so far this year further divestments are in the pipeline.
I think the most important thing to pull out of these results and probably for all the majors will be the costs, I dont think the market has grasped quite how inefficient these companies were at $100+ and therefore how lean they are running now. As I said recently, I have some evidence that margins are higher now in exploration than they were at $115 crude, will we find that the recent oil price fall has been a blessing in disguise?
Providence Resources- Dont hold your breath…
The Providence Resources share price has doubled in the last month but today the market is much easier as it announces the much delayed farm-out of up to 32% of Spanish Point in the North Porcupine Basin. Now Providence has poor form when it comes to farm-outs as those who believed them when they told all sorts of stories about Barryroe, which still hasn’t been done. The company say, as if it’s good news, that Cairn are to ‘commence operations for drilling in 2017’ and that with costs so much lower now drilling will be cheaper. When the drill bit finally turns, maybe not until well after 2017 I would hate to forecast what rig costs might be. Having said that, there is a general view that interest in Ireland has been stimulated recently, as noted by the participants in the current licencing round where apparently companies of all sizes have pitched in. Also comments from Europa, who are also on the farm-out trail and have detected signs of life but again have a long timetable.
The political play for the year hasn’t finally played out yet but the elections in Argentina will end up positively, pretty much whoever wins. After the first round at the weekend the centre right candidate Mauricio Macri did well enough to take it to a run-off on November 22nd, even if Daniel Scioli wins then he too is pro-business. I say this because not only will the oil industry win but many of the majors who are involved will do to, as will old favourite Andes Energia. I met recently with Alejandro Jotayan CEO who told me that things are looking very helpful all round and it is a play, and a stock worth watching.
It’s a nerve wracking few days for punters watching for highly significant well results. FOGL must be close to finding out quite what is in Humpback as this well cant go on for ever, at least they are not paying for this bit…In Texas, Pantheon must also be close to telling the market news from the testing on VOBM#1 in Polk County as it only takes so long to analyse the rocks. Finally, at Loto-2, Amerisur said that testing the Mirador reservoir would take around 14 days so news from there must also be imminent.Watch these spaces…
A bit quiet today on the Sporting front, The Chosen one has booked his normal taxi to the FA for this week’s disciplinary hearing although he has been seen looking at the jobs pages of Italian sporting papers…
Tonight its the Clueless Cup and Jose has a trip to the Potteries to try and wrestle a win against Stoke, elsewhere the Toffees host the Canaries, Hull City Tigers take on the Foxes and the Owls entertain the Gooners.
England lost the cricket but the tail wagged well enough that it was nearly saved, if the middle order has such stick-ability…