WTI $31.82 +$2.39, Brent $34.81 +$2.31, Diff -$2.99 -8c, NG $1.78 +14c
Oil price- The ‘B’ is back….
This time last month we had the terror of manic May Monday as the near term May WTI contract expired. Unlucky investors and grossly incompetent ETF managers conspired to give the oil market a bad name although to be honest anyone who plays with fire, in this case ETF’s should predict the potential outcomes.
Today is another day, expiry day for the June contract and the amount of open interest is at best 1/3 of that a month ago and the ETF’s are nowhere to be seen, only Trafigura are sad about it. Back to the headline, the ‘B’ is back, by which I mean a rare sighting recently of a backwardation in the oil market as front month contracts are priced above the future. This is on low volume but in WTI and maybe in Brent and Dubai we could be seeing a modest change in the future.
This is all about the growing if tenuous tightening of the oil market as described here in the last few days, today I’m looking at the tracker market which is about as good as it gets in terms of up to date info. Kpler report that Opec+ seaborne exports are down 6.3m b/d over the past month to 27m b/d whilst Petro-Logistics confirm that, they say that from 1-13 of May the fall was 5.96m b/d. the numbers we have been hearing are about right, Saudi is on about 7.26m b/d down 2.24m b/d, Russia are complying with a fall of 922/- b/d. With Kuwait and UAE down 1.2m b/d only Iraq and Nigeria are apparently lagging.
Finally as promised yesterday the retail gasoline numbers came out overnight, overall in the USA a gallon of gasoline costs $1.878 which is a rise of 2.7c w/w but still nearly 80 cents down on this time last year. I am keen to see how much demand in the US is up and the data over the next few days on product inventories will be important.
A Ruvuma Farm-out update this morning reveals that ‘following payment of the Capital Gains tax bill and payment by ARA of the Stamp Duty bill the Tanzanian Revenue Authority (TRA) has issued the Tax Clearance Certificate (TCC) to the company’. This TCC has now been submitted to the TPDC to be forwarded to the Ministry of Energy.
The Company has now completed all the requirements to allow the Minister to grant approval of the assignment of the 50% interest in the Ruvuma PSA to APT, the final remaining condition to completion of the Farm-out. CEO of Aminex Robert Ambrose said ‘This is a major milestone. With the receipt of the Tax Clearance Certificate from the TRA and with the onward submission to the TPDC, Aminex has now accomplished all of the conditions within our control in order to complete the Ruvuma Farm-Out.’
The company has announced cost reductions aimed at reducing group overheads by 30% on 2019 and include reduction of executive directors base remuneration, reducing headcount and reductions of advisor and contractor costs. The executive director’s salaries will be permanently reduced by 20% and the current LTIP scheme will be discontinued for the next five years. In its place comes another scheme, the Option Scheme which represents a re-balancing of executive director remuneration more heavily towards equity in order to achieve greater alignment with shareholders.
President waited until the shares were up 25% this morning before confirming press reports that in Argentina the Government has announced a fixed oil price of $45pb, it is clearly important not to pre-judge such press reports. This clearly has an important and positive impact on PPC and importantly following a period of lock-down that the country is emerging from.
The key for President is clearly demand without which any fix of the oil price would be negated and the country does appear to be exiting the COVID-19 lock-down well with many industries now back at work in many provinces, road traffic materially increasing and demand for hydrocarbons showing increases. With a market cap of only £24m these shares are still massively undervalued as I have said for some time.