Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $59.19 -10c, Brent $62.72+13c, Diff -$3.53 +23c, NG $2.59 +4c
If only the Vampire squids had known how their 2018 oil price forecasts would have affected the market they might have been able to make a good trade out of it and resurrect their awful commodity trading performance, or maybe they did……………
As I had suggested the big guns were wheeled out yesterday to back up the Opec/Non-Opec adherence after the recent price fall. The Iraqi minister said that they were in full compliance (they had been suspected of overproducing) and that there would be no reappraisal of quotas until December. The Opec Secretary General said that the recent fall was ‘merely a blip' and the Russian Energy Minister said that global energy stocks were still trending lower.
The IEA report was mixed, on the upside it lifted world demand numbers and were added to the list of the 100 club, ie the world demand will break 100m b/d by the end of this year, they also noted that inventories were down. On the downside they also joined the EIA in increasing their US production numbers which came as no surprise.
During the day prices drifted but rallied off the lows, after hours though the API stats showed higher stock builds than expected at +3.9m and also in gasoline +4.6m which need to be verified by the EIA tonight. It won't be long before spring refinery maintenance starts to rear its ugly head and demand for crude drops, albeit temporarily.
More good news from Hurricane this morning as the update from Dubai where the Aoka Mizu is being upgraded, repaired and having its life extended. A key project milestone has been achieved as completion of the buoy ‘dry' trial fit testing operations have been reported by Bluewater and Dubai Dry Docks. This gives a ‘high level of confidence' that the ring of the buoy will successfully engage with the turret during offshore hook-up.
This is a week ahead of schedule and very important as any problems offshore would have ‘cost and schedule consequences' as an incorrect fit during offshore hook-up would create a significant risk to the project. It seems that all parties are ‘delighted' with current progress and sail away from Dubai for the vessel is still on target for 3Q 2018. On a recent visit to the yard it did appear that work was going very much according to plan and this is indeed an important milestone to achieve.
A complicated announcement from Genel this morning which appears to suggest that Taq Taq reserves have increased by 40% but more importantly suggests that potential for ‘high value' oil resources at Bina Bawi is better than the market expects.
Yesterday we had another announcement from Faroe, this time an operational update and some guidance for 2018. Last year production closed at the top end of guidance at 14,300 so it's no surprise to see this years guess at 12-15/- b/d which should be wide enough for most people…
Reserves ended the year at a highly creditable 97.7 MMboe an increase mainly down to the successful Brasse appraisal well. Adjusted for yesterday's Fenja deal it is 78.6 MMboe but bear in mind the huge cut in capex as a result, down from $232m to $70m which leave FPM very strongly financed indeed. This means that the company can pick and choose from opportunities from either within its portfolio or even have the scope to make an acquisition should that arise.
Faroe is still very much the poster boy of the sector with its excellent exploration record and a management that never fails to deliver, regrettably I can't make next week's analyst visit to Norway but am sure that those who are attending will come back suitably impressed. One of the first names on the bucket list and still incredibly good value.
We are back to the Champions League and last night Spurs came back from 2-0 down to get a good draw with two invaluable away goals which should see them through ok. The Noisy Neighbours got the easy draw and went to Basel and won 0-4, easy as you like. Tonight it's the HubCap Stealers away at Porto which should also be straightforward…
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