Today’s Blog – Wednesday 1st July 2015


Today’s blog is a short and early one – I’m heading out today for a field trip to view a mining tenement in Mongolia with strong graphite potential.

Hopefully this is not too heretical to the hard-core oil and gas junkies in this blog’s readership.  However, I think the World’s energy needs are vast enough to require an “all of the above” approach.  (Plus its somewhat cheaper to acquire and explore for minerals than it is for oil and gas in a time when capital markets don’t want to know about the latter).

Commodity prices

Crude prices rebounded last night, as attention moved from Greece to Iran.  Brent closed at US$63.59 and WTI at US59.47.  In an un-surprising move, the Iran nuclear talks participants have kicked their particular can down the road for one week.  Expect more can-kicking next week…..

Henry Hub edged up to US$2.83.

The end of the quarter yesterday allowed a view of quarter-on-quarter commodity price moves.  Oil was by far the strongest, with Brent increasing 13% and WTI by 18% (clearly the spread between the two narrowed).  Gas was the very poor cousin, with Henry Hub down 5% and Asian LNG spot prices down 6%.

The next quarter should provide evidence, one way or another, to indicate whether the oil market is in fact in Will E Coyote territory (over the cliff) or in fact is still on firm ground – which I think would require material US production declines and increasing demand not reliant on SPR builds.

The oil markets in the medium term (when information is available not just from the US) are more predictable (in my view) – the massive cuts made in exploration and other capex by the Majors and NOCs will inevitably result in much tighter (or short) oil markets in 3-5 years time.  Petrobras’s recently announced multi billion dollar capex cuts confirmed the trend.


On Friday Gazprom’s CEO Alexei Miller partially faced some of the fiscal realities facing his company – it cannot fund all of its plans.  He announced the postponement of the Vladivostok LNG project (using Sakhalin Island sourced feedstock).  The Russia to China pipelines are more important projects – not surprising in that they actually have customers (and even contracts with prices in them) in the case of the Power of Siberia pipeline.

Governments and fracking

Whilst Lancashire county council was putting at least a couple of nails into the Cuadrilla coffin, over the Atlantic a Court in normally oil-patch friendly Oklahoma ruled that damages could be sought from oil companies injecting waste-water.  This garnered much less media attention, but could be of more long term import.

The Court found a sufficient evidentiary link between water injection – a very widespread and vital activity – and an earthquake which caused rocks form a chimney to fall on someone, causing injury.

Quote(s) of the day

Moving on 150 years from Napoleon’s observation on China, we have some very similar views from the mid twentieth century – at a time when the “giant” was at best nursing wounds from the 100 year collapse of the Qing dynasty and various foreign invasions:

“Beware the sleeping dragon. For when she awakes the Earth will shake.” – Winston Churchill

“China is a big country, inhabited by many Chinese.” Charles de Gaulle (no doubt this sounds wittier in the original French!)

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