Today’s Blog – Thursday 6th August 2015

Introduction

Today I start with a serious quote (don’t worry, dear readers – I finish with one from The Donald that is less dry).  This is from Houston HQ’ed oil and gas investment bank, Tudor Pickering Holt (TPH).  Based as they are in the heartland of the US oil industry, TPH has a deep understanding what this blog calls the “numbers” side of the oil pricing game and yesterday offered up what I thought was a well expressed insight (with which I naturally agree):

“Many E&P and oil services business models are structurally broken with crude under $50/bbl…….A protraction of this carnage will only serve to make global market tightening more severe and violent……..we remain confident the 24/7/365 phenomenon of declines globally will manifest in a substantially undersupplied market in late 2016 thru 2018”.

Commodity prices

Crude prices fell again overnight, despite some positive “numbers” emerging from the US EIA’s weekly report.  The previous day’s bounce was truly that of the proverbial dead cat (the living or dead status of that cat reminds me of a pithy joke for the scientists out there: Schrödinger’s cat walks into a bar – and doesn’t).

Brent closed at US$49.63 and WTI at US$45.12.  The weekly EIA report noted that crude inventories fell by 4.4mmbbls – more than consensus (although gasoline and diesel went up by 1.5mmbbls).  Normally that would aid the bulls in the market, but the headwinds of a rising US dollar and gaining confidence that the US Fed will raise interest rates, trumped these numbers.

Henry Hub natural gas prices closed down a few cents at US$2.78.

LNG

Bloomberg has reported that the re-start of Japan’s nuclear industry could start as soon as next week.  The issues that the industry faces are both technical – but more importantly political – as the country’s leaders’ desire to reduce gas/etc imports are balanced by strong public fears.  How this plays out will have big consequences for LNG markets.

Over in Africa, the Mozambique Government has been disappointed by the offers made under a recent offshore acreage release. The lack of interest in taking on new areas (and new expenditure commitments) is commonplace at present across the oil and gas industry (pace Mexico recently) – but may specifically also reflect a growing view that the LNG supply queue is a long one.

Governments

A tale of two sides of the Arctic reflecting rather different Governmental styles:

  • On the Russian side, the country has recently re-staked its sovereign claim over a large part of the continental shelf extending from Russia under the polar ice cap (and including the North Pole itself – upon which Russia planted its flag – by submarine – a couple of years ago).  Pursuing further oil and gas activities is a key driver – and Russia already has the world’s first offshore Arctic production.
  • On the US side, Shell’s massively expensive offshore Alaskan exploration campaign remains held up by Government imposed drilling restrictions.  As all fans of Game of Thrones know: “winter is coming“! – if Shell does not get its skates on, another year may pass on its Arctic efforts.

Company news – Santos Ltd (STO)

Since yesterday’s story on the above, on the one hand a STO spokesman has denied that the company is considering a rights issue, whilst on the other hand the likes of Credit Suisse has welcomed the mooted capital raise.

It is not clear how this might play out – but ongoing low oil and LNG prices will continue to put pressure on STO.

Company news – Comet Ridge Ltd (COI)

Yesterday ASX junior explorer COI announced a large contingent resource booking (153 PJ of 2C) in Queensland’s Galilee Basin.  This is the first conventional gas 2C booking in the area.  The booking came about following a re-evaluation of a well drilled 20 years ago which flowed some gas to surface.

Quote of the day

With the eagerly awaited Republican candidate debate due on Fox overnight, it will be interesting to note what fervent “Birther” (when it came to Obama anyway), The Donald, says to fearsome Texan Senator Ted Cruz – who was born in socialist Canada of all places.  A foretaste:

“It’s a hurdle. Somebody could certainly look at it very seriously. He was born in Canada. If you know and when we all studied our history lessons, you are supposed to be born in this country”.

Heny

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s