Today’s Blog – Friday 15th January 2016

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Introduction

Today your blogster only has time for a “flash” blog.

Commodity  prices

Crude oil traded in the green yesterday – a new experience for any traders who started work in 2016.  Brent finished up ~2.5% at US$31.00 and WTI ~2% at US$31.10.  The Brent discount to WTI still managed to continue into a second day.

No particular “events” or “numbers” drove trading on the day – rather the large body of oil price shorters took some profits by closing out their positions in the context of a general rally in stock markets.

Henry Hub was however down, losing 6% on the day, to close at US$2.14.

Company news – BHP

The Big Australian today announced yet another write-off over its on-shore US shale positions that it acquired a few years ago in rather higher commodity price times, taking a hit of US$7B.  This added to the previous write-offs made on these assets of US$6B.

The head of BHP’s petroleum division at the time of its shale acquisitions, Mike Yeager,  is currently the MD of an ASX listed junior, Maverick Drilling (MAD), with some onshore US assets.

MAD yesterday announced it had acquired further acreage in the US – but in a location too secret to disclose, given the company is pursuing further deals in the same area. “Chuck’s” timing on this deal is likely better than when he was at BHP.

Quote of the day

Another quote from Daniel Yergin’s The Prize, whose commentary on the 1986 oil price fall reminds us that commodity markets are cyclical – all the way back to the days of Standard Oil:

“A shade from the past was rising again – John D Rockefeller and the prospect of an all out price war. In the late nineteenth century and early twentieth century, Rockefeller and his colleagues had often instituted a “good sweating” against their competitors by flooding the market and cutting the price…Circumstances were, of course, wholly different in the mid-1980s; yet they were not so different after all”.

 

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