Today’s Blog – Monday 22nd February 2016

Please pass this blog onto others who may be interested

Today we have time for a “flash” blog only

Introduction

A story with a distinctively two-edged sword – the mighty Exxon-Mobil (XOM) recently announced its annual results, which for the first time in more than decades included a reserves replacement ratio of less than 100% (at a measly 67%).

This yet again demonstrates that the “medium” term market for oil is getting very tight – good news for those in the sector who want to see prices rise.  However, it is not very good news for the robustness of the global energy supply system when the premium supply company in that system is starting to effectively liquidate itself.

Of course, if anyone can tell us what the definition of “medium” is in this context – we will offer to share the resultant multi-billion profits 50/50.

Amongst the results, XOM wrote off ~ 5 Tcf of gas reserves in the US (due to the SEC mandated reserves booking mechanism which reflects last year’s low prices in determining economic viability).  The company’s reserves to production ratio fell to 16 years.

Commodity prices

Crude prices fell on Friday, with Brent closing down nearly 4% at US$33.01 and WTI fell by a similar magnitude to US$29.64.  The primary market driver on the day appeared to be the full absorbing of the previous day’s negative inventory numbers from the EIA’s weekly report.

The BHI rig count on Friday continued its strong negative run, with rigs down by 27 (26 oil and 1 gas).  However, the market shrugged this off – the rig count correlation with production is either poor – or more likely much longer dated than previously thought.

Overall the week was flat to negative – with lots of volatility in between.

Henry Hub continued its decline – falling to US$1.80 – down nearly 10% on the week.

Governments and fracking

We reported last week on CBM-funded Queensland Senator Glenn Lazarus’ current enquiry into the evils of gas production (other than from “other places”).

A typical piece of hypocrisy was demonstrated by the flying up to Dalby from Tasmania by ex-Green’s leader Bob Brown.  Lentil powered plane perhaps?

Quote of the day

Saudi Arabia’s Foreign Minister recently expounded upon his country’s support for two mutually contradictory policies – free markets and the KSA’s right to manipulate these:

“The oil issue will be determined by supply and demand and by market forces. The kingdom of Saudi Arabia will protect its market share and we have said so.” Adel al-Jubeir.

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