Today’s Blog – Wednesday 21st September 2016

WE HAVE TIME FOR A SHORT BLOG TODAY, BUT OTHERWISE NORMAL SERVICES ARE STILL LIKELY TO BE INTERRUPTED FOR A FEW WEEKS

Editorial

A new regular report has recently been made available to the oil patch from the US Department of Energy’s EIA – counting DUCs (drilled but uncompleted wells) in the main tight oil and gas basin in the US.

As expected, this has shown a sharp rise in DUCs since the 2014 oil price crash.  Much more interestingly, it has shown a material fall 0f 400 oil well DUCs over the last five month (the total is still a hefty 4,117 wells – a figure which compares well to the total number of wells ever drilled in many other countries).

This has occurred in a period when many have been pointing to resilient tight oil production, notwithstanding the much lower rig count, and hailing the impressive productivity gains.  But this new report begs the question – is a material part of this apparent improved rig performance in fact due to DUCs coming on line?

US shale’s resilience -in fact and in myth – is a big driver of trading in oil markets.  The new DUC report could start to drive short term markets in the same way as other “numbers” from the EIA, BHI, etc, do.

Commodity prices

Trading in crude for the first two days of this week has been up.  Overnight Brent closed at US$46.13 and WTI at US$44.42.  Good old OPEC Ice appears to be being dished out to gullible traders again in the lead up to the next “informal” OPEC meeting.

Bizarrely, the Oil Minister of basket-case country Venezuela recently said that production needed to drop 10% (i.e. 9.5 mmbbls – more than total US output for example) to bring the market back into balance.  Not being able to count must be less important than loyalty to the Chavismo regime.  Pretty much everyone else in the crude market would think ~2mmbbls per day would re-balance the market if not send it soaring.

Henry Hub has gone on a  bit of a tear overnight, closing over US$3 again at US$3.07.

LNG and international gas

We have noted recently that ENI’s Mozambique LNG project appears to be gaining traction as one of the “5 out of a hundred” LNG projects that might move forward in the next few years.  Some further support for this appeared to be granted recently with news that Qatar could join Exxon and ENI in the country in what would be a pretty high powered LNG joint venture.

Governments, fracking, etc

It gets worse.  A survey published today in that August journal, the Adelaide Advertiser, noted that nearly a majority of those surveyed supported a ban on fracking in South Australia (although we suggest that if the survey company had actually asked what fracking was, about 1-5% would have had a clue).

With an election due in Western Australia soon, it would not surprise us if the expected winners thereof (the Labor Party) decided that they too wanted a “moratorium” on this nefarious practice.

Company news – AWE Ltd (AWE)

AWE announced yesterday that reserves in its onshore WA Waitsia asset had increased again – these were now nearly half a Tcf (gross to the JV).  Better watch out for that potential moratorium though……

Company news – Santos (STO)

Last week STO announced the appointment of a new CFO – Roc Oil CEO, Anthony Nelson. He should commence before year end.

His experience at Roc dealing with its PRC owner, conglomerate Fosun, could come in useful when dealing with a possibly disgruntled strategic Chinese shareholder in STO, ENN Group.

Quote of the day

Prussian Statesman Otto von Bismarck is not usually noted for his witty quotes – stuff about sausages and politics generally first leaps to mind.  However the following can still be used today (substituting South Australia, Western Australia, etc, etc, as one’s prejudices suggest):

“When the end of the world is nigh, I will move to Mecklenburg, because everything happens 50 years later there.”

 

 

 

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