Today’s Blog – Thursday 16th February 2017


Is it just us or is world becoming increasingly like something out of a James Bond (or even an Austin Powers) movie?  We have:

  • The very recent assassination in KL of Kim Jong Un’s half brother – using some sort of poison administered by a femme fatale.
  • The abduction of a Chinese billionaire from his Hong Kong apartment (presumably by mainland agents) – with his personal bodyguard exclusively comprised of female martial arts experts proving powerless to stop this (did a Chinese Austin exercise the power of his mojo over these Fembots?).
  • The aura of a Manchurian Candidate infiltration in the White House – where the outlandish hairstyle of the big chief rivals that sported in Pyongpang.

Other than being fun to report on, what relevance do these sorts of things have on the oil patch?  Well, we think they increase the potential scope of unknown unknowns that could emerge and create oil market disrupting “events”.

The wildcard that is Trump is arguably a known unknown – who would be really surprised if he quit almost at any time in some sort of bizarre unravelling?   Uncertainties associated with that would hit asset markets (particularly shares, but also commodities – other than the barbarous relic) hard.

Commodity markets

Crude markets may also be operating in their own Bizarro World just now, as bad “numbers” from the weekly EIA and BHI reports seem to be routinely ignored.  The same thing happened yesterday, with crude prices closing essentially flat notwithstanding the bearish notes emanating from the weekly EIA report.

Brent closed at US$55.69 and WTI at US$53.00.  The EIA indicated that crude stocks were up 9.5 mmbbls, gasoline was up 2.8 mmbbls and distillate was down 0.7 mmbbls.  Some market traders have speculated that OPEC members might be trading in the futures market each Wednesday afternoon to defend the oil price in the face of the EIA report coming out with these figures over the last month or so.

Henry Hub was flat at US$2.93.

LNG and international gas

We reported last week on a major potential order for new – and large – FSRU vessels being made by Houston based Excelerate Energy from South Korean shipyards (the North Korean shipyards seem to specialise in the sort of submarines that can escape from sub-sea secret lairs).

A counterpoint to this has just emerged from a LNG conference in Europe at which a speaker bemoaned how FSRUs were becoming too large to capture many of the smaller and newer markets that were potentially emerging (such as Australia we might add).

We think that the market will ultimately offer a range of FSRU solutions – and indeed note the current smaller and more flexible FSRU barge development project being pursued by Belgium’s Exmar.

Company news – Origin Energy (ORG)

ORG has announced some initial contingent resource numbers from its Northern Territory Beetaloo Basin joint venture.  An impressive 2C number of 6.6 Tcf (gross to the JV) has come out – and gas composition appears good, with acceptable CO2.  Liquids are only a small amount of ethane though.

The Beetaloo is now being compared to the Marcellus and Barnett shales in the US – locations however with rather lower cost structures.

ORG and its partners can do no further work in the Beetaloo until the NT Government lifts its current embargo on fracking.  Based on the performance of other State Governments in Australia, that might be a long – or even permanent – wait.

ORG put out a presentation this morning on its half year results.  No timeline appeared therein for the IPO or trade sale of its upstream non-core E&P (“Crapco”) assets – which seems to suggest some slippage from previous indications of Q2 this year.

Quote of the day

A quote from the Ottoman Empire – which shared certain North Korean practices when it came to managing dynastic successions:

“My ancestors handled some inconveniences with their experience. Two sultans cannot live in the same country.” – Mehmed I Chelebi, the fourth Sultan of the Ottomans


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