Today’s Blog – Monday 19th June 2017



And when we come back we look forward to seeing:

  • The successful IPO of Aramco, with full reserves disclosure, impeccable ongoing corporate governance and happy investors.
  • Oil prices rising to reflect the long term cost of replacing current production.
  • LNG prices being fully reflective of gas – not oil – markets.
  • Greenies and farmers, having read the scientific literature, being persuaded that fracking is in fact a mundane, long term and safe practice.
  • Solar PV costs continuing to follow Moore’s Law (but in which case the second point above would be under threat….).
  • Australia’s E&P companies rapidly adapting to the new world and recovering their share prices of a few years ago (now we are being ridiculous).

Commodity prices

Oil prices fell ~2% last week, closing at US$47.37 in London and US$44.74 – i.e. pretty much what they were 7 months ago before the OPEC cuts.

Weekly inventory numbers were poor again, with a small-ish crude drop of 1.7 mmbbls (2.1 adjusting for SPR sales), a gasoline build of 2.1 mmbbls and a distillate rise of 0.3 mmbbls.

The weekly BHI rig count was also bear-ish – a rise of 6 oil rigs and one gas rig.

Henry Hub had a better time, closing at US$3.04.

Company news – Origin Energy (ORG)

The potential trade sale of ORG’s Lattice Energy upstream assets is getting to the pointy end – indicative bids were lodged last week.  And according to the media, this now included a previously elusive “Chinaman with a chequebook”.  ORG will be hoping some big numbers are written in that chequebook, as the other noted bidders seemed unlikely to pay too much.

Quote of the day

Even the Wall Street Journal is now starting to express the doubts that have long emanated from once fringe figures such as Art Berman over the sustainability of US tight oil production:

“The shale-drilling renaissance rocked global markets and helped send crude prices into a prolonged slump.  What it didn’t do was bring in much cash. Since 2011, the largest 30 independent U.S. shale producers spent an average of nearly $1.33 for every $1 they made drilling wells, according to a Wall Street Journal analysis”.





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