WTI $56.96 -$2.51, Brent $62.01 -$1.58, Diff $5.05 +93c, NG $2.78 -5c
Oil price
The oil price had headed south way before the EIA stats came out but they were the final nail in the coffin, analysts who had been wrong-footed on Tuesday had the sign wrong again, their predictions of a 1.8m draw turned out to be a build of 2.4m barrels. With refinery runs at 95%, higher than the API number the product numbers were even more interesting as gasoline draw was an impressive 1.76m barrels and gasoline demand was up 100/- b/d.
The next few days will be interesting to say the least, in the US its Non-farm payrolls tomorrow after which traders will leave the Strasa and head home for Independence Day celebrations, so positions will likely be minimal. I say that because on Sunday Greece could be celebrating Independence from Europe Day, although the Yes camp is gaining ground as Marxism is starting to lose its appeal. Tspiras is starting to back down and there are even stories that the referendum will be postponed for ‘infrastructure’ reasons, the ever-informed Marcus Ashworth notes that technically the Greeks have to vote in the town of their birth…
Hunting
A trading update from Hunting today and like other service companies, especially when so dependent on rig activity, it was laced with references to the decline in the number of wells drilled, particularly in the US. 2Q declines in oil and gas markets were due to a 34% fall in US wells and 33% worldwide compared to the first quarter. Figures for the year to date show the US down 56% and world wide lower at a 12% decline. Accordingly, profits were down 76% in the first five months y/y and for 2015 in total the guess is that the fall will be between 50-75% ‘if there is improved activity’. With headcount down 25% so far this year, giving an annualised saving of $41m, costs are indeed being trimmed and with most plants on one shift with the exception of the fully booked Subsea division and US Connections facility in Louisiana the outlook isn't so grim.
I was extremely fortunate to have fairly recently visited a number of Hunting facilities in Texas and managed to spend some quality time with senior management in all parts of the business. There was no doubt that the 2nd quarter would be bad but nowhere we visited…
