WTI $43.30 +22c, Brent $49.66 +48c, Diff $6.36 +26c, NG $2.93 +9c

Oil price

Away for a couple of days in the North West and not much has changed on the oil price front. It is that time of the month that the agencies release their data and bulls and bears select random data to suit their book. No doubt that the bulls will find the IEA stats better reading than either the EIA or Opec numbers but to be honest none look dreamy for oil companies. Best news from the bunch is the IEA being upbeat about demand numbers increasing at their quickest pace in five years with the call on Opec next year of 30.88m b/d. The EIA number for that is 29.91 which pretty much what happens to demand and supply from Iran and Libya, means further misery. They run with 2015 price estimates of $54 for Brent and $49 for WTI and for next year go with $59 and $54 respectively. Lower prices will linger longer but 2H 2016 does look better than that to me, by that time the capex cuts by the majors will be kicking in quite hard.

Given that the greenback weakened yesterday as a September rate rise is now less than a 50/50 chance, the price rise looks even more miserly and the EIA inventory stats were only slightly bullish, at a draw of 1.7m barrels it was better than the API numbers indicated and the market clutched at straws. Two refineries are either out or working well below capacity making the demand for crude fall but increasing crack spreads even higher. Whiting will be down around 60% for at least a month and the Phillips 66 Linden refinery will lose 238/- b/d for at least a fortnight. Accordingly the aforementioned crack spreads have rocketed to over $30 p/b up over $5 on the week.

Ithaca Energy

Ithaca is performing better thanĀ its industry peers but performance is nothing to write home about, unsurprising at $50 oil I hear you say. But the key point about Ithaca it should be remembered is its long term hedging policy which means that almost no other company in the sector can match its realisations at the moment. With two years of hedging giving Ithaca $70 crude until 2017, operating costs down 29% to $35 p/b coming down to $25 when Stella starts up and a Brent beak-even…

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