WTI $41.75 -$1.18, Brent $44.06 -$1.75, Diff $2.31 -57c, NG $2.26 n/c

Oil price

Another bad day at the office for oil market bulls, the prices are now well back through the longer term moving averages and looking vulnerable to more weakness. December Brent expires tonight and at a two month low doesn't look good, indeed with the Fed increasingly likely to raise rates in December crude will remain in a battle with a strong dollar for a while.

The EIA inventory report didn't help, stocks were up 4.2m barrels which was well above estimates and at Cushing up 2.2m barrels, also higher than forecast. Opec came out with an interesting comment, ‘the build in inventories is due to an increase in total supply outpacing growth in world oil demand in the first 9 months of the year’. Never…..! Their demand for Opec crude next year is 30.78m b/d against current production of 30.2m b/d apparently and with the Saudis at 10.3m, unchanged and Iraq at 4m b/d there is little room for Iran in the new year. The IEA is out this morning and it should be noted that these three reports may carry a little more weight than usual as they are the last before the Opec meeting on December 4th.

Hunting

I had an update with Hunting earlier in the week and whilst things are pretty grim in the market place the team are hunkering down and patiently hoping to see out the stormy weather. Operationally, margins are expected to see some degradation as stocks are wound down but with exciting  kit such as the new perforating gun available the sales force will be able to offer this at old levels.

Financially, the company are concentrating on watching and reducing debt whilst aiming to build the EBITDA number through next year sufficiently to ensure no breach of covenants. I don't expect an equity issue as this would be much more expensive than existing debt and the company are being highly disciplined on Capex. Continued expenditure this year has been sanctioned by the board as it is pointless to keep customers waiting for products or worse, subcontracting and outsourcing kit. With Cape Town and Mombasa up and running, business can grow steadily there and in Singapore building the new facility has been moved to the right slightly to ensure that capex next year stays at around $50-60m.

Finally, regarding takeover stories I would…

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