WTI $45.94 -11c, Brent $49.52 -9c, Diff $3.58 +5c, NG $2.71 +6c

Oil price

Fairly short oil comment today, the oil price is relatively calm ahead of the weekly inventory data which is delayed by a day following the Labor Day holiday. Equity markets rallied yesterday, in particular Japan, having its best points rally since 1994 and China and the Hang Seng recovering after Chinese officials said that there would be ‘more forceful’ fiscal policy to boost economic growth. Elsewhere there were rumours, again, that Indonesia are about to rejoin Opec which one has heard before  but might be true this time.

The retail gasoline price in the US is falling quite sharply, at $2.437 a gallon it is down another 7.3 cents on the week, $1.02 on the year and as I said on Monday the lowest Labor Day price for 11 years.

Pantheon Resources

With 45 days on the clock the market was itching for news from Pantheon and today the company threw us a small fish. The VOBM#1 well has encountered a potential reservoir in the Eagleford/Woodbine sandstone and the company has decided to undertake a flow-test and have completed and cased the well.

A new, lighter and cheaper rig will be brought in for this and will be on site within 10-14 days. Timing here will be crucial and I don't expect the company to hurry the process, expect something in 3/4 weeks. What can one read into this is the big question, clearly it is very good news that a potential reservoir has been identified and the company are prepared to spend more dollars to test, but I suppose the key is, will it flow? The fact is that you can’t determine permeability by electric log and so a proper flow test will be needed. However the other key point is that the company would be unlikely to spend another million bucks if they weren’t ‘pretty damn encouraged’. Another interesting point is that when engineering the well, the drill team went to a larger casing in case they needed to complete the well horizontally, the fact that they have decided to take what they have through the vertical route is extremely positive in my view. The well has found the base of the Austin Chalk with gas shows and the top of the Eagleford exactly where they predicted which also inspires confidence.

Having completed this well the rig has already…

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