Malcy's Oil Report - PPC | Malcolm Graham Wood

18th Sep '15 by Malcolm Graham Wood

6 comments 5839 reads

WTI $46.90 -25c, Brent $49.08 -67c, Diff $2.18 -42c, NG $2.65 -1c

Oil price

So, the market got it right and the Fed decided that rates would stay unchanged, having said what they did it looks like next year now before they think again. And it is what they said that caused the oil market to move so sharply after the announcement. Initially crude rose sharply as the idea of a weaker dollar excited traders but when the release was read to them it transpired that the reason that there was no change was because of worries about world economic growth. The Fed also stated that low oil prices ‘are a negative, especially for emerging markets’ and were not worried so much about the greenback.

On the downside Kuwait poured more cold water on any recovery by saying that whilst they were ‘confident that the oil market would balance itself, but that this would take time’ thus not showing any support for change, at least until the December 4th meeting. The fact that prices will probably end modestly up on the week is more of analysts reading into the three reports that have come out recently. As reported here, if you believe in the EIA or Opec you have to remain bearish, if you think that the IEA are right things do look quite a lot better for next year. Technically we had a go at $48 WTI but need to breach it properly before the next leg of a potential bull market is established.

President Energy

I noticed the news from Argentina and took the opportunity to have a chat with Peter Levine about the situation over there. The Puesto Guardian concession has been converted to a new, unconventional concession and for another 35 years, thus expiring in 2050 compared to 2026 which was what it was before. This is a most important deal to get through apparently, for shareholder value long term security of tenure is incredibly important. This is particularly the case under the new law in Argentina for unconventional exploration which also covers conventional. The extended duration of the licence will also be very important when it comes to potential farm-outs particularly on things such as deep gas projects. President has done this now because, as Peter Levine says, ‘timing is everything’ and this will create a platform for funding the business through to 2025, long term thinking…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Novice Investor

18th Sep '15

The first 45?

More of a footie fan are we Malcy? Lol.

NI

mgallear

What are your thoughts on the oil price will go down again or is the worst over? Is it likely to go up next year or do believe Goldman Sachs?

This question will of course have an important bearing on what oil shares do.

janebolacha

20th Sep '15

In this article, there's a seemingly fresh take on the "oil glut" and the supposedly high levels of US inventories:

http://seekingalpha.com/article/3520066-an-important-insight-regarding-elevated-crude-inventories

There are all kinds of opinion in readers' responses, probably mirroring people's perplexity on this topic.
The apparent "glut" (in the US) seems to be attributable simply to an oversight in basic definitions, can it be so simple?

(The person who wrote this article is a quite respected contributor to "seeking alpha")

rhomboid1

Hi Jane

This is simply jaw dropping, I read it and couldn't see a fatal flaw to the logic, I'm staggered that this point hasn't been made more publically. The inventory build or draw figures are some of the most market sensitive data and it beggars belief that this simple thesis hasn't emerged as a factor undercutting their significance.

I guess the nearest equivalent is the apparent simplistic interpretation of the Baker Hughes rig count that also moves the market but is really only meaningful if adjusted heavily to take account of other issues eg. multiple completions off single pads etc

I am not at all au fait with the intricacies of the oil market but is there perhaps one future factor that might compromise even further this use of US inventories and drawdown figures as leading indicators, that is the allowing of crude exports from the US, something which I understand has a fair chance of passing in the next few months? That would presumably need to be factored in as well since I suppose the inventories figures would then include oil destined for export as well as for US consumption? I suppose there would not be too much in the way of exports with oil at $45 a barrel but that this would complicate further the use of this measure should prices rise a fair bit going forward? Tell me if my simple outsider thinking is off the mark. All I'm doing is looking at some oil and oil services stocks and trying to work out what means what!

"I guess the nearest equivalent is the apparent simplistic interpretation of the Baker Hughes rig count that also moves the market but is really only meaningful if adjusted heavily to take account of other issues eg. multiple completions off single pads etc "

Is not another major flaw in relying on the rig count that it ignores the effect of process and productivity improvements?

21st Sep '15

Thanks for the article but not sure I believe it - you have to give your email away to read it. With oil and most commodities falling in price it feels like we have demand problems rather than just a temporary over supply. My suspicion is that a global recession is taking place.

(However, I did read in a book that Gold Sachs have a habit of saying something is going to happen when they know that the opposite is true.)

Malcy's Oil Report - PPC

Oil price

President Energy

Unlock the rest of this article with a 14 day trial

About the Author

Malcolm Graham Wood

6 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...