WTI $56.71 +32c, Brent $63.98 +66c, Diff $7.27 +$3.34, NG $2.68 +7c
With the expiry of the May Brent contract on Wednesday the last 48 hours has seen quite a swing in prices, indeed at one stage yesterday it nearly reached $65 having been below $58 on Tuesday. Bulls were on the Twitter machine yesterday asking if I had changed my view that the oil price would test the lows before rising again long term and whilst the news is generally better I still think that we are not past the worst quite yet.
The week has given us the monthly reports from the agencies and as the brilliant David Hufton says, there are stories there for bulls and bears alike what with Opec exceeding expectations and the USA production falling, albeit modestly. I find it ironic that the highest cost producers in the USA are actually gushing flat out ready to pay the interest bills in June….what will happen after the hedges run out and the bank manager is on the doorstep?
Finally one thing that does worry me is the level of speculative interest in the oil price at the moment. I have mentioned this a bit recently and I notice that open interest in Brent futures is up another 30% this week to 2 million contracts, not only a level that gives some cause for concern but one that should it have to be reversed in a hurry could cause quite a panic, you have been warned!
Schlumberger
Figures from Schlums yesterday and whilst the revenue missed the consensus by $210m the earnings actually easily beat the whisper coming in at $1.06 against expectations of 91c. No surprise to find out that the weak US drilling market is the main problem with revenue here falling 13% against only 8% on the international side. As the company say, 'an extended period of price weakness as US land drilling was further pushed out in time' and it looks like when it does recover it will not be to previous levels for some time. Another cut to the capex budget, this time to $2.5bn having been $3bn and $4bn last year mean another 9/- jobs go after 11/- announced last quarter. Like most other service companies the SLB price has traded sharply off the lows of January and has tracked the oil price quite well, cost cutting is fine but can only go…
