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BP and Shell climb despite lower crude, BG group, Cairn Energy and Tullow Oil retreat

15th Mar 2010, 2:55 pm BP and Shell climb despite lower crude, BG group, Cairn Energy and Tullow Oil retreat

Oil retreated ahead of tomorrow’s OPEC (organization of Petroleum Exporting Countries) meeting, which is expected to produce a decision on production quotas for the current year. The oil cartel’s current targets stand at 4.2 mmboe (million barrels).

The current supply levels are expected to remain the same amid a clouded outlook for the ongoing economic recovery. The oil minister of Iran, which usually champions lower supply levels to support crude prices at a high level, said that prices are likely to remain around US$80/barrel this year and his country was against production increases or any changes to the current targets.

Last week, OPEC upped its demand forecast for the current year yesterday, projecting the global consumption to grow by an additional 0.9 mmbbls/d (million barrels per day) to 85.24 mmbbls/d provided that the ongoing economic recovery firms.

IEA (International Energy Agency) also revised its oil consumption forecast for 2010 upwards by 1.6 mmbbls/d to 86.6 mmbbls/d this year. The IEA also upped its global demand estimate for 2009 to 85 mmbbls/d.

Last week’s bearish news from China also factored in, further weakening crude prices. The world’s second largest energy consumer reported that its inflation rate reached an annualised 2.7% in February despite the government’s measures to curb lending that were introduced in the previous month. China said that the rate was still within its 2010 target of 3%, though it was not enough to eliminate speculation of further monetary policy tightening in the country to prevent its rapidly growing economy from overheating.

May Brent Crude slipped to US$78.62/barrel, while US light, sweet crude declined to US$79.83/barrel.

Blue chip oil and gas producers showed little movement today. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) posted gains of less than 1%, while BG Group (LSE: BG), Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW) declined marginally.

Amec (LSE: AMEC) also posted a small gain, while fellow oil and gas engineering group Petrofac (LSE: PFC) lost 1.3%.

Most midcaps declined. Dragon Oil (LSE: DGO), Premier Oil (LSE: PMO) and Soco International (LSE: SIA) were flat, while Heritage Oil (LSE: HOIL) and Dana Petroleum (LSE: DNX) lost less than 1%. Salamander Energy (LSE: SMDR) and Melrose Resources (LSE: MRS) declined 1.6% and 2.4% respectively.

JKX Oil & Gas (LSE: JKX) went against the tide, climbing 2.5%.

Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) shed 1.1% and 2.6% respectively.

Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) moved with the sector, sliding 8% and 6.5% respectively. Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) and energy investor Xtract Energy PLC (AIM: XTR) were down 3.7%.

North America focused oil & gas junior Pantheon Resources (AIM: PANR) and Europe focused oil and gas developer Ascent Resources (AIM: AST) did better, tacking on 5% and 4.5%.

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