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Oil prices rise during week, but Shell, BG Group and Cairn Energy decline

31st Jul 2010, 4:31 pm Oil prices rise during week, but Shell, BG Group and Cairn Energy decline

Oil prices advanced on Friday to close near US$79/barrel, capping off a positive week which saw future contracts for Brent Crude and US light, sweet crude recapture the US$77/barrel and US$79/barrel levels they lost on Monday. Equity markets were volatile at the start of the week as investors were digesting the results of the stress test of European banks, which came out on Friday showing just 7 failures, while Goldman Sachs (NYSE:GS) predicted 10. Yet the results were not convincing enough with commentators questioning why just one Greek bank failed to show it would withstand another crisis.

The prices were supported by an upward trend in the markets the next day, when the Commerce Department said that new home sales jumped by 23.6% to an annualised rate of 330,000 in June after plummeting 36.7% to 267,000 in May. This, however, was countered by a decline in the Dallas Fed manufacturing activity index showed growth, though the rate of growth and number of new orders continued to decline. The Chicago Fed national activity index failed to impress, sliding from 0.31 in May to -0.63 in June.

Equities got a boost from strong gains in the banking sector at the start of the week after the Basel Committee on Banking Supervision said it would relax its liquidity and capital requirements in its draft Basel III reform. More support came from Goldman Sachs, which said that the current fundamentals could support oil at a much higher price. However, the investment bank cut its forecast for H2 to the lower end of the US$85-95/barrel range, citing high inventories and mixed signals about the strength of the ongoing economic recovery.

US inventories made further gains last week as was shown in reports from the American Petroleum Institute (API) and US Energy Information Administration (EIA). API said that US stockpiles added 3.8 million barrels, while data from EIA showed an increase of 7.3 million barrels. EIA also said that gasoline stockpiles added 100,000 and distillates, which include diesel and heating oil, rose by 900,000 barrels.

Investors were looking to the Fed’s Beige Book survey of regional economic conditions and US GDP data for clues about the outlook for oil demand. Beige Book turned out to be somewhat disappointing, showing only “modest” growth in ten Federal Reserve districts with the remaining two making little progress. The Fed also noted weak manufacturing and housing market, while the credit market remained tight. Friday’s US GDP data also failed to give a boost to the commodity markets, revealing a fall in GDP growth to 2.4% in Q2 from 2.7% in the previous quarter, while analysts expected a decline to 2.5%.

However, the University of Michigan consumer confidence was revised to 67.8 compared to a previous reading of 66.5 for July, still marking a decline from June’s 76. More positive news came with the release of the Chicago PMI index for July, which beat expectations with an improvement from 59.1 to 62.3.

Blue chip oil and gas companies were mixed this week. BP (LON:BP) climbed from 398 pence to 405 pence, while fellow supermajor Shell (LON:RDSB) declined from 1,749 pence to 1,679 pence.

BG Group (LON:BG) slid from 1,081 pence to 1,023 pence, and Cairn Energy (LON:CNE) fell from 473 pence to 466 pence, while Tullow Oil (LON:TLW) improved from 1,179 pence to 1,231 pence.

Oil and gas engineering companies were in decline. Amec (LON:AMEC) fell from 903 pence to 875 pence and Petrofac (LON:PFC) slipped from 1,353 pence to 1,252 pence.

Small Cap News

Petroceltic International (LON:PCI) has hired a Dubai-based drilling contractor Dalma Energy for a four-hole appraisal programme on the Isarene permit, Algeria. The company believes that the Ain Tsila gas discovery, which is hosted on Isarene, “may turn out to be a world class hydrocarbon resource”.

Oil and gas company with assets in Iraq, Syria and Gulf of Mexico, Gulfsands Petroleum (LON:GPX) has said that gross oil production  from the Khurbet East  and Yousefieh fields combined has been increased to 20,000 bopd (barrels of oil per day) for July and that early production and pressure data from the Yousefieh field has indicated a better than expected reservoir performance.

Nighthawk Energy (LON:HAWK, OTC:NHEGY) has revealed that it has now signed seven confidentiality agreements with prospective partners, consisting of significant US and international firms, regarding the Jolly Ranch oil shale project in Colorado.

At today’s AGM, Petrel Resources (LON:PET) managing director David Horgan told investors that the company has overcome serious difficulties in recent years, and it now faces the future with renewed confidence. In recent week’s the company has resolved the Subba and Luhais impasse in Iraq and with US$7m in the coffers, and a 10% profit sharing agreement in-hand, it is now looking for “big potential projects”.

Argos Resources looks set to join a select group of oil and gas explorers, who have grown a strong following among AIM’s investment community. The currently unlisted company owns a number of prospective interests in the North Falkland basin, and with growing investor interest in the region it has raised £22m and it is set to join the AIM market later this week.

Forte Energy NL (LON:FTE, ASX:FTE) reported significant uranium intercepts from reverse circulation drilling at the A238 anomaly in the northern part of its exploration  licences in Mauritania.

Mongolia-focused Petro Matad Ltd (LON:MATD) said wireline logs from the Davsan Tolgoi-1 (DT-1) exploration well in Block XX indicate indicate good log porosities, 25 percent average on average,  and permeabilities concentrated in six sandstone zones, with a total net pay of 12 metres.  Further analysis needs to be undertaken, but the logs confirm the promising initial results.

Large and Mid Cap News

Shares in BP (LON:BP) rose almost 3 per cent as the oil major began to lay the groundwork for the departure of gaffe prone boss Tony Hayward.

Tullow Oil (LON:TLW) has announced that its Owo-1 exploration well in Ghana in the Deepwater Tano license offshore Ghana has intersected a “significant column of excellent quality light oil,” establishing Owo as a “major new oilfield requiring further appraisal.”

Oil and gas producer and FTSE 250 constituent Dana Petroleum (LON:DNX) has announced the commencement of drilling at the Anne Marie exploration well at its 25% owned Anne Marie prospect and license area.

BP (LON:BP) confirmed the ejection of hapless boss Tony Hayward as it set aside US$32 billion to meet the cost of the Gulf of Mexico disaster.

A day after taking control of Heritage Oil’s (LON:HOIL) assets in Uganda, Tullow Oil (LON:TLW) has unveiled a large strike at one of its prospects in the landlocked African nation.

Melrose Resources PLC (LON:MRS) announced an exploration discovery in the Galata block offshore Bulgaria, a new agreement to farm-down its interests in the Rhone Maritime concession offshore France and the commencement of seismic acquisition operations in the South East Mansoura concession in Egypt.

Dana Petroleum iPLC (LON:DNX) the Fin-1X exploration well has discovered a new oil field, in the North Zeit Bay Production Sharing Contract (PSC) area onshore in the Gulf of Suez, in Egypt.  This follows the discovery of the Lorcan oil field, made just last month in the same PSC area.

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