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Monday, September 14, 2009

Crude Oil Futures Extend Friday’s Losses on Resurgent Dollar and Persistent Concerns over US Demand

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This morning’s resurgent dollar and persistent concerns over weakening US demand has seen Crude oil fall further below last week’s high of US$72/barrel. West Texas Intermediary (WTI) futures for October are currently trading around $68.50, after trading down towards $68 in the early hours of Monday.


 Last week’s better-than-expected industrial production in China and a relatively meek OPEC meeting supported the Oil price last week, however this mornings resurgent US Dollar has halted recent gains.


Friday’s inventory report from the Department of Energy had a mixed reception initially pushing oil higher, however despite crude inventory data showing a bigger than expected draw of 5.9 million barrels, US distillate stockpiles have reached their highest since 1983. WTI closed over 3% lower on the New York Mercantile Exchange.


The oil futures market is also being weighed down with analysts and traders anticipating a disappointment in tomorrows US consumer spending data , without including auto-sales, tomorrows data is expected to show little-to-no growth for August. With the US driving season over and a temperate fall expected, the US demand picture has analysts in hesitant mood.


UK listed oil majors British Petroleum (LSE:BP) and Royal Dutch Shell (LSE:RDSB) suffered this morning falling over 1.5% on Monday morning. Fellow tier one oil producers Cairn Energy (LSE:CNE) and Tullow Oil (LSE:LTW) we’re impacted further by falling crude prices losing over2.5% each.


Mid cap Heritage Oil (LSE: HOIL) was a bright spot, as it actually managed to stay above the opening level, outperforming its peers Dana Petroleum (LSE: DNX) and Dragon Oil (LSE: DGO), which followed the oil & gas majors and shed 1.3% and 1.6% respectively.


Junior oil companies have had mixed fortunes this morning, although they’ve generally traded marginally lower, Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) was the leading faller among the juniors in early trade with a 5.3% decline, though considering the huge increase in the share price of the company in recent weeks, the fall was marginal.


Diversified energy investment company Xtract Energy (AIM: XTR) also was in decline after selling part of its stake in Wasabi Energy (ASX: WAS), moving down almost 5%.

Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and Kazakhstan operating Max Petroleum (AIM: MXP) both lost over 3%. PetroMatad (AIM:MATD) and Dominion Petroleum (AIM:DPL) also slipped.


Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL) lead the few gainers in the AIM oil sector jumping over 11% around lunchtime.

North Sea explorers Xcite Energy (AIM & TSX: XEL) rose almost 5%, while Faroe Petroleum (AIM: FPM) jumped 15% after it announced a new gas discovery in the West Shetlands.  San Leon Energy (AIM: SLE) also rallied this morning, climbing around 8%.

 Meanwhile North American focused Nighthawk Energy (AIM:HAWK) gained more than 3% following news of a new ADR programme sponsored by Bank of New York Mellon, which is expected to expand it appeal to US investors.

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