Oil has bene volatile over the past five days, arriving at about the same level it was on Monday late in the week as investors digested mixed cues from economic data and inventories reports.
Crude prices hit 2010 highs at the beginning of the last week after US economic data that was released during the Easter holidays improved the demand outlook and inspired optimism among traders, helping US benchmark crude to above US$87/barrel, while Brent was steady above US$86/barrel. Though, further build-ups in US oil stockpiles that were reported by the American Petroleum Institute (API) and Energy Information Administration (EIA) spurred demand concerns among investors, which lasted well into this week, negatively impacting crude futures.
EIA said that crude stockpiles rose by 2 million barrels in the previous week, while the API reported a 1.1 million barrel increase.
At the start of the week, the International Energy Agency (IEA) has said that rising energy prices coupled with a tight credit market could hamper the economic recovery in OECD (Organisation for Economic Cooperation and Development) countries, while acknowledging that the outlook for oil supplies has gotten better. The agency added that concerns that oil market was overheated remained, as does the possibility of a quick reversal in the upward trend that was evidenced in March and early this month.
Data from API that came out on Tuesday showed further increases in US stockpiles, which, however, had little impact on prices. API said that inventories rose by further 1.4 million barrels last week, while gasoline stockpiles and distillates, which include diesel and heating oil, added 1.6 million barrels and 1.7 million barrels respectively, signalling weaker demand.
However, EIA said the next day that stockpiles fell for the first time since January, reporting a decline of 2.2 million barrels. This was complemented by an increase in refinery utilisation. The EIA report also said that gasoline stockpiles declined by 1.1 million barrels, while distillates, which include diesel and heating oil, rose by 1.1 million barrels.
Oil got more support when the world’s second largest energy consumer China reported strong Q1 growth, saying its GDP increased 11.9% year on year in the first three months of 2010.
Sentiment was dented on Friday, when demand concerns renewed amid weak jobless claims data that came out in the US, showing that initial claims in the US increased by 24,000 to 484,000 last week after adding 18,000 in the previous week.
Crude has also been under pressure from a stronger US dollar, which gained against the euro after the spread between German and Greek bonds reached record levels as EU’s decision to provide debt-laden Greece with a €30 billion loan facility did little to reassure investors in Greece’s ability to guide its way out of the ongoing fiscal crisis.
In other news, OPEC (Organization of Petroleum Exporting Countries) said it had no plans to increase output any time soon despite higher prices. Chairman of Libya’s National Oil Corp said that the current fluctuations did not warrant a policy change, which could come if the prices stabilise above US$90-95/barrel.
On Friday, June Brent Crude declined to US$86.79/barrel, while US light, sweet crude for June delivery fell to US$85.83/barrel on the New York Mercantile Exchange (NYMEX). On Saturday, Brent dropped to US$85.66/barrel, while US benchmark crude slipped to US$84.63/barrel.
Nearly all blue chip oil and gas producers were in decline this week. BP (LSE: BP) went against the tide, improving from 638 pence to 651 pence, while fellow supermajor Shell (LSE: RDSB) slipped from 1,920 pence to 1,897 pence. Cairn Energy (LSE: CNE) declined from 427 pence to 411 pence, Tullow Oil (LSE: TLW) slid from 1,319 pence to 1,297 pence and BG Group (LSE: BG) fell from 1,167 pence to 1,144 pence.
Petrofac (LSE: PFC) advanced from 1,238 pence to 1,244 pence, while Amec (LSE: AMEC) rose from 836 pence to 851 pence.
Large and Mid Cap News
Tullow Oil (LSE: TLW) has successfully delineated the extent of oil in the Kasamene field and discovered oil in the Wahrindi North fault block, through the drilling of the Kasamene-3 and Kasamene-3A wells in the Butiaba region of Uganda Block 2.
Small Cap News
Dominion Petroleum (AIM: DPL) has received a drilling permit for Ngaji-1, the company’s first exploration well in Uganda, in the highly prospective Exploration Area Block 4B (EA4B). The drilling permit was issued by Uganda's Department of Petroleum Exploration and Production (PEPD).
IGas Energy (AIM: IGAS) has appointed John Blaymires as chief operating officer (COO). Blaymires has 27 years of experience in the international oil and gas industry, gained with both Shell International and Hess Corporation.
Nighthawk Energy (AIM: HAWK) has commenced a three well drilling programme at its Jolly Ranch oil and gas project in Colorado after interpretation of 3D seismic data established potential sweet spots in the Cherokee and Atoka shale packages to add to several conventional targets.
Northern Petroleum (AIM: NOP) said a report by RPS Energy for the Providence Resources PLC (AIM: PVR) operated Baxters Copse joint venture licence area (PEDL 233) in the Weald Basin attributes previously unreported gross 2P and 3P reserves of 5.36 million stock tank barrels (MMstb) and 15.06 MMstb respectively of undeveloped reserves. The licence area has 1P reserves of 0.70 MMstb.
Edison Investment Research has said that Xcite Energy’s (TSX-V, AIM: XEL) 9/3b-R pre-development well in the Bentley heavy oilfield in the North Sea could prove to be “transformational” for the company as a successful outcome would enable it to convert sizeable contingent resources to reserves with significant positive implications for the field’s commercialisation and valuation.
Europa Oil & Gas (AIM: EOG) told investors that the Voitinel-1 well, in which it has a 28.75% working interest, will be frac stimulated in May. Aurelian Oil & Gas (AIM: AUL) is the operator of the well in the EIII-1 Exploration Area of the Brodina Block in northern Romania. Aurelian has hired Schlumberger (NYSE: SLB) to undertake a proppant frac stimulation of the `1650 sand' in Voitinel-1.
Rockhopper Exploration (AIM: RKH) has spudded its 100% owned Sea Lion 14/10-B exploration well in the Licence PL032 in the North Falkland Basin. Once drilling is complete, Sea Lion’s results will be eagerly anticipated among investors following the prospective Falkland oil and gas play.