Oil prices were on the rise during the week before sliding on Friday after the US dollar bounced back against other major currencies, while US business confidence unexpectedly declined.
Following Friday's positive eocnomic reports that included a 0.6% increase in US retail sales and a 12 point surge in the Empire State manufacturing index to 15.73, an update on the University of Michigan consumer sentiment index showed a decline from 68.2 to 67.9 in October.
Analysts expected the preliminary reading to show an increase to over 69 in the index.
As a result, the main stock indexes in Europe and the US turned negative, while oil and metal prices fell.
Movements in currency markets were favourable for oil prices for the better part of the week.
The US dollar fell hard against other major currencies after the minutes of the latest policy meeting of the Federal Open Market Committee (FOMC) showed that the regulators were in favour of more quantitative easing (QE) and it was likely to come sooner rather than later.
Further debt purchases by the Fed are expected to lead to a higher level of economic activity and increase energy demand as well as weaken the US dollar.
Fed Chairman Ben Bernanke said that more QE would help preclude a deflation in his speech on Friday, while stating that the Fed would like to see the inflation rate accelerate from the current 1% to 2% to encourage more spending.
However, Bernanke did not offer a timetable for more stimulus or any indication of what the scope of the next round of stimulus could be, signalling that the Fed would not take action too soon.
This led to a rebound in the US dollar, which put further pressure on oil prices.
A stronger US dollar curbs demand for crude, making it more expensive for holders of other currencies.
In other news, the Organization of Petroleum Exporting Countries (OPEC) convened in Vienna on Thursday and, as was expected, left its production quotas unchanged, while expressing little concern about the current price level of over US$80/barrel.
Venezuela’s energy minister has predicted a price range of US$90 to US$100 per barrel in 2011, calling it a fair price for both the consumers and producers.
Saudi Arabia has said earlier this year that it was comfortable with a price of between US$70 and US$80 per barrel.
Prior to the meeting, the OPEC slashed its demand forecasts for its crude oil from 28.7 million barrels per day to 28.6 million barrels per day, citing the slowing recovery in the world and particularly the US.
Goldman Sachs (NYSE:GS) has set its 3 month target for crude prices at US$92/barrel and its 12 month target at US$102/barrel.
This week, asset management company AllianceBernstein’s (NYSE:AB) research division Sanford Bernstein has slashed its forecasts for crude prices from US$103/barrel to US$90/barrel in 2011, while the 2012 estimate was cut by 8% to US$102/barrel.
November Brent Crude declined to US$82.76/barrel compared to last week’s close of US$84.19/barrel, while US light, sweet crude for November delivery fell to US$81.35/barrel from US$82.80/barrel a week ago.
Blue chips oil and gas producers were headed in different directions this week.
Shell (LON:RDSB) advanced from 1,898 pence to 1,926 pence. Another supermajor BP (LON:BP) declined from 435 pence to 425 pence, while Tullow Oil (LON:TLW) slipped from 1,276 pence to 1,255 pence and Cairn Energy (LON:CNE) inched lower from 432 pence to 429 pence.
BG Group (LON:BG) did better, climbing from 1,153 pence to 1,167 pence.
Amec (LON:AMEC) surged, rising from 997 pence to 1,038 pence, while fellow oil and gas engineering firm Petrofac (LON:PFC) advanced from 1,392 pence to 1,455 pence.
Small Cap News
Shares in Desire Petroleum (LON:DES) plunged 25% after the 14/15-1 well on the Rachel prospect became the latest in the Falklands to come up dry. The well reached a total depth of 2,877 metres and initial wireline logging showed that no hydrocarbons were found.
Sefton Resources' (LON:SER) shares advanced to trade around 9% after it revealed positive results from its steam-based production enhancement programme in California.
U.S. Oil and Gas Plc (PLUS:USOP) shares shot up 75% after geochemical tests confirmed the presence of five hydrocarbon reservoirs at the Hot Creek Valley property in Nevada.
Caza Oil & Gas (LON:CAZA; TSX:CAZ) has finished drilling the Caza 162 well on the Windham Wolfberry Prospect, and logging data indicates potential pay zones in four separate formations.
Shares in PetroLatina (LON:PELE) fell 6% after the company lost a project in Colombia. The Agencia Nacional de Hidrocarburos (ANH) has reversed its previous decision to award block LLA57 in the Llanos basin to PetroLatina and handed it over to a third party. PetroLatina pledged to bid for new acreage in the Llanos basin in forthcoming bidding rounds to fulfill its goal of gaining representation in all three of the most prolific basins in Colombia namely Middle Magdalena, Putumayo and Llanos.
Europa Oil & Gas (LON:EOG) has raised funds to advance its key projects in Romania and the UK, while reporting that revenues in the full year 2010 rose to £3.1 million.
Kea Petroleum (LON:KEA) has been granted a Petroleum Exploration Permit (PEP) in New Zealand, over a prospect which was previously discovered by Shell around 20 years ago, the Mercury prospect.
Nighthawk Energy (LON:HAWK, OTCQX:NHEGY) announced that it had arranged a £25 million equity finance facility (EFF) as it set a deadline for bids from farm-in partners to its Jolly Ranch oil project in Colorado. In other news, Nighthawk Energy hired Bank of New York Mellon to act as its Principal American Liaison (PAL) for its OTCQX listing.
Cove Energy PLC (LON:COV) said that, following approval from the Kenyan Minister of Energy, all necessary permissions and approvals have been granted for the acquisition of a 15 percent participating interest in five offshore Production Sharing Contracts (PSCs).
Ascent Resources (LON:AST) unveiled an independent report that estimates that the Petişovci-Lovaszi project on the Hungarian and Slovenian border holds 412 billion cubic feet (Bcf) of gas, representing 68.7 million barrels oil equivalent (MMboe).
Rockhopper Exploration (LON:RKH) shares spiked around 25% lower after it warned of a delay to a key report on the Sea Lion oil discovery in the North Falkland Basin.
Petroceltic International (LON:PCI) told investors that it is on schedule to start the 2010/2011 appraisal campaign at the Ain Tsila gas field in Algeria in the first week of November.
Coastal Energy Corp (LON:CEO, TSX-V:CEN) reported that the results of the A-11 well in Thailand were encouraging and that production at another key project, Songkhla A, has been ahead or expectations.
Numis Securities analyst Andy Davidson initiated coverage on Pan African Resources (LON:PAF) in a note entitled: “Platinum-tipped gold...with a yield”. The analyst rates the stock as a ‘Buy’ with a 16p target.
Shares in Frontera Resources (LON:FRR) soared 25% on the first results from frac operations at its well in the Republic of Georgia. A multi-zone frac completion at the Mirzaani #5 well on the Mirzaani field targeted zones 13 and 16/17.
Shares in Global Petroleum (LON:GBP) rallied 14% after its 7.939% interested Tyler Ranch EFS #1H well in south Texas encountered good oil and gas shows. The well is operated by Texon Petroleum (ASX: TXN).
Large and Mid Cap News
Shares in Soco International (LON:SIA) were down 19% in reaction to news that the company decided to plug and abandon an appraisal well at one of its main oil and gas projects in Vietnam.