WTI $43.88 -96c, Brent $53.44 -$1.23, Diff $9.56 -27c, NG $2.72 -1c
Oil price
The trend is weaker and it ain't getting any better any time soon, at least that's how the market feels. I still contend that we have to try out the lows before making any meaningful upward progress and the market fundamentals are not on the side of the bulls at the moment.
Stocks again will dominate with inventories expected to rise again in the API and EIA stats today and tomorrow, the refinery maintenance season is fully underway giving little chance of a demand tug. Yesterday WTI saw an intra-day low of $42.85, not seen for many years and Brent was also poor hitting a low of $52.50 before expiring weakly at $53.44. It is worth noting that the chartists are getting very worried about Brent, the short-term base of $53.13 nearly fell yesterday and there has been a crossover of the Kijun and Tenkan which apparently doesn't bode well. Failing to hold these levels is bearish with the next base as low as $45.19, you have been warned…
The Opec monthly report didn't help much either, their non-Opec supply numbers are unchanged and they don't expect any fall in US shale production until the end of this year meaning that the June meeting is likely to be a rollover. Libya is apparently back up to 500/- b/d and the chatter about an Iran nuclear deal is ever present although I feel that there are hurdles there. Retail gasoline prices in the USA fell last week for the first time since the bottom on 26th January although only down 3.4c a gallon at $2.45.
Sound Oil
Another red-letter day for Sound as it receives Environmental Impact Approval from the Lombardy Regional Government for an exploration well on its Badile prospect. Sound has proved adept at making progress within the Italian regulatory system and this not only opens up the largest and most strategic asset in its portfolio but makes it more ready for a farm-out. The company carries a best case estimate of 178 Bscf which could be as much as 50p a share on top of existing production and other exploration prospects.
If all goes to plan one might expect drilling on Badile at the end of this year or early next and if a farm-out were to happen of course the asset is de-risked further and costs would be…
