What a chart, further to go, or not
Comments please

Some funny games has been played today with the oil shares, as mostly being marked down heavily from the start.

OIL price rose at the end of the day yesterday by $1, so it was $1 cheaper this morning
But taking PMO as a example, she rose 2p on the oil price rise late yesterday, but today is 5p down, so something is not right.

Large drop on oil shares today

PANR 146.50p -16p -9.85%
PMO 64.50p -5p -7.19%
TWL 232.50p -10.50p -4.32%
XEL 8.76p -2.12p -19.49%

Expect Much Higher Oil Prices As The Cycle Comes To An End
Jun 15, 2016, 4:40 PM - By DAN STEFFENS
In my last article for OilPrice.com (May 16, 2016), I laid out my reasoning for a prediction that the Global Oil Markets would soon be back in balance. Picking an exact date when an oil cycle will end is difficult, but they do call them “cycles” for a reason. This cycle is no different than all of the others that came before it. Oil producers and consumers respond to price changes, which brings supply & demand back into balance, just like they always do.

The last six major oil price cycles lasted an average of two years. This one started in July, 2014.

On June 14, 2016 the International Energy Agency (IEA) issued their monthly Oil Market Report. In the report the IEA revises their first quarter increase in global demand forecast from a 1.4 to 1.6 million barrel per day year-over-year increase. They are also forecasting a big spike in demand of 1,270,000 barrels per day from the 2nd quarter to the 3rd quarter. Since demand ALWAYS spikes in the 3rd quarter, this was not a surprise to anyone.

Since this cycle has been so severe, I predict that it will not end well for speculative traders that continue to short oil futures. If some of you purchased a gas guzzling SUV because you believed the talking heads that said oil would never sell for $100/bbl again, you may want to consider a smaller second car.

• Global oil production in May was 590,000 barrels per day less than it was a year ago.

• Nigeria’s oil sector is under attack and the situation seems to be getting worse

• OPEC production fell by 110,000 barrels per day as increases in Iranian production were more than offset by big losses in Nigeria, Libya and Venezuela

• Global demand is up 1,600,000 barrels per day year-over-year as Chinese demand has held up and demand from India is very strong

Canadian wildfires at their peak took 1,500,000 barrels per day off the market. This production should be restored in the 3rd quarter. The situations in Nigeria, Libya and Venezuela are much worse. Inf fact, there is now concern that the government in Venezuela may collapse under the debt load created by low oil prices.

The direction of the oil market should now be crystal clear to everyone. Demand growth is relentless. The products refined from oil are essential to a high standard of living on this planet. We will all complain when gasoline is back over $3.00/gallon, but we will continue to pay for it. Within 6 to 9 months, demand for oil should exceed production. High storage levels provide a cushion, but oil prices will continue to ramp higher.

What are other analysts predicting?

• Raymond James says West Texas Intermediate (WTI) will average $60/bbl in the 3rd quarter and $75/bbl in 2017

• Morgan Stanley recently raised their long-term oil price for Brent by $10/bbl to $80/bbl

For those of you investing in upstream oil & gas companies it is important to note that “$70 is the new $100”. By this, I mean that the improving well results and much lower drilling & completion costs of horizontal wells in the U.S. shale plays makes the economics for new wells about the same at $70 oil as they were a couple of years ago at $100 oil.

Related: Cheap Energy Storage Is Set To Undermine Fossil Fuels

Keep an eye on the frack sand companies (EMES, FNSA, HCLP, SLCA). The upstream companies are getting better well results by using a lot more sand to complete horizontal wells. To stabilize U.S. oil production, the upstream companies will need to complete twice as many wells as they are completing today. Demand for frack sand could double within twelve months.

Natural Gas Market

I want to shift gears and remind you that all upstream companies produce a combination of oil, natural gas and natural gas liquids (NGL). Each product trades on a separate market.

The U.S. natural gas market is isolated from the rest of the world. Although we are the world’s largest gas consumer, the U.S. has very little import capacity other than pipelines from Canada. Canadian production has declined, so they have less gas to send us. We are now exporting gas via pipeline to Mexico and via ship in the form of liquified natural gas (LNG). The U.S. is on-track to be a net exporter of natural gas by 2020.

In just the last two weeks, the price of natural gas has increased by $0.45/mmbtu. The January, 2017 NYMEX contract, which will be the front month contract by late November, closed at $3.32/mmbtu on June 10th. The oil and gas prices you see quoted in the business news each day are the front month NYMEX contracts.

The reason for the sharp move in the gas price is awareness by the speculative traders that our gas market is going to be a lot tighter heading into next winter. U.S. production is now falling by over 400 MMcf per day month-after-month, primarily because the associated gas from horizontal wells in the oil shale plays is dropping like a rock. Gas from the Eagle Ford shale play in South Texas is falling by over 200 MMcf per day. At this rate of decline, we will have 4 to 5 Bcf per day less gas supply heading into the heating season than we had a year ago. Five percent less supply will have a significant impact on gas prices.

For reference, the U.S. consumed approximately 80 Bcf per day in 2015 (including exports). U.S. consumption is expected to be approximately 83 Bcf per day in 2016 and approaching 100 Bcf per day by 2020. Driving the increasing demand is power generation, LNG exports and industrial demand.

Five coal fired power plants and a nuclear power plant are being replaced by gas fired plants this year. Plus, the weather forecast for July is HOT for the eastern U.S., which will significantly increase demand from our gas fired power plants. Gas fired power plants now produce more electricity than coal fired power plants in the U.S.

Over 90 percent of new homes built in the U.S. are heated with natural gas, so residential space heating demand goes up each year.

Natural gas in storage is high for this time of year thanks to a mild winter, but a hot summer should bring storage levels back to normal by the time the next winter heating season begins. If that happens, the price of natural gas in the first quarter of 2017 should top $4.00/mmbtu.

Conclusion

The sharp decline in drilling activity has U.S. oil and gas production on steady decline and I expect the rate of decline to accelerate in the 3rd quarter.

71.75p +4.50p (+6.69%)

FOR THOSE WITH NEGATIVE VIEWS

Have got a punch where it hurts, as the oil price bounces and now over $50 and the FTSE digest the weekend comment of the - Brexit - polls

Jefferies International today reaffirms its hold investment rating on Premier Oil PLC (LON:PMO) and raised its price target to 75p (from 33p).

74.50p + 2.75p
UT was 75p

A very good day for the stock though the rise on the oil price almost lost all the rise by 4.30pm

75.375p +2.875p

On the up as most oils after oil price moving higher after London close, despite FTSE moving lower

having seeing the stock moving from 76 to 76.50p for the last couple hours and order book getting weaker also

decided to close the position T+9 @ 76p for 9% gain

StockMarketWire.com
Premier Oil (PMO) said it is discussions with its lending group on the terms of its existing financial facilities, which it said are progressing well.

The lending group agreed that the test of Premier's financial covenants at 30 June 2016 will be waived and replaced by a test for the 12 month period ending 31 July 2016.

This deferral allows further time to agree amendments to Premier's medium term covenant profile and the resetting of its debt maturities. In return for the proposed amendments, it is anticipated that additional security will be provided for existing debt holders.

Premier expects negotiations to conclude during Q3 2016. Further deferral of the covenant test date will be sought if required.

Premier continues to have access to undrawn funds within its revolving credit facility to allow the company to meet its ongoing funding requirements.

Lucky or well researched?

I see share price is down to 65p today, as the oil price has been moving lower for the last fews days.

PMO must say is not alone on moving lower today even BP. is down now -8.95p after being a couple pence up earlier

PMO
PREMIER OIL 65.00p -5.75 -8.13%

GENL
GENEL ENERGY 123.38p -10.62 -7.93%

IAE
ITHACA ENERGY 65.75p -5.25 -7.39%

TLW
TULLOW OIL 202.80p -37.80 -15.71%

Bought some again @ 65.1675p

Had a large retracement culminating on today's large drop. Oil price looks like is trying to bounce back after the last few days drop
order book still a bit weak but improving

quite brave, though i sort of see the logic
would not RDSB be a better bet even on the slim margins you seem to work to?

Nothing did happen for the rest of the afternoon, but the oil price has recovered and just now has gone positive for the day with a nice spike Up
should see a better day tomorrow if the price holds
futures
Brent $ 48.32 +0.10
light $ 47.76 +0.19

re - would not RDSB be a better bet

you suppose to know I do not go for dividends like you but a fast buck, no time for waiting recorded day.

that is the way shares move up today, you can make up your own mind why I have chosen PMO "cynic "

PMO 68p +4.62%
RDSB 2100p +0.86%

fair comment
i prefer RDSB (for my sipp) more as a defensive due to the source of its earnings as well the divi

ditto BATS and IMB which have performed very well all things considered

A view from " capra " of crude oil wave

Below is oil chart with how I see things playing out so far and what we could be looking at. If on the higher degree charts we are in corrective wave 2 of a 5 wave motive oil still has 2 large impulse moves to the upside with a further corrective move (wave 4) before the larger correction comes into play after the 5th wave on the higher degree.

Commodities have their cycles but are by far and large influenced by current and forward supply and demand forecasts. In case of PMO (and others) the data available from say OPEC and other producers-US stocks-Far East demand -available hydrocarbons currently held on "floating" storage due contango (not to be sneezed at) amongst others is far more relevant than technicals.

A weak pound is good for BP , Premier Oil and Enquest - By Motley Fool | Mon, 11th July 2016 - 16:14

One of the biggest beneficiaries of the pound's fall in the wake of Brexit has been oil stocks. That's because, like most commodities, oil is priced in dollars. London-listed oil stocks therefore have large dollar-based incomes that would benefit UK investors as they translate their foreign currency earnings back into sterling.

Dividend benefit

Shares in BP (LSE:BP) have benefitted massively from the recent fall in the pound, with shares up 20% since the EU referendum on 23 June.

Just like its earnings, BP's dividends are also declared in dollars, which means its dividends would also benefit from sterling's recent fall. The improved sterling value of BP's dividends mean UK investors would effectively get a 12% dividend rise, simply because of the fall in the value of the pound. Although this is a meaningful benefit for UK investors, sterling's weakness may not persist.

In addition, the pound's strength also pales in significance when compared to the fall in oil prices. Weaker sterling could add around 12% to the oil major's 2016 profits, but that still forecasts at less than half of its 2014 levels.

What's more, BP's dividends aren't fully covered by earnings and a dividend cut remains a very real possibility. BP's dividend futures, which are traded on Eurex, are currently pricing-in an 18% cut in its dividend for 2017.

Cost benefit

UK North Sea oil producers also have an additional benefit from weaker sterling: that is, improved competitiveness. Because a significant share of costs, including wages and a good proportion of equipment and services are paid in local currencies, UK North Sea producers have become relatively more competitive than their global peers.

The oil majors, including BP and Shell, have some big North Sea wells, but overall production from the UK accounts for a very small proportion of their total revenues. Instead, smaller producers, such as Premier Oil (LSE:PMO) and Enquest (LSE:ENQ), which have the bulk of their operations in the UK, stand to benefit more greatly from the improved cost competitiveness of UK North Sea.

Premier Oil is in a particularly good place to benefit from weaker sterling following its recent acquisition of Eon's North Sea assets back in April this year. But even before this recent deal, both producers generated a majority of revenues from the UK North Sea.

However, a weak pound may be too little too late for these oil producers. Both are quite heavily indebted and what they really need is a substantial rebound in oil prices. Although these companies earn most of their income in dollars, their debt is in the US currency too. So while the weaker pound does help in terms of competitiveness, it doesn't have an immediate benefit for debt as well.

Neither producer is expected to report a profit for the next two years, which makes it difficult to see whether their stocks are worth buying. The market seems optimistic though. Shares in Premier Oil are up 40% since the start of the year, while Enquest's shares have gained 61% over the same period.

StockMarketWire.com
Premier Oil said in the half year to June 30 it has delivered a robust production performance, achieved first oil from Solan, completed the E.ON acquisition and reached key milestones on the Catcher project.

HIGHLIGHTS:
* Strong production of 61.0 kboepd, with recent record rates above 80 kboepd; full year production expected to be at or above the upper end of earlier guidance of 65-70 kboepd

* Solan ramping up to 14 kbopd from P1, currently at 11 kbopd; P2 completed, successfully tested and will be tied in shortly

* Integration of E.ON UK assets completed; portfolio performing strongly

* Catcher on schedule with the FPSO hull now in Singapore; further cost reductions secured, with capex now 20 per cent lower than at sanction

* Opex for the period of $16/boe, 14 per cent below budget; weaker sterling exchange rate will reduce cost of sterling denominated opex, capex and debt

* Net debt of c. $2.6 billion at period end, flat on end Q1 2016 position; as previously announced, negotiations with lenders are progressing well with the main covenant test deferred while discussions are finalised.

Spangel comment today:
"Here is a scientific paradox which revolves around a cat in a box that may be dead or alive. How do you know unless you open the box and look? How can you tell that the action of opening the box doesn't kill the cat, or bring it back to life? In short, does observing whether the cat is dead or alive create the outcome?
In this respect we believe that PMO is in the same position with its debt. If it looks, it will breach its covenants, but if it doesn't ask the question, it can say that it doesn't breach. We get the impression in this instance that Management know that their debt cat in the box is dead, but until they open it up and look, they can say that it isn't; QED: no breach.
This doesn't change the fact, however, that outside of the Management team, the way in which this has been articulated, strongly suggests, with a high degree of confidence, that the covenants have been breached, otherwise, why would the Management team leave the Company's future in limbo for so long while they renegotiate the covenants?
We would expect the share price to stage a rally in the short term as the Company’s owners express relief, but this does not escape the fact that the outlook for the Company is less in the hands of management, and more in the hands of its creditors. This could be terminal for the Durant reign, which let’s not forget signalled that the Company was ex-growth by initiating a share buyback programme in a falling oil price environment to generate shareholder value.
In the longer term however we are more confident that the Company will survive as there is a significant number of highly regarded members of the Management team that can step in seamlessly if the need arises, to help navigate the Company’s future, potentially through what is becoming an increasingly difficult time.
Once the outlook for the Company stabilises, or at least the path that it will follow becomes more certain, we believe that attention will start to turn towards the decisions that have been made, when and how. As with all companies in these positions, we believe that the Management team need to start to articulate what the future plan will be, and what portfolio action they will take, because against this backdrop, we can’t see its Falklands ambitions surviving.

72p +3.25p

Should you play the oil price recovery with PMO?
By Motley Fool | Tue, 12th July 2016 - 14:24

North Sea-focused

Premier Oil came under the spotlight this year when shares crashed to 19p from their 2015 peak of 180p. The update from Premier today is a strong one but the balance sheet remains a serious worry even though recent production rates have been above 80,000 bopd and full-year guidance is likely to beat expectations. This was due to Premier's new Solan development coming online and producing 11,000 bopd. It's also encouraging that opex is $14 per barrel below budget and the integration of E.ON's North Sea assets is complete.

CEO Tony Durrant stated that Premier has "delivered a robust production performance." He also added: "At current oil prices, we start to generate free cash flow later this year, which positions us well to manage the balance sheet whilst retaining some optionality for future growth projects."