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OIL - OPTISCAN IMAGING LIMITED


theflasherman

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The security premium in the oil price seems to get bigger and bigger after attacks in Saudi over the weekend and this is before an incident which actually does disrupt supply.

 

Oil at US$38.98. AUDUSD at 0.7290. Australia producers are, therefore, receiving A$53.47 a barrel.

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AYO is a gas producer. only selling small quantities of condensate. Therefore the oil price is of little significance. BPT will be doing nicely but there are probably better stocks out there. ARQ (in low 0.80s), TAP (around 1.40), AMU (under 0.50), STU (low 0.70s), COE (0.17-0.18) would make very good buys for the medium term and are some of the better leveraged. BPT seems to have consistently lagged. The key to BPT is what it decides to do with its ample cash position.
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Well the black stuff got to US$40 a barrel. The Aussie dollar also came off. AUDUSD is 0.7020, closing West Texas June contract is US$39.93. Therfore A$ price is $56.86. This is an increase of more than A$3 a barrel since Tuesday. IMO buy TAP (because Woolybutt and now Linda are on stream) and AMU (almost solely an oil producer with costs denominated in US$). These are two low risk producers that have not really participated in the rise like WPL. ARQ is also a good buy if purchased in the low 80c range. I own AMU, COE and ROC.

 

COE had a couple of interesting trades late on Friday. ITG put 2 lines through of 908,500. That seemed to rally the troops and it closed up 7.89% at 20.5c, which is unusual on a plugged and abandoned announcement at Acacia Grove. COE is a definitie buy around 18c and perhaps it strayed too far from proper value of around 25c exlcluding exploration upside. Conspiracy theorists could suggest that BPT's cash hoard is at work in a takeover of COE. However, I note that BPT used Euroz as a broker for their capital raising not ITG so would be very surprised if it is related to that.

 

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OIL PRICE DAYLEAD

NEW YORK, May 7 AFP - Crude oil hit $US40 a barrel in New York today for the first time in more than 13 years on fears of terrorist strikes in the Middle East and US petrol shortages, traders said.

The price of light sweet crude for delivery in June spiked to the symbolic $US40 threshold just minutes after the opening of trading, but failed to sustain the move.

The last time prices were so high was in October 1990 after Iraqi troops rolled into Kuwait.

"The high energy prices we're seeing today are unwelcome and they're unhelpful," US Treasury Secretary John Snow said in an interview with CNBC financial news television.

The key New York contract closed at $US39.93, up 56 cents and the highest finish since October 1990.

"It is really a market driven by fear, fears of potential terrorist incidents in Saudi Arabia and Iraq, and also concerns about potential civil unrest in (major oil producers) Nigeria and Venezuela," said Refco energy market analyst Marshall Steeves.

Crude oil prices could rise to $US41.15 a barrel, the record trading high of October 1990, in the next week, he said.

World oil prices have soared since gunmen attacked a Saudi oil facility at Yanbu port on May 1, killing five staff of the Swiss engineering group ABB and a Saudi national guard. The four attackers also died.

Saudi Arabia, the world's number-one oil exporter, has been hit by a series of attacks that began a year ago with the bombing of three residential compounds in the capital of Riyadh.

"It had been creeping up towards 40 dollars for the last three days, and many people made the bet that it would hit 40 before the weekend," said Oppenheimer market analyst Fadel Gheit.

Traders were unwilling to go home for the weekend with insufficient oil contracts, he said.

"They remember what can happen over the weekend. Last weekend there was a terrorist attack in Saudi Arabia and it pushed up oil prices by almost two dollars in the following two days," Gheit said.

The outlook for stability in Iraq had deteriorated since the publication of photographs apparently showing US troops humiliating naked and bound Iraqi prisoners at the Abu Ghraib prison near Baghdad, he said.

"The terrorists have a waiting line for volunteers," he said. "It is really backfiring big time on us."

In London, the price of a barrel of Brent North Sea crude oil for June delivery headed up towards new 13-year highs, rising 47 cents to close at $US37.00 a barrel.

Crude prices were also being infected by a feverish petrol market, with fuel stocks low ahead of the so-called "summer driving season" in the United States when motorists flock to the roads, analysts said.

OPEC agreed in March to cut daily output quotas by one million barrels to 23.5 million from April 1.

The grouping's next scheduled meeting will be on June 3 in Beirut, though at least some ministers will have a chance to discuss the market in Amsterdam on May 21 on the sidelines of an energy conference.

AFP ao

08-05 0702

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Oil is still holding strong near US$39 a barrel (US$38.72 acutally as I write) despite comments from Saudi Arabia that it favours at least a 1.5mmbo increase in input. Offsetting this is the latest attack on oil coming out of the middle east cutting Iraqi exports by around 400kbopd. At the moment I think the terrorist aspects are dominating the oil price.

 

Setting aside any morality, oil prices are set to remain high, which I mean above US$30 a barrel as it is clear now that oil installations are targets in Iraq and Saudi Arabia. Potentially attacks could occur anywhere in the world as well IMO but I see little point in terrorists targetting small oil fields.

 

Some of the oilers have come off due to recent marketwide weakness and exploration failures. Given the backdrop of high oil prices I think some are nearing bargain territory. I've already mentioned TAP and AMU but I think ARQ below 80c is a steal. ARQ seems to have support in the low 80s but it might temporarily trade lower and I think it should be bought at that point. OSH below $1.10 is in the same category although the ebb and flow of any PNG pipeline will be the big driver. I still favour producers over explorers at the moment as there are few low risk company making wells around that I can see.

 

Of course I could be talking complete bollocks! http://www.sharescene.com/html/emoticons/biggrin.gif

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