Crude ends week at $80 after downward revision to US Q4 GDP

Crude prices started the week with declines, still feeling pressure from India’s move to hike its repo rate, which is charges banks for short term loans, to 5% and its reverse repurchase rate that it pays banks for loans to 3.5% in what was explained as an attempt to curb inflation. Losses from India’s rate hikes were in part offset by OPEC’s (Organisation of Petroleum Exporting Countries) decision to make no change to its production quotas for this year.
Oil was further hit by a drop in existing home sales in the US, which declined 0.6% in February, as was revealed on Tuesday. The US dollar also grew stronger as the euro declined on the European debt woes following Fitch’s downgrade of Portugal to AA- and the lack of a consensus among the euro zone states on a bailout deal for debt-laden Greece. The agreement that was reached by EU leaders on Friday provided immediate relief for Europe’s single currency, though failed to substantially improve the long term outlook for Greece’s fiscal problems, limiting gains in the euro.
A stronger US dollar makes dollar denominated commodities including crude more expensive for holders of other currencies, curbing demand.
The inventories reports that came out this week offered little support for crude, showing significant build-ups in US oil stockpiles. US Energy Information Administration (EIA) reported that crude inventories increased by 7.2 mmbbls (million barrels) compared to an expected rise of just 1.7 mmbbls. EIA said that gasoline inventories declined by 2.7 mmbbls, while distillates, which include heating oil, dropped 2.4 mmbbls.
Earlier in the week, the American Petroleum Institute (API) reported a 7.5 mmbbls rise in crude stockpiles, adding that gasoline stocks fell 81,000 barrels, while distillates declined by 2.5 mmbbls.
Oil got some support by an improved demand outlook amid a rally in European and Asian stock markets on Thursday and Friday and bullish US jobless claims data that showed a steeper than expected decline of 14,000 in initial jobless claims last week to 442,000.
The recovery in the commodity market, however, was stopped by the downward revision of US GDP growth in the final quarter of 2009 that was announced on Friday, showing a drop from 5.9% to 5.6%.
May Brent Crude slid to US$79.36/barrel at the end of the week, while US light, sweet crude currently stands at US$80.15/barrel.
Supermajors BP (LSE: BP) and Shell (LSE: RDSB) ended the week flat. Other FTSE 100 oil and gas producers headed in different directions as while BG Group (LSE: BG) declined sharply, Cairn Energy (LSE: CNE) posted good gains and Tullow Oil (LSE: TLW) made smaller advances.
Oil and gas engineering firm Amec (LSE: AMEC) advanced, while peer Petrofac (LSE: PFC) rose sharply during the week.
Large and Mid Cap News
BG Group (LSE: BG) has signed a Liquefied Natural Gas (LNG) sales contract with state-owned China National Offshore Oil Corporation (CNOOC), concluding negotiations announced in May 2009, for the supply of 3.6 million tonnes of LNG per annum (mtpa) over a 20-year period. The deal is reported to be worth between US$40-80bn depending on varying oil price assumptions.
FTSE 250 oil and gas producer Soco International (LSE: SIA) said 2009 results have been the strongest to date as pretax profit from continuing operations rose from US$37.4 million to US$93.5 million while revenues more than doubled from US$55.34 million to US$131 million. The group  expects 2010 to be an eventful year with the possibility of the expansion of reserves over the course of this year’s drilling programme.
Small Cap News
Xtract Energy (AIM: XTR) reported on the progress being made by its 50% owned Turkish subsidiary Extrem Energy  AS, on the Alasehir licence in South-West Turkey. In the past few days, Extrem has completed the drilling, wire-line logging and casing of the Sarikiz-3 exploration well. Xtract said that oil shows were recorded during drilling and preliminary analysis of the wire-line logs provides further indications of hydrocarbons at several levels.
Northern Petroleum (AIM: NOP) has completed the seismic operations in the offshore West Sicily thrust belt, which covers four licences: GR17 NP, GR20 NP, GR21 NP and GR22 NP. The licenses are being explored through a joint venture with Royal Dutch Shell (LSE: RDSB, RDSA) subsidiary, Shell Italia E&P SpA.
Dominion Petroleum (AIM: DPL) said it is commencing its 2010 exploration programme, embarking on the most active period in corporate history that will include drilling and 3D seismic acquisition at its African projects.
Gulfsands Petroleum has announced that it had reached an agreement with AuDAX Resources  (ASX: ADX), to acquire working interest positions in two exploration permits in Tunisia, Chorbane and Kerkouane,  and one  exploration permit in Southern Italy, GR15 PU. Gulfsands will earn-in to the projects through the partial funding of upcoming exploration work.
In its interim report, Nighthawk Energy (AIM: HAWK) said it continues to be encouraged by its performance, as it begins to see progress with its production. In the six months ended 31 December 2009, the company generated revenues of US$1.01m, up 218% against the comparative period in 2008.
Victoria Oil & Gas (AIM: VOG) announced that George Donne is taking a 12 month leave of absence and is stepping down from his position as executive director to “pursue his passion for hiking and mountaineering,” while Jonathan Scott-Barrett will join the management as commercial director, reporting to the board.
Gulfsands Petroleum (AIM: GPX) confirmed that the latest offer approach, made on 18 March, was priced at 315p per share for the company’s entire share capital. The company reiterated that proposal is wholly inadequate, highly conditional and materially undervalues Gulfsands.

Ascent Resources’ (AIM: AST) Hungarian-based subsidiary PetroHungaria kft has begun production from the PEN-105 well in the Penészlek area of the Nyírség permits. Production from the well is expected to stabilise at over 2mmscfd (million standard cubic feet per day) within a few days. PEN-105 was completed and shut-in in December whilst the company connected it to the main export pipeline and completed drilling of the nearby PEN-101 well.
Northern Petroleum’s (AIM: NOP) Dutch subsidiary Northern Petroleum Nederland (NPN) will acquire the respective interests of Nederlandse Aardolie Maatschappij (NAM) and Dyas and assume operatorship of the Zuid-Friesland III production license, which has been granted to NAM and Dyas along with Total (NYSE: TOT) and Petro-Canada.
Petro Matad (AIM: MATD) has appointed an exploration manager, hiring petroleum geologist James Coogan, who has an extensive experience in geological terrains that are analogous to the North Asian basins in which the company operates.
Pan Andean Resources PLC  (AIM: PRE) said it was notified that managing director David Horgan acquired 170,000 ordinary shares in the company at a price of 15.5 pence each and now holds 3,735,000 shares, or 2.93 percent of the capital.
Ascent Resources (AIM: AST) has completed the 3-D seismic processing and the preliminary interpretation for the Petišovci project in Slovenia, and the results have exceeded its expectations. The 3-D seismic data was acquired over some 120 square kilometres, extending the project area and mapping over 12 new drilling targets with a total estimated potential of over 75Bcf (billion cubic feet) of recoverable gas.
In it first-half results, Xtract Energy (AIM: XTR) said has continued its transformation from being a passive investor to being much more involved in its investee companies. During the six months to end-December 2009, the company’s core investees Extrem Energy and Elko Energy continued to make progress on their respective development projects and since the period-end, Xtract upped its stakes to at least 50% in each company.
Even though the economic conditions remained challenging in 2009, Xcite Energy (TSX-V, AIM: XEL) managed to make significant progress on the operational and financial fronts at its key project, the Bentley oil field in the North Sea, which was reflected in today’s full year report.
Following closing of the latest placing last week, Xcite Energy (TSX-V, AIM: XEL) has received formal notification from three investors today of their respective holdings in the group, which is currently developing the Bentley oilfield in the North Sea.

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