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Friday, November 27, 2009

Oil and Gas equities recover some of yesterday’s losses

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Many US oil traders have been reaching for their ‘Sell Button’ this morning as they return to work with little thanks for the Emirate state-owned Dubai World. While most of America’s oil traders were relaxing at home yesterday, Dubai World sought refuge from its $60 billion debts triggering a global sell off.


Both equities and commodities came under pressure after Thursday’s news that state owned Dubai World had delayed its debt repayment obligations. Traders in New York and Chicago will now be playing catch-up with their European and Asian counterparts.


West Texas Crude fell $5/barrel earlier today amid fears that a potential default in Dubai could seriously hamper the robust economic recovery which appears to be priced into $75+ crude. WTI Futures were last changing hands around $74 after hitting earlier intraday lows of $72.30.


Many economists expect the neighbouring Emirate state of Abu Dhabi to bail out Dubai. However many of the world’s major institutional investors and central banks hold the Emirate state’s sovereign debt and the potential fallout of any default remains unclear.


With the exception of supermajors BP (LSE: BP) and Shell (LSE: RDSB), which posted small losses, oil and gas stocks were on the rebound after Thursday’s losses. Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW) were in the lead with gains of 1.5% and 1% respectively, while other FTSE 100 constituents BG Group (LSE: BG) and Petrofac (LSE: PFC) rose marginally.


Midcaps did better with Heritage Oil (LSE: HOIL), Dragon Oil (LSE: DGO) and Dana Petroleum (LSE: DNX) tacking on 2%, 1.5% and 1% respectively.


Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP), Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL) and Kazakhstan operating Max Petroleum (LSE: MXP) were the top performers among the small caps, advancing 9%, 6.7% and 4.5% respectively.


Europe focused oil and gas developer Ascent Resources (AIM: AST), which announced a placing to raise £5 million today, was the leading faller in the sector with a 12.5% slide. Energy investor Xtract Energy PLC (AIM: XTR) and South American Focused explorer Pan Andean Resources (AIM: PRE) followed, shedding 5% and 4% respectively.


Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG), Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) and North American based explorer Nighthawk Energy (AIM: HAWK) all lost more than 3%.

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