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Wednesday, December 02, 2009

Crude Falls Ahead Of US Inventory Data

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Crude oil prices fell around half a percent this morning, as apparently burgeoning US stockpiles continue to make American oil market fundamentals look fragile. Elsewhere OPEC was in the news as they commented on their perceptions of growing Chinese consumption following Tuesday’s upbeat manufacturing data.


Globex Light Sweet Crude futures were last changing hands at $77.70 in electronic trading.


Last night, the American Petroleum Institute (API) reported that crude inventories increased by almost 3 million barrels, while gasoline and distillate stockpiles also grew, with reducing refinery utilization. Investors will look to today’s announcement from the US Department of Energy for further direction.


On Tuesday crude prices rebounded from the sour end to November, buoyed by an improving Chinese manufacturing outlook. Two separate reports - conducted independently by China’s government and international banking group HSBC - both revealed a sharp rise in Chinese manufacturing. As western economies, particularly the United States stumble out of recession, the oil market has become increasingly dependent on the future growth in Chinese consumption.


OPEC (Organisation of Petroleum Exporting Countries) in particular has been paying closer attention to the Chinese consumption story. An industry report yesterday suggested that the cartel increased output to 26.65 million barrels of oil a day in November.

It’s believed that the increased output follows OPEC’s increased confidence of a significant increase in Chinese oil consumption as it leads the world’s economic recovery. At these levels OPEC’s combined production output is at its highest level since the turn of the year.


In other oil related news, Iranian oil minister Masoud Mirkazemi added to the growing level of political posturing as tensions continue build. According to Iran’s Mehr news agency, the oil minister for OPEC’s second largest producing nation reportedly warned Iran may stop exporting crude oil if economic sanctions continued.


On the London Stock Exchange oil and gas stocks were relatively flat, with just a couple of companies moving more than 1% this morning. In the FTSE100 Cairn Energy (LSE: CNE) were the most active, with the Edinburgh headquartered major falling nearly 2%, Irish producer Tullow Oil (LSE: TLW) traded in the red also, sliding more than half a percent. British Petroleum (LSE: BP.), Royal Dutch Shell (LSE: RDSB) and BG Group (LSE: BG.) were unmoved.
 Petrofac (LSE: PFC) was the only FTSE100 constituent to make any gains on Wednesday morning, as the upstream processing and engineering company climbed around 1%.


In the FTSE250, Afren (LSE: AFR) outperformed the sector as the emerging African oil and gas producer advanced 5.5%, Soco International (LSE: SIA) and Premier Oil (LSE: PMO) were also positive as the climbed one percent and half a percent respectively.


Moving in the opposite direction was Dragon Oil (LSE: DGO), Dana Petroleum (LSE: DNX), JKX Oil and Gas (LSE: JKX). Elsewhere Heritage Oil (LSE: HOIL) and Gulfsands (LSE: GPX) were both unchanged.


On the AIM market, oil and gas junior’s were fairly mixed. Leni Gas and Oil (AIM: LGO) was among the top risers, as it climbed around 4% this morning, Aurelian Oil and Gas (AIM: AUL) and Aminex (AIM: AEX) both followed, each rising 2.5%.


Northern Petroleum (AIM: NOP), Petrel Resources (AIM: PET) and Falkland Oil & Gas (AIM: FOGL) added more than 1.5% to Tuesday’s close. Regal Petroleum (AIM: RPT), Rockhopper Exploration (AIM: RKH) and Salamander Energy (AIM: SMDR) also trades on the positive territory.


Nostra Terra (AIM: NTOG) and Leed Petroleum (AIM: LDP) were the heaviest falling stocks as they both dropped more than 7.5%. Matra Petroleum (AIM: MTA), Petroceltic International (AIM: PCI), Sterling Energy (AIM: SEY) and Ascent Resources (AIM: AST) also fell.

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