Brent pulling back today albeit well off the lows as of early afternoon as we hear headlines of an OPEC meeting potentially called early (although the sources of this meeting seem to be only forces who benefit from the cartel holding an emergency meeting) but also now having digested last week’s inventory and rig count data.

Public Domain image courtesy the U.S. Coastguard: http://commons.wikimedia.org/wiki/File:Development-driller-3.jpg

Watch the Brent-WTI spread as a barometer for just how bad the supply issue remains. The spread we said last week could hit $15 by mid-summer.

We would still maintain that call and see potential for even greater upside if OPEC truly does gather momentum to cut in June.

BNO

One of the keys to the oil data was that we are seeing a precipitous fall in the horizontal rigs as well as the overall rig count.  Horizontal rigs are the ones more required in the shale game. 

spread

On headline oil prices we reiterate our view that we have hit bottom but that you don’t need to chase some of the high quality names in the services, integrated, and drilling space.  Be wary of headlines that will continue to be in the interests of those oil producers who need OPEC to step into supply cuts.  Algeria out there this AM along with the named Nigerian headlines above.  Russia’s oil minister continues to lobby behind the scenes for cuts, as does Venezuela’s.

A number of oil industry plays are hitting key support lines today after four sessions of falling prices  

Our top picks and levels to watch:

Integrateds

TOT

$50.50

COP

$63.00

XOM

$88.00

 

Serivces

HAL

$42.00

SLB

$81.00

 

Drillers

SDRL

$11.10

RIG

$15.75

 

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