Commodities | Jan 24 2007
By Rudi Filapek-Vandyck
The short term outlook for crude oil prices looks promising again, technical chartists at Barclays Capital reported this morning. The chartists did state, however, that this is merely an expression of a short term view as their forecast remains for lower oil prices on a medium term horizon.
Securities analysts at Shaw Stockbroking agree with the short term outlook which is now considered to be “bullish”. Shaw sees yesterday’s announcement by the US of a pending increase of its strategic petroleum reserves from US spring onwards as a clear positive sign which should bring the oil market closer to equilibrium. That cannot be a bad thing given that a growing production surplus was seen as one of the factors behind the oil price fall in the previous weeks.
The US has announed it will be increasing its Strategic Petroleum Reserves from current capacity of approx 700mmbls to 1400mmbls, with buying to commence in US Spring time at 100,000bbls a day. Interestingly, Shaw remarks, China is also looking to start building an SPR targeting 400mmbls.
The broker suspects the US is simply trying to get in ahead of China while oil prices are in the OPEC price band and while some spare capacity exists. Shaw believes current spare capacity is approximately 3.5% of global consumption or 2.5-3mmbls a day.
Also, cooler weather in the US in the short term should support an oil price in the near term between US$50-$60bbl, the broker believes.
Shaw Stockbroking has taken the opportunity to highlight its preferred exposures in Australia. At the top end Woodside (WPL) remains the broker’s favourite while at the mid cap level Anzon Australia (AZA) is considered the best exposure. At the small end of the market the broker prefers Amadeus Energy (AMU), while those investors looking for a potential higher risk reward may want to consider Nexus Energy (NXS), the broker said.
FNArena also notes that one of our sources in the market has informed us market speculation is for Oil Search (OSH) having landed on the radar of a possible suitor. BHP Billiton (BHP) is one of names mentioned.
Late in the afternoon, less than half an hour before market closing, Oil Search shares were trading 5.4% higher at $3.50. BHP shares were 2.33% higher at $25.87.