Pic: Getty
Oil stocks are looking tasty, but expect that virus to have a long tail
Energy
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It looks like them energy names are on the rise Wednesday, largely punching above a local market weighed down by weak US leads and possibly boredom.
But don’t thank our collective refusal to acknowledge a warming planet. In this case oil prices are rising in the face of – and because of – everyone’s favourite cartel of leading global oil producers.
Yes, OPEC+ — that highly-combustible and desperately-cagey coalition of the Organization of the Petroleum Exporting Countries and a cohort of Russian-led oil producers — have agreed to stay the course on their collective 400,000 barrels a day increase in monthly production for February.
The largely predictable bet made early this morning Sydney time to keep pumping more crude, rests on the likelihood Omicron won’t be scuttling demand in the same way previous waves of Covid have sunk oil prices.
The group agreed last year to boost output in such increments each month until production reaches pre-pandemic levels, but reviews the policy every month in case more money can be made with a tweak here or there.
After pausing to digest the thinking, Brent crude jumped by 2% while US crude closed near a six-week high.
But why are prices rising on increased production?
Well, last year crude posted its biggest annual gain in value since the release of Lady Gaga’s unexpectedly slick horror-pop mashup Poker Face (look it up) – and with lockdown fatigue at its own all-time high right now, the canny cartel knows when more is less and more is more. In this case, the latter.
Ahead of the morning meet, OPEC’s Technical Committee cut around 25% off what it reckons the global crude surplus will be for the first three months of the year, calling the omicron impact “mild” and “short term.”
Meanwhile stateside, there’s already a bunch of producers struggling to meet their quotas, a gap OPEC+ is more than willing to take a run at.
Fear and panic
“If anything, the fear and panic of a month ago over widespread disruptions and a blow to demand recovery has now subsided, giving OPEC+ greater confidence to continue increasing supply,” says Singapore-based Vandana Hari, founder at energy analysts Vanda Insights.
Here’s her short term take for oil prices:
- Having jumped in reaction to OPEC+’s confidence in demand rebound, crude will remain in recalibration mode
- Rising hopes of the Omicron being far less destructive than initially feared must balance with governments maintaining a cautious stance and not showing signs yet of relaxing the fresh curbs introduced more than a month ago
- The positive narrative over Omicron’s low virulence will struggle for the spotlight, especially in the West, as policy makers and healthcare experts are keen to push their vaccination and booster jab campaigns
And for the medium term:
- We see a long tail of Covid
- So even now it looks like the pandemic will remain an overarching influence on the oil market in 2022
- Global economic recovery momentum is expected to slow down
- The pent-up demand that fuelled consumer spending from the latter half of 2020 and through 2021 is likely to run out of steam
- This’ll be aided by persistent inflationary pressures, weakening a key prop for growth
Here’s the local small caps rising to the occasion:
| CODE | COMPANY | 1 DAY RETURN % | 1 WEEK RETURN % | SHARE PRICE | MARKET CAP |
|---|---|---|---|---|---|
| DOR | Doriemus PLC | 0% | 32% | 0.15 | $17,451,635.23 |
| GLV | Global Oil & Gas | 14% | 25% | 0.03 | $41,058,506.65 |
| BRK | Brookside Energy | 0% | 24% | 0.02 | $70,882,147.77 |
| NWE | Norwest Energy | 4% | 23% | 0.03 | $146,471,772.67 |
| 88E | 88 Energy | 17% | 17% | 0.03 | $399,899,057.29 |
| JPR | Jupiter Energy | 0% | 13% | 0.04 | $6,595,240.80 |
| WGO | Warrego Energy | 13% | 13% | 0.13 | $140,659,067.49 |
| TMK | Tamaska Oil Gas | 0% | 13% | 0.01 | $8,865,000.00 |
| XST | Xstate Resources | 13% | 13% | 0.004 | $12,860,726.60 |
| ADX | ADX Energy | 0% | 11% | 0.01 | $29,744,372.02 |
| LIO | Lion Energy Limited | 9% | 11% | 0.07 | $25,618,134.94 |
| TOU | Tlou Energy | -4% | 10% | 0.05 | $33,010,947.15 |
| BRU | Buru Energy | -4% | 9% | 0.24 | $131,918,532.80 |
| KAR | Karoon Energy | 4% | 9% | 1.83 | $978,889,362.88 |
| IPB | IPB Petroleum | 0% | 8% | 0.01 | $4,715,968.15 |
| BPT | Beach Energy Limited | 0% | 7% | 1.31 | $2,977,140,421.08 |
| CTP | Central Petroleum | 0% | 7% | 0.12 | $83,473,358.81 |
| BYE | Byron Energy | 2% | 7% | 0.12 | $119,633,936.73 |
| CVN | Carnarvon Energy | 1% | 6% | 0.35 | $532,229,171.78 |
| STO | Santos | 3% | 6% | 6.79 | $22,387,552,007.35 |
| TDO | 3D Oil Limited | -2% | 6% | 0.06 | $14,850,548.83 |
| CUE | CUE Energy Resource | -2% | 5% | 0.07 | $48,868,380.40 |
| HHR | Hartshead Resources | 0% | 5% | 0.02 | $40,694,986.77 |
| WPL | Woodside Petroleum | 1% | 5% | 22.82 | $21,981,553,495.42 |
| HZN | Horizon Oil Limited | 2% | 4% | 0.09 | $143,683,809.54 |
| NZO | New Zealand Oil&Gas | 0% | 4% | 0.50 | $82,215,359.00 |
| ATS | Australis Oil & Gas | 4% | 4% | 0.05 | $61,923,182.45 |
| SGC | Sacgasco | 4% | 4% | 0.03 | $12,511,166.56 |
| EEG | Empire Energy | 3% | 3% | 0.35 | $208,105,275.94 |
| CE1 | Calima Energy | 2% | 2% | 0.22 | $107,957,687.88 |
| IVZ | Invictus Energy | -10% | 2% | 0.12 | $76,060,060.31 |
| PGY | Pilot Energy | -10% | 2% | 0.05 | $30,096,102.06 |
| COE | Cooper Energy | -2% | 2% | 0.28 | $457,165,688.00 |
| VEN | Vintage Energy | 0% | 1% | 0.09 | $60,656,302.84 |
| SXY | Senex Energy Limited | 0% | 1% | 4.62 | $855,936,335.10 |
| BAS | Bass Oil | 33% | 0% | 0.002 | $6,919,022.19 |
| BUY | Bounty Oil & Gas NL | -11% | 0% | 0.01 | $12,334,508.84 |
| COI | Comet Ridge Limited | 5% | 0% | 0.11 | $90,303,616.73 |
| E2E | Eon Nrg | 0% | 0% | 0.001 | $769,888.93 |
| GAS | State GAS Limited | 0% | 0% | 0.30 | $58,950,529.98 |
| GGE | Grand Gulf Energy | -8% | 0% | 0.02 | $33,360,877.29 |
| GGX | Gas2Grid Limited | 0% | 0% | 0.003 | $12,174,306.23 |
| GLL | Galilee Energy | 0% | 0% | 0.38 | $110,767,708.50 |
| HPR | High Peak Royalties | 0% | 0% | 0.06 | $11,492,601.95 |
| LKO | Lakes Blue Energy | 0% | 0% | 0.002 | $53,282,113.44 |
| MEL | Metgasco | 0% | 0% | 0.03 | $20,520,774.23 |
| NSE | New Standard Energy | 0% | 0% | 0.004 | $3,554,995.46 |
| OEL | Otto Energy Limited | 0% | 0% | 0.01 | $62,335,127.05 |
| OEX | Oilex | 0% | 0% | 0.004 | $25,047,520.08 |
| PCL | Pancontinental Energ | 33% | 0% | 0.002 | $10,731,334.22 |
| PKO | Peako Limited | 0% | 0% | 0.02 | $6,477,536.12 |
| PRM | Prominence Energy | 13% | 0% | 0.01 | $10,276,870.55 |
| PSA | Petsec Energy | 0% | 0% | 0.02 | $10,260,346.40 |
| PVE | Po Valley Energy | 0% | 0% | 0.03 | $25,166,085.98 |
| ROG | Red Sky Energy. | 0% | 0% | 0.01 | $42,417,817.58 |
| SAN | Sagalio Energy | 0% | 0% | 0.01 | $2,660,581.69 |
| STX | Strike Energy | -2% | 0% | 0.21 | $435,397,584.68 |
| TEG | Triangle Energy | 0% | 0% | 0.01 | $15,054,325.10 |
| TNP | Triple Energy | 0% | 0% | 0.03 | $1,799,901.35 |
| WEL | Winchester Energy | -7% | 0% | 0.01 | $14,114,971.01 |
| FAR | FAR | 3% | -1% | 0.40 | $38,419,339.42 |
| AJQ | Armour Energy | -3% | -3% | 0.02 | $39,357,103.42 |
| MAY | Melbana Energy | 0% | -5% | 0.02 | $56,139,500.57 |
| AXP | AXP Energy | -5% | -5% | 0.01 | $58,121,806.73 |
| TPD | Talon Energy | -6% | -6% | 0.01 | $54,297,516.20 |
| NGY | Nuenergy Gas | -7% | -7% | 0.03 | $41,466,753.92 |
| KKO | Kinetiko Energy | 0% | -8% | 0.09 | $56,731,864.86 |
| ICN | Icon Energy Limited | 5% | -12% | 0.01 | $7,233,676.32 |
| WBE | Whitebark Energy | 0% | -13% | 0.004 | $15,305,939.43 |
| EXR | Elixir Energy | -7% | -16% | 0.17 | $160,512,007.68 |
| KEY | KEY Petroleum | 0% | -17% | 0.00 | $4,919,820.32 |
| ABL | Abilene Oil & Gas | 0% | -100% | 0.00 | $397,614.35 |
| OSH | Oil Search | 0% | -100% | 0.00 | $8,394,516,682.56 |
Bass Oil (ASX:BAS)
Leading our charts on no news, Bass Oil may well have benefitted from having existing oil production from its operations in Indonesia.
The company recently recorded production of 5,722 barrels of oil in November and flagged that it was close to completing the acquisition of three non-operated Cooper basin assets, including a 30% interest in the producing Worrior oil field and other acreage, from Cooper Energy.
Pancontinental Energy (ASX:PCL)
Also up on now news, Pancontinental holds acreage that is on trend with two high impact wells that Shell and Total are drilling separately in the Orange Basin, offshore Namibia.
Successful drilling of either or both wells will substantially increase the prospectivity of the company’s Saturn oil play in PEL 87.
88 Energy (ASX:88E)
Adding to the list of oilies that are up no news, 88 Energy remains on track to spud its Merlin-2 appraisal well in February.
This follows up on Merlin-1, which demonstrated the presence of oil in multiple stacked sequences within the Brookian Nanushuk Formation and targets 652 million barrels of oil.
