Oil & Gas Daily Flow
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Market Update: Tuesday 24 August 2021
Union Jack Oil* (AIM:UJO): Strong flow rates recorded at Wressle
Brent Oil US$69.5/bbl vs US$66.4/bbl yesterday
WTI Oil US$66.2/bbl vs US$63.7/bbl yesterday
Natural Gas US$3.93/mmbtu vs US$3.89/mmbtu yesterday
Oil Price News
Oil prices rose over 5% yesterday as a weaker US dollar and strong global equities markets boosted futures after seven sessions of declines
This follows a challenging demand outlook with concerns around the rapidly spreading delta variant forcing expectations lower through the remainder of the year
The uptick in prices comes despite yesterday’s announcement by the US energy department that plans to sell up to 20MMbbls of crude oil from the nation’s Strategic Petroleum Reserve
Contracts will be awarded in September with delivery to take place during Q3 2021
The number of oil and gas rigs in the US rose by 3 last week, according to Baker Hughes, following an increase of 9 the previous week
The total rig count is now 503, up 249 from the same time last year, the highest rig count since April 2020, but still down sharply from the 790 active rigs in March 2020
The EIA’s estimate for oil production in the US rose by 100,000bopd for the third week in a row to an average of 11.4MMbopd
US crude inventories fell 3.2MMbbls last week to 435.5MMbbls, their lowest since January 2020, according to US Energy Department figures
Gasoline stocks, however, rose modestly, and gasoline product supplied to the market, a measure of demand, was 9.5MMbopd, just 1% below 2019 levels
Fuel demand in the worlds top consumer has steadily increased throughout the year with the four-week average of overall US product supplied was 20.8MMbopd, in line with pre-coronavirus levels from 2019
That has come just as the OPEC+ agreed to raise output by 400,000bopd every month into next year, returning some of the supply the group has held back since early 2020
The IEA estimates that demand for oil is expected to increase at a slower rate over the rest of 2021 because of surging cases of the Delta variant
Also bearish for the markets in the longer term, a US offshore regulator yesterday said efforts to resume a federal oil and gas leasing program were underway and would soon bear results following a court decision ending a suspension
Gas Price News
Natural gas futures continue to trade within a range of US$3.8-US$3.9/mmbtu as production figures continued to fluctuate but generally remained firmly entrenched in the low 90s Bcf/d range.
Liquefied natural gas volumes also were stable near 11Bcf/d.
On the weather front, the latest models cooled a bit but remained in a pattern biased to the warmer side of normal, according to Bespoke.
The price action is pointing towards the current low storage levels, and elevated summer temperatures in the US and Europe
Carbon dioxide emissions from the energy sector will increase 7% to 4.9 billion mt in 2021 given growing economic activity, according to the EIAs Short-Term Energy Outlook
The sectors emissions fell 11% in 2020.
With summer heat nearing what traditionally is the peak period this month, weather forecasts have once again become a driving force for gas markets
The American and European data each saw a difference of less than 2 cooling degree days (CDD) for the coming 15 days
Union Jack Oil* (AIM:UJO): Strong flow rates recorded at Wressle
Share Price: 34.8p, Market Cap: £34.4m
STRONG BUY – TP: 176p
Union Jack has confirmed that initial well test measured flow rates at Wressle (UJO 40% WI), under a restricted choke, have exceeded 500bopd which was the forecast rate following the proppant squeeze operation.
The Wressle-1 well is continuing to clean up and has not yet reached its optimum potential.
A further update will be provided once a stablised oil flow rate is established in the coming weeks.
Our take: A positive and welcome update from Union Jack. Wressle will boost the Company’s production profile and cash flow position once on commercial production, and today’s update reinforces the long-term potential in our view. With oil prices now enjoying a period of relative stability, first commercial oil at Wressle has come at an opportune time for Union Jack. In-depth modelling infers a break-even5oil price of c.US$17.62/bbl, highlighting the compelling project economics on offer at the project. In terms of cash generation, at current oil prices, annualised net revenues to Union Jack from Wressle could be in excess of US$4m. Further upside value drivers including the possible production of gas and electricity sales over and above that used on site, in addition to the c.50% increase in the Contingent Resource volumes within the Penistone Flags reservoir. We reiterate our STRONG BUY rating and 176p/share TP.
* SP Angel Acts as Nominated Advisor and Broker to Union Jack Oil
Research – Oil & Gas
Sam Wahab - 0203 470 0473 / 0784 385 5037
Richard Parlons – 020 3470 0472
Abigail Wayne – 020 3470 0534
Rob Rees – 020 3470 0535
Grant Barker – 020 3470 0471
Prince Frederick House
35-39 Maddox Street London
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
Sources of commodity prices
Oil Brent, WTI - ICE
Natural Gas -NYMEX
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