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Brent Crude Oil

Oil prices shake off API and EIA inventories data as US dollar weakens

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Crude continued its climb this week despite another increase in US oil stockpiles, which was revealed by reports from both the American Petroleum Institute (API) and US Energy Information Administration (EIA).

On Tuesday, inventories data from the API showed that oil stockpiles added just 421,000 barrels last week, while distillates, which include diesel and heating oil, fell by 1 million barrels and gasoline stocks shed 946,000 barrels. The increase in stockpiles was smaller than expected, however, EIA said on Wednesday that oil stockpiles increased by 2.9 million barrels, while gasoline inventories added 300,000 barrels and distillates dropped 1.1 million barrels.

Oil was supported by an improved demand outlook at the beginning of this week following a rally in European and Asian stock markets late in the previous week and bullish US jobless claims data that showed a steeper than expected decline of 14,000 in initial jobless claims to 442,000. The recovery in the commodity market, however, was stopped by the downward revision of US GDP growth in the final quarter of 2009 that was announced on Friday, showing a drop from 5.9% to 5.6%.

However, crude extended gains later in the week, getting more help from a weaker US dollar, which declined against the euro after the outlook for Europe’s debt crisis improved due to the agreement on a bailout deal for Greece reached at a recent EU summit. A successful bond issue by Greece to raise €5 billion further weakened the American currency to bolster crude prices.

A stronger greenback makes US dollar-denominated commodities such as crude more expensive for holders of other currencies.

Back on Wednesday, initial jobless claims for the previous week were shown to have decreased by 6,000. Non-farm payrolls data is due out in the US today.

In other news, OPEC (Organisation of Petroleum Exporting Countries) said that oil prices could stay within the current range of US$70-80/barrel for the next ten years. This week’s terrorist attacks in one of the world’s largest oil producers Russia also contributed to crude’s surge.

Despite the increase in crude prices, blue chip oil and gas producers were flat. BP (LSE: BP) was roughly unchanged from Monday’s levels, while fellow supermajor Shell (LSE: RDSB) posted a marginal decline. Cairn Energy (LSE: CNE) was unchanged from Monday, while Tullow Oil (LSE: TLW) and BG Group (LSE: BG) posted small gains.

Oil and gas engineering firms did better as both Petrofac (LSE: PFC) and Amec (LSE: AMEC) posted solid gains during the week.

May Brent Crude last traded at US$83.88/barrel, while US light, sweet crude reached US$85.20/barrel on the New York Mercantile Exchange (NYMEX).

Large and Mid Cap News

International engineering and project management firm, AMEC (LSE: AMEC) has announced its acquisition of Newcastle-based environmental engineering consultancy Entec for an initial cash payment of£61.2 million. The FTSE100 constituent bought the Entec from investment company Growth Capital Partners on a cash free/debt free basis and further payments may be made, subject to Entec’s performance.

Tullow Oil (TLW) announced that the Likonde-1 well, located onshore in the Lindi Block in the Ruvuma Basin of Southern Tanzania, has encountered thick sands with hydrocarbon shows.

International oil & gas facilities service provider Petrofac (LSE: PFC) said it has acquired metering services and systems specialist Stephen Gillespie Consultants Ltd (SGC) for an initial cash consideration of 2.1 million, with up to 1.4 million in performance-based payments over two years.

Small Cap Movers

Caza Oil & Gas (TSX: CAZ; AIM: CAZA) responded to lower gas prices by growing production and cutting expenses to bring down pretax losses for full year 2009, while shifting focus on its oil exploration projects.

The speculative Falkland Islands oil-exploration play suffered a considerable blow this morning after the Liz 14/19-1 well, drilled through a JV between Desire Petroleum (AIM: DES) and Rockhopper Exploration (AIM: RKH), returned disappointing results. The primary Liz target was encountered at around 2,550 metres, with indications of hydrocarbons while drilling, however subsequent logging operations have shown that whilst oil may be present in thin intervals, the reservoir quality is poor.

Xtract Energy (AIM: XTR) said its 50% owned Turkish subsidiary Extrem Energy  AS has extended its license over the Candarli Bay area in Turkey until October 2012 and hired a marketing firm to find a farm-out partner for the project, while preparing to production test the Sarikiz-3 well after identifying a number of promising levels via analysis of the wire-line logs and other well data.

Petroceltic International (AIM: PCI) said it has conditionally raised £81m through the placing of approximately 635m new shares at 12.75p each. The proceeds will be used to support the company’s appraisal programme in Algeria and also fund drilling in Italy.

In the year ended 31 December 2009, Gulfsands Petroleum (AIM: GPX) increased revenues by 57% to US$84.4m (FY08: US$53.6m), to turn a maiden net profit of US$27.8m compared to a loss of US$5.4m in the previous year. The company’s strong performance was driven by increased production in the Khurbet East oilfield in Syria. These strong results follows last week’s bid speculation after the company reported that it had rejected a preliminary approach, reportedly from two large Indian oil companies.

Solo Oil’s (AIM: SOLO) exploration partner in Tanzania, Tullow Oil (LSE: TLW), has drilled the Likonde-1 wildcat well to a total depth of 3,647m and the well encountered thick sands with hydrocarbon shows. Likonde-1 intersected two sandstone intervals of over 250m combined thickness with evidence of residual oil and gas.

Ascent Resources (AIM: AST) announces that drilling is currently underway on the PEN-106 well in the Penészlek area of the Nyírség exploration permits in eastern Hungary. Last month, the company began production from the nearby PEN-105 well, and once the PEN-106 drilling is completed the rig will return to PEN-101 to complete remedial work required to ready it for production.

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