Market Update & Important Indicators
Wall Street stocks have finished a buoyant week with a whimper, ending the session lower in a drop attributed to profit taking. The Dow Jones Industrial Average shed 60.59 points (0.34 per cent) at 17,824.29 on Friday. The broad-based S&P 500 lost 7.05 (0.34 per cent) at 2,055.47, while the tech-rich Nasdaq Composite Index declined 20.70 (0.43 per cent) to 4,744.40. The losses followed a strong jobs report that sent US stocks higher in the morning. The Labour Department said the US economy added 257,000 jobs in January, better than the 235,000 projected by analysts. The report included large upward revisions to jobs growth in November and December. Hourly wage growth gained 0.5 per cent, a big improvement after a December drop.
With anxiety over Greece still weighing on sentiment London's FTSE 100 slipped 0.18 per cent to 6,853.44 points, while in Paris the CAC 40 lost 0.26 per cent to 4,691.03 and Frankfurt's DAX 30 index shed 0.54 per cent to 10,846.39. Madrid's IBEX 35 managed a 0.36 per cent gain. The euro declined to $US1.1330 from $US1.1475 late in New York on Thursday.
Investors seemed to shrug off a clash between Greece's new finance minister and his German counterpart over renegotiating Athens' debt, and a strong rally on Wall Street provided support to most Asian markets. Tokyo stocks on Friday added 0.82 per cent, or 143.88 points, to close at 17,648.50 and Seoul gained 0.14 per cent, or 2.68 points, to 1,955.52 however, Shanghai sank 1.93 per cent, or 60.62 points, to 3,075.91 and Hong Kong slipped 0.35 per cent, or 86.10 points, to 24,679.39.
In Australia, the market on Friday notched up its longest ever rally, with a 12th straight day of gains coming on strength in the mining and energy sector. The benchmark S&P/ASX200 index was up 9.2 points, or 0.16 per cent, at 5,820.8. The broader All Ordinaries index was up 9.2 points, or 0.16 per cent, at 5,774.7. Reserve Bank of Australia governor Glenn Stevens is scheduled to give a speech at the RMB Clearing Bank launch ceremony in Sydney. Meanwhile, the ANZ job advertisements series for January is due out.
Oil prices have scored strong gains for a second day, helped by a surprisingly robust jobs report in the United States, the world's largest crude consumer. US benchmark West Texas Intermediate (WTI) for March delivery advanced $US1.21 (2.4 per cent) to settle at $US51.69 a barrel. Brent North Sea crude for March, the European benchmark, closed at $US57.80 a barrel, up $US1.23 (2.2 per cent) from Thursday's closing level. After several days of volatile trade in a market worried about ample supplies and slowing global economic growth, the two key futures contracts posted their best weekly performances since February 2011: WTI jumped 13.6 per cent and Brent added 9.4 per cent.
Metals on the LME were mixed up with of Tin, Copper & Aluminium falling 2.4%, 1.3% & 0.8% respectively. Gold, Platinum & Silver were all down with gold the biggest looser at 2.5% to US$1233/oz. The AUD/USD is trading at 0.776.
Thought for the day – What is Brent Crude?
Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation). The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.
Background
Originally Brent Crude was produced from the Brent oilfield. The name "Brent" comes from the naming policy of Shell UK Exploration and Production, operating on behalf of ExxonMobil and Royal Dutch Shell, which originally named all of its fields after birds (in this case the Brent Goose) But it is also an acronym for the formation layers of the oil field: Broom(oseBerg), Rannoch, Etive, Ness and Tarbert. Petroleum production from Europe, Africa and the Middle East flowing West tends to be priced relative to this oil, i.e. it forms a benchmark. However, large parts of Europe now receive their oil from Russia.
Characteristics
Brent blend is a light crude oil (LCO), though not as light as West Texas Intermediate (WTI). It contains approximately 0.37% of sulphur, classifying it as sweet crude, yet not as sweet as WTI. Brent is suitable for production of petrol and middle distillates. It is typically refined in Northwest Europe. Brent Crude has an API gravity of around 38.06 and a specific gravity of around 0.835.
Pricing differential: Brent v WTI
The price difference between Brent Crude and West Texas Intermediate narrowed in mid-2013 Monthly spot price of West Texas Intermediate in relation to the price of Brent Crude Historically price differences between Brent and other index crudes have been based on physical differences in crude oil specifications and short-term variations in supply and demand.
Prior to September 2010, there existed a typical price difference per barrel of between ±3 USD/bbl compared to WTI and OPEC Basket; however, since the autumn of 2010 Brent has been priced much higher than WTI, reaching a difference of more than $11 a barrel by the end of February 2011 (WTI: 104 USD/bbl, LCO: 116 USD/bbl). In February 2011 the divergence reached $16 during a supply glut, record stockpiles, at Cushing, Oklahoma before peaking at above $23 in August 2012. It has since (September 2012) decreased significantly to around $18 after refinery maintenance settled down and supply issues eased slightly.
Many reasons have been given for this widening divergence ranging from a speculative change away from WTI trading (although not supported by trading volumes), Dollar currency movements, regional demand variations, and even politics. The depletion of the North Sea oil fields is one explanation for the divergence in forward prices.
The US Energy Information Administration attributes the price spread between WTI and Brent to an oversupply of crude oil in the interior of North America (WTI price is set at Cushing, Oklahoma) caused by rapidly increasing oil production from Canadian oil sands and tight oil formations such as the Bakken Formation, Niobrara Formation, and Eagle Ford Formation.
Oil production in the interior of North America has exceeded the capacity of pipelines to carry it to markets on the Gulf Coast and east coast of North America; as a result, the oil price on the US and Canadian east coast and parts of the US Gulf Coast since 2011 has been set by the price of Brent Crude, while markets in the interior still follow the WTI price. Much U.S and Canadian crude oil from the interior is now shipped to the coast by railroad, which is much more expensive than pipeline.
In This Issue
Panoramic Resources (PAN)
Panoramic Resources (PAN) forecasts the cessation of mining from Deacon, the last significant grade and tonnage Reserve pod scheduled for mining from Lanfranchi, by June 30 2015. Exploration is ongoing and the recently discovered extension to the Schmitz orebody adds potential for life extension, however Argonaut forecast a hiatus in steady state production as orebody extensions are defined and developed. The Company maintains a strong balance sheet with $61m cash and minimal debt.
Recent Contacts & Presentations
Northern Star (NST), Doray Minerals (DRM), Troy Resources (TRY), Gold Road Resources (GOR), Saracen Mineral Holdings Limited (SAR), Beadell Resources Limited (BDR), Resolute Mining Limited (RSG), RTG Mining (RTG), Otto Energy Limited (OEL), Peninsula Energy Limited (PEN), Sandfire Resources NL (SFR), Atrum Coal (ATU), Empired (EPD), DTI Group (DTI), Austal (ASB), TFS Corporation (TFC), Pioneer Credit (PNC), IMF Bentham (IMF), Sino Gas & Energy (SEH)
Please read Argonaut's Important Disclaimers & disclosures
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