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Oil posts weekly losses as EIA and API report higher inventories, energy stocks mixed

Crude prices followed other commodities, posting sharp falls on Friday after climbing for most of the week.

Crude rose early in the week ahead of OPEC’s (Organisation of Petroleum Exporting Countries) decision on supply quotas and the Federal Reserve’s policy meeting, which expectedly produced no changes to the currently ultra low interest rates. The Fed said that the strength of the ongoing economic recovery did not warrant a rate increase, while inflation was likely to stay at a low level and the job market was slow to recover. This was in line with the Fed’s repeated pledge to keep the rates exceptionally low for an extended period of time.

OPEC’s decision also failed to surprise anyone as the cartel made no changes to this year’s production levels. Prior to the meeting, Saudi oil minister Ali Naimi has said that the organisation would not allow the oil market put too much pressure on the prices. The current price of above US$80/barrel is believed to be comfortable to OPEC.

Last week, OPEC upped its demand forecast for the current year, projecting the global consumption to grow by an additional 0.9 mmbbls/d (million barrels per day) to 85.24 mmbbls/d provided that the ongoing economic recovery firms.

IEA (International Energy Agency) also revised its oil consumption forecast for 2010 upwards by 1.6 mmbbls/d to 86.6 mmbbls/d this year. The IEA also upped its global demand estimate for 2009 to 85 mmbbls/d.

Movements in the currency markets also factored in as the US dollar slid after the Fed’s announcement, making the dollar denominated crude cheaper for holders of other currencies to help the demand.

Oil prices declined later in the week after API (American Petroleum Institute) and EIA (Energy Information Administration) released their weekly inventory reports, showing yet more increased in crude stockpiles in the US. On Tuesday, API said crude inventories increased by 0.4 million barrels, while distillate and gasoline stockpiles dropped 3.7 million barrels and 0.7 million barrels. Thursday’s update from the EIA showed an increase of 1 million barrels in crude inventories for the previous week, while distillates including heating oil and gasoline stocks were down 1.5 million barrels and 1.7 million barrels respectively.

Crude fell on Friday as the US dollar firmed on a weaker euro, which was under pressure from renewed worries over Greece’s debt situation. The latest development in Greek fiscal crisis came yesterday when the debt laden country said that it was unlikely that it would receive aid from other euro zone countries and that it could turn to the IMF (International Monetary Fund) for help.

On Saturday, May Brent Crude stood at US$79.80/barrel, while US light, sweet crude dropped to US$80.68/barrel.

Blue chip oil producers climbed this week, with the exception of Tullow Oil (LSE: TLW), which raised £1 billion from its shareholders. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) posted weekly gains, as did fellow FTSE 100 constituents BG Group (LSE: BG) and Cairn Energy (LSE: CNE).

Oil and gas engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) were in decline during the week.

Large and Mid Cap News

Salamander Energy (LSE: SMDR) treated investors to a flurry of statement this morning, annioouncing it raised US$100m through a convertible bond and the expansion of its operation in Vietnam operations. The FTSE 250 constituent also reported full year results for the year ended 31 December 2009, which revealed a 42% increase in production, a 56% increase in revenue to US$157.1m and pretax losses narroeing substantially to US$3m from US$75.5m).

Nexen (TSX: NXY) and its partner Royal Dutch Shell (LSE: RDSB) have made a significant oil discovery in the Eastern Gulf of Mexico at Appomattox, in Mississippi Canyon blocks 391 and 392.

Small Cap News

Gulf Keystone Petroleum (AIM: GKP) has completed a fully subscribed placing of 20.9m new shares at a price of 76.5p per share, raising gross proceeds of approximately £16 million. The company said it intends to use the proceeds to fund its ongoing activities in Kurdistan, with a 2010 work campaign planned for the Shaikan and Sheikh Adi blocks.

Aurelian Oil & Gas PLC (AIM: AUL) said it appointed John Conlin as a non-executive director and chairman-elect.  It is intended that Conlin will become chairman at the company's annual general meeting, to be held in May, when David Prior will step down from the role while remaining as a non-executive director.

In a note to investors, London-based stockbroker Astaire Securities said that Ascent Resources’ (AIM: AST) diverse project portfolio enjoys access to established infrastructure and strong European gas pricing. The broker calculates Ascent’s total NAV of 14p per share, identifying considerable upside from the current market price of around 5.8p.

Range Resources (ASX: RRS; AIM: RRL) has announced an update on the company’s US Gulf Coast interests  following the successful connection of the Smith #1 well in Texas to the sales line late last month.

Aurelian Oil & Gas (AIM: AUL) said its strategy to test prospective areas in Bulgaria with minimal investment was on track after the company secured a zero-cost option over a new exploration license, called Provadia, while partner Sorgenia has exercised its farm-in option to drill on Aurelian's 30% owned B1-Goliza license.

Gulfsands Petroleum (AIM: GPX) confirmed it has rejected the preliminary approach  it announced earlier in the week regarding a possible offer for the company. Gulfsands said the board was unanimous in its view that the unsolicited approach was wholly inadequate and materially undervalues the company.

In a note on Nighthawk Energy (AIM: HAWK), London-based stockbroker Daniel Stewart highlighted a series of events in Nighthawk’s development, expected over the coming months. The first will be the interims, followed by other events, which in Daniel Stewart’s opinion, will go a long way to de-risking the company’s Jolly Ranch project in the US.

Disclosure: The author holds no positions in the company