UK Oil

BP started a project in the U.K. North Sea that will restore production halted since 2013 and help double the company’s output in the area by the end of the decade.

BP and its partners budgeted 4.4 billion pounds ($5.7 billion) for the Quad 204 project, which involved building a new floating production and supply vessel and redeveloping the aging Schiehallion and Loyal fields. Output from Quad 204 will ramp up to 130,000 barrels of oil a day this year, the London-based company said in an emailed statement Monday.

The producer plans to double its U.K. North Sea output to 200,000 barrels of oil equivalent a day by 2020, the company said. Volumes from the region, one of the world’s most expensive areas for finding and extracting oil, have shrunk in the past decade as older fields deteriorated and exploration spending dropped with crude’s three-year decline. BP partner Royal Dutch Shell Plc said earlier this year that it was selling a majority of its North Sea positions.

Among those divestments, Shell agreed to reduce its interest in the Schiehallion field, where it owns a 55 percent stake, while BP has 33 percent and Siccar Point Energy 12 percent. Once the deal is completed, Shell will hold 45 percent.

The Schiehallion and Loyal fields stopped production in 2013 as the sites needed redevelopment, new wells, replacement of infrastructure on the sea bed and a new production vessel. The new ship, the Glen Loyal, is 36 percent owned by BP, which is the operator, 54 percent by Shell and 10 percent by Siccar Point. The partners intend to drill 20 new wells there.

BP’s shares rose as much as 0.8 percent and Shell’s B shares added as much as 0.7 percent in London trading, in line with the gain in the Stoxx Europe 600 Oil & Gas index.

Quad 204 is the third of seven new projects BP plans to start this year. The company will restore its total oil and natural-gas production to about 4 million barrels a day by the end of this decade, a level it was at before the disastrous Gulf of Mexico oil spill in 2010 forced it to sell a third of its assets, Chief Executive Officer Bob Dudley said May 17.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

Oil Bears

U.S. oil prices fell nearly 4 percent Wednesday, reaching a session low of $50.28 per barrel and marking their biggest daily percentage decline since early March, as inventories posted a less-than-expected decline for the week.

US Crude Futures closed the day down 3.76 percent, trading at $50.44 per barrel and hovering only slightly above the key $50 level, while Brent Crude futures dropped nearly $2.30 to trade around $52.70 a barrel.

Earlier on Wednesday, the U.S. Energy Information Administration (EIA) said U.S. crude stocks fell 1 million barrels on the week, a bit less than anticipated. A surprise build in gasoline inventories despite heavier refining activity, along with an increase in U.S. crude production, largely pushed prices lower.

“[Wednesday’s] crude drawdown was not as large as expected,” John Kilduff, founding partner at Again Capital, said in an interview Wednesday. “There was also a large jump in refinery capacity utilization ahead of the peak summer driving season. That’s weighing on the perception of the [EIA] report.”

“In other words, production of these refined products is expected to rise, increasing inventories.”

Kilduff also noted that U.S. daily production increased to 9.25 million barrels per day. “That’s another bearish sign for oil prices.”

The selling intensified into the close on some maneuvering by traders.

U.S. crude for May expires Thursday, and traders are dumping their oil contracts ahead of that, one analyst also noted.

“Some of the people who picked up contracts below $50 decided to run out ahead of expiration,” said Gene McGillian of Tradition Energy.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) has had a difficult time reducing a global crude glut, as supply remains high in parts of the world, particularly the U.S.

“There’s a lot of talk the (OPEC) agreement is going to be extended, but we have a full month to go before the (OPEC) talks are held,” McGillian added. “The market has a hard time sustaining itself within striking distance of the year’s highs.”

U.S. inventories now sit at 532.3 million barrels, only down about 3 million units from the record reached in March.

Energy stocks dragged the stock market down further Wednesday with the SPDR Energy ETF falling to its lowest level since November.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

Oil Market Movement

Oil’s plunge is bringing some excitement back into the market.

As futures in New York slipped to the lowest since OPEC’s output deal in November, options trading surged and signaled the biggest bias toward a price decline in six weeks. That’s a stark departure from last month, when the West Texas Intermediate benchmark traded at the narrowest price band since 2003.

Futures had been trading between about $50 and $55 a barrel this year as the Organization of Petroleum Exporting Countries and 11 other major producers implemented historic supply cuts to help rebalance the market. But shale producers aren’t helping. A drilling revival in regions like the Permian Basin of West Texas and southeastern New Mexico has pushed U.S. crude inventories to record highs, and production topped 9 million barrels a day.

WTI for April delivery slumped 2 percent to settle at $49.28 a barrel, the lowest level since November 29. On Wednesday, the U.S. benchmark broke below the 100-day moving average, a key technical level, also for the first time since late November. Futures are down 7.6 percent this week.

Options on WTI saw 570,934 lots traded as of 5:01 p.m. in New York, set for the second-highest volume ever, according to preliminary data compiled by Bloomberg. WTI crude futures volume was at about 1.57 million on Thursday, following 1.76 million on Wednesday. The most-active WTI options traded Thursday include April $50 calls, April $48 puts, April $51 calls, April $55 calls and April $47 puts.

For now we would say keep your powder dry but watch this space.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd