Providence sees no reason for slump

A further sharp fall in its shares at one stage yesterday for Providence Resources prompted the owner of the Barryroe oil field to issue a statement to reassure investors that it is still in talks with partners “to farm out” or develop its major asset off the south coast.

The statement came on the day that world crude oil prices traded close to six-year lows, as fears of a supply glut continued to haunt markets.

Shares in Providence fell at one stage yesterday on the the Enterprise Securities Market in Dublin to 17.5c, down 7.9% from Friday’s close. The shares have now slumped by 84%, from 109c, since the start of the year.

That prompted the company to issue its statement saying it was “not aware of any specific reason for this decline”.

It said it has 330m barrels of oil equivalent in resources at Barryroe and Spanish Point, “and continues to focus on the delivery of its long-term, Irish-centric strategy, including the Barryroe farm-out process.”

Yesterday, world oil prices fell towards six-year lows as figures showing the economy of Japan, the world’s third-biggest oil consumer, contracted in the second quarter.

The global oversupply picture was exacerbated by another weekly jump in US oil rig additions last Friday, hinting at growing production, and news that Oman produced a record-breaking 1m barrels per day in July.

US West Texas Intermediate crude for September was trading 45c lower, at $42.05 a barrel, yesterday, close to its lowest in more than six years.

Brent futures for October briefly reached an intraday high of $49.44 a barrel on news that Kuwait’s 200,000-barrels-per-day Shuaiba refinery had shut following a fire.

The contract traded just below Friday’s close at $49.18 a barrel in afternoon trading.

Over the past two weeks, US crude prices have fallen by more than 10% on US supply concerns. Brent has fallen by around 4%.

Production by the Organisation of the Petroleum Exporting Countries is running well above demand, filling stockpiles worldwide.

Iran is expected to increase its oil exports once Western sanctions are lifted after ratification of a recent nuclear deal.

“The oversupply story remains well intact, which fuels the bearish sentiment,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

Adding to the negative picture was data showing Japan’s economy shrank.

“Oversupply, high stocks, and seasonal weaknesses are outweighing record demand growth,” said Société Générale analyst Michael Wittner.