16 November 2014
Oil prices have continued to be weak over recent weeks, albeit bouncing on Friday, having driven towards US$75 a barrel. The US is lifting its ban on crude oil exports and market participants have remained concerned what this will do for market prices. The threat of US oil production has been known so price reaction may be more muted once the restriction is removed unless further US supply increases are seen again. NZX listed company NZ Refining (NZR) gained nearly 13% after releasing information stating that its refining margins had continued to get better at US$7.54/barrel for the month and were the best since late 2012. The strong period has allowed NZR to repay all but $1.5m of the fee floor, a guaranteed minimum level of revenue, from the oil companies. Following industrial action a few weeks back the company also indicated agreement had been reached between itself and the unions reducing the risk of a strike. With refining margins recovering, industrial action less likely, the NZ dollar falling and their large refinery upgrade to come, that deliveries material margin uplift, many broker analysts think the company looks set to have a good few years.