Even we are slightly surprised by the lack of some sort of pullback after a tremendous runup. What’s going on?

Looking at it from a technical point of view, the shares are a little overheated. See

However, the volume remains high and the price refuses to buckle.

Basically, there are only two explanations for this:

• Short covering
• More people know what is going to happen

We believe it is likely to be a combination of both, basically. All the signs so far out of Antelope2 are very bullish. This, as both Raymond James and Morgan Stanley have recently argued, is de-risking the shares further, whilst further likely good news will put new horizons on the stock price.

So a combination of the unlikelihood of significant falls, and the possibility of much higher prices (for instance, if InterOil manages to get the oil at the bottom of the resource flowing) is what will have scared the shorts.

We stand by our earlier analysis of the near future, and we can add the rumor that MS and InterOil are going to do a roadshow for institutional investors shortly.

There is one possible event that especially plays to the imagination, the possibility of a commercial oil find. We know that at the bottom of Antelope, there is an oil zone (even the analyst paid by the shorts admitted to that). All that is needed is for that oil zone to meet more porous/permeable rock, so that it can flow in sufficient quantities.

Is that likely? Yes. In fact, it’s near inevitable. The most porous/permeable rock dips down from the center of Antelope, so it seems inevitable that it will intersect with the oil zone at some point. Read a petroleum engineer’s take on that earlier today.

With an underused (but nevertheless profitable) refinery on the island, and having to import crude from Singapore, it’s not hard to see what a commercial oil leg could do for the bottom line at InterOil. The refinery will turn into a real money spinner in a much shorter time-span, shareholders do not have to wait for the LNG facility (or even the PNG government approval of that project) to be build.

We do believe at least a temporary pullback will come, but with so many possible good news catalyst, the shares could very well keep running for quite a while.