MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, APRIL 14, 1998 (3)
OIL & GAS
Venezuelan PDVSA Sees Lower World Oil Demand In 98
BUENOS AIRES, April 14 - Venezuela's state-run oil firm Petroleos de Venezuela SA (PDVSA) sees global oil demand growing this year at a lower rate of 1.3 million barrels per day (bpd), its President Luis Giusti said Tuesday.
Addressing an oil forum in Argentina, Giusti said PDVSA was making its estimate based on the ongoing crisis in Asia and the warmest winter in 100 years.
''Some analysts are correcting their estimates and put it at 1.6 million bpd but this time we want to be more conservative and are estimating for this year growth of 1.3 million bpd,'' he said.
''Although lower than previously estimated, it still is good demand,'' Giusti said. ''Only two or three years ago we considered growth of 800,000 bpd important demand.''
Global oil demand had grown by 2.0 million bpd in 1996 and a similar amount in 1997, he said, adding that current global oil consumption stood at 75 million bpd.
For information on Argentine companies see (AR/EQIU).
Oil Subsides With No Relief Yet From Glut
LONDON, April 14 - Shaky world oil markets took another downward turn on Tuesday, frightened by the size of the glut in global supplies.
Benchmark Brent blend futures for May loading were 27 cents lower in early business at $13.73 a barrel.
Dealers said the weight of oversupply continued to dictate market direction in spite of the accord among world producers to remove excess oil.
Prices are now $2 a barrel lower than the peak of a short-lived rally after the March 22 pact was announced in Riyadh.
The pact should shave some 1.5 million barrels a day (bpd) from the 75 million bpd global market if pledges from 16 oil producers are met.
But dealers remain sceptical, preferring to wait for solid evidence of the reductions particularly from OPEC producers which have promised to remove 1.25 million bpd from their output.
Independent observers say that world oil output is running so high that even if the pledged cuts are met in full then markets could remain in trouble.
The International Energy Agency said on Friday that supply exceeded demand by a hefty 1.5 million bpd in the first quarter of the year, leaving stocks to build heavily when normally they are drawn down.
''Current supply exceeds demand and stocks are high, suggesting a continuation of a difficult market for producers,'' said the Paris-based agency in a monthly report.
The IEA said it had downgraded its estimate for winter demand among industrialised countries because of mild weather and a marked reduction in deliveries to South Korea.
Further bad news for oil producers emerged on Monday with the news that Iraq was planning to substantially raise UN-monitored oil exports in April.
The Middle East Economic Survey said that Iraqi exports under the UN's oil-for-food exchange were planned at 1.58 million bpd in April from 1.22 million in March.
Crude has lost a large portion of the gains established in a rally after the March 22 producers pact which took Brent to $15.82 a barrel.
NYMEX Crude Falls On Thin Trade, Awaits API Data
NEW YORK, April 14 - NYMEX crude fell on thin volume Tuesday as the market faced a dearth of news and awaited short-term direction from the American Petroleum Institute's stock inventory data.
NYMEX May crude lost 20 cents at $15.12 a barrel, just above the fresh $15.10 low, as the market wrestled with fears that the oil oversupply situation may linger on.
The front-month contract hit $15.60, the day's high, but quickly gave ground, breaking a minor resistance charted at $15.35-$15.40.
''There was very little going on for crude, everybody was just waiting on the sidelines,'' said a NYMEX floor trader.
May heating oil again followed crude's lead, dropping 0.27 cent at 42.54 cents a gallon but for the most part trading above its previous week's low of 42.20 cents and reaching a high of 42.90 on the day.
Traders gave a second look at reports on Monday of two medium-sized cat crackers of Phillips Petroleum and Shell Oil being idled for a week or so.
That served to support gasoline, which closed 0.23 cent higher at 50.05 cents a gallon.
''The refinery problems somehow helped gather support for gasoline,'' said a Refco Energy Group trader.
Along with that, the consensus among analysts and traders polled by Reuters is that the API data will show a draw in gasoline stocks of about 900,000 for the week ending April 10.
API's data, followed by the Department of Energy's more conclusive statistics released Wednesday morning, typically give the market a short-term lift or slide, depending on whether the inventory figures are bearish or not.
Last week, the market rose on gasoline draws in the API and DOE data, but pulled back on Thursday as the market settled down to the realization that there were big gasoline shipments expected in the next two weeks from Europe and turnaround of some facilities was adding to the already brimming stocks on storage.
The market plodded along on Monday, drifting downwards.
Meanwhile, Star Enterprise confirmed after the market closed that it shut a 100,000 bpd crude unit at its Convent Louisiana refinery due to a weekend fire.
A company spokesman said he had no estimate when the unit would be back up. The unit was taken down Sunday morning after it suffered a fire. The spokesman said the second 100,000 bpd crude unit at the plant was running normally.
U.S. Cash Crude - Short-Covering Strengthens WTS
NEW YORK, April 14 - West Texas Sour/Midland on Tuesday gained almost 10 cents in relation to the U.S. cash crude benchmark West Texas Intermediate/Cushing, traders said.
But with the 20-cent drop in the front-month futures contract, the outright price for WTS lost about 10 cents. Most other grades of U.S. crude on the cash market lost outright value in line with the NYMEX.
WTS firmness was caused by several contributing factors, traders said, including short-covering buyers. But the firmness is expected to be lived longer than a day because of of the emerging summer gasoline season, said a trader from a major U.S. oil company.
One trader said WTS differentials to WTI/Cushing should be up to around $2 shortly and go into the $1.90s after June becomes the front-month futures contract on the NYMEX.
''Is it going to go under -$1.80, probably not, but I definitely thing it's going to trade into the $2 range,'' said the trader.
Light Louisiana Sweet/St. James on Tuesday morning strengthened about five cents but by the end of the day was back to Monday's levels. It ended Tuesday talked in a -73 cent/-69 cent range.
It was done Tuesday morning at minus 70/69/68 to WTI/Cushing. But those trades, and they were said to be numerous, were all done before 1000 EDT/1400 GMT. By Tuesday afternoon, LLS was done as low as 73 cents under WTI/Cushing.
WTS was done at -$2.15/-$2.16/-$2.17/-$2.18/-$2.20. By the end of trading Tuesday, it was offered at $2.15 below WTI/Cushing and bid at -$2.19. The front-month NYMEX contract, May, closed down 20 cents at $15.12 per barrel.
WTI/Cushing was talked in a range of $15.18 to $15.24 per barrel.
WTI/Cushing postings-related plus was done at $1.94 and $1.95 over WTI/Cushing, which was a good guide for that crude's worth, traders said.
Heavy Louisiana Sweet/Empire was talked five cents stronger, and done at a $1.15 discount to WTI/Cushing. HLS was talked at -$1.15/-$1.10.
West Texas Intermediate/Midland was talked at minus 38/37 cents and done at -38 cents. Eugene Island crude was talked at minus $2.02 to minus $1.95.
Bonito Sour was talked -$1.75/-$1.65. Mars was talked at -$4.20/-$3.90 and Poseidon was in a range of - $4.70/-$4.20.
NYMEX Hub Natural Gas Ends Firmer In Lighter Volume
NEW YORK, April 14 - NYMEX Hub natural gas futures quietly ended higher Tuesday after some early shortcovering pumped May into the low-$2.50s.
But a waning open interest and mild weather forecasts bridled a sharper uptick, industry sources said.
May finished 2.2 cents higher at $2.501 per mmBtu. June settled up 1.9 cents at $2.533, while other deferred months through this autumn followed closely behind.
''We got range-bound between $2.50 and $2.52. We're outside the channel, and that could have ramifications,'' one trader said, noting basic shoulder month fundamentals were weighing on the market and would likely lead to some minor softening in Wednesday's session.
Futures still held a premium to cash prices, which fell an average of 10 cents today. Henry Hub was quoted at $2.43-2.45, while Midcontinent prices slipped to about $2.30-2.32. Appalachian values were also lower in the high-$2.50s, while New York city-gate was pegged in the mid-$2.60s.
Above-normal temperatures are expected to continue throughout much of the U.S. before cooling in the central U.S. on Thursday and Friday. Warmer-than-normal weather is forecast to remain in the Northeast into next week, while temperatures in the Southwest are expected to warm to seasonal levels by Friday, Weather Services Corp said.
Technically, traders said May resistance was still in the mid-$2.50s, and then at Monday's high of $2.635 and the $2.725 contract high. Support was seen at $2.465, and then at the double bottom at $2.33.
Separately, injection estimates for tomorrow's AGA storage report were plus three bcf to plus 50 bcf, versus a draw of 16 bcf a year ago.
The May KCBT contract settled up two cents at $2.395 per mmBtu.
US Spot Natural Gas prices Soften Early Despite Futures
NEW YORK, April 14 - U.S. spot natural gas prices were suppressed early Tuesday by mild weather, but storage demand surfaced late following NYMEX's recovery, industry sources said.
''Cash came out quite a bit lower, but as soon as the screen started coming up, storage buys began,'' one Midwest trader said, noting the higher-priced deals were reported done in late morning trade.
Stifling cash prices, however, were forecasts still calling for above-normal temperatures throughout much of the U.S. through midweek. Cooler weather is expected to seep into the Midwest on Thursday and Friday, Weather Services Corp said.
Henry Hub swing gas traded in the low-$2.40s early and the high-$2.40s late, indicating a daily loss of about nine cents.
Dragging cash higher prior to nomination deadlines was a recovery on NYMEX. May futures bounced into the low-$2.50s after dipping to a low of $2.465 on Monday.
Similarly in the Midcontinent, prices fell an average of six cents to the low-to-mid $2.30s.
Chicago city-gate gas began trading in the mid-$2.40s before stepping back up into the high-$2.40s, still off a few cents from yesterday.
In the West, southern California border prices eased only three cents to about $2.55-2.58 as scheduled maintenance on Pacific Gas Transmission's system kept supplies fairly tight.
Permian prices were quoted about seven cents lower at $2.25-2.28, while San Juan values slipped to $2.19-2.26.
In the Northeast, New York city-gate prices slipped into the mid-$2.60s, while above-normal temperatures in the region were expected to remain in the region into early next week. Appalachian values on Columbia were also lower in the mid-to-high $2.50s early and about $2.58-2.61 late.
Meanwhile, early estimates for Wednesday's American Gas Association storage report show that the gap to year-ago will likely widen. Estimates were showing an injection of three bcf to 50 bcf, versus a draw of 16 bcf a year ago.
Canadian Spot Natural Gas Prices Mostly Steady In West
NEW YORK, April 14 - Canadian spot natural gas prices remained fairly strong in Alberta Tuesday, supported by continuing tight supplies in the region, traders said.
Spot gas at the AECO storage hub in Alberta was quoted again at C$2.30-2.31 per gigajoule (GJ), while May business was reported done at C$2.25-2.27.
One-year prices at AECO were also quoted a little higher at C$2.48 per GJ.
Temperatures in southern Alberta are forecast to rise to a high of about eight degrees Celsius on Wednesday and Thursday, a Calgary based trader said.
At Sumas, Wash., export gas prices also held in the low-US$1.90s per million British thermal units (mmBtu) today due to a firm demand on the West Coast and scheduled maintenance on Pacific Gas Transmission's system.
The maintenance at Station 5, which is affecting about 200 million cubic feet per day, is expected to be completed Wednesday.
Gas for export at Niagara, however, fell another three cents to about US$2.59-2.60 per mmBtu in response to yesterday's sharp downward move on NYMEX and a waning demand in the region.
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