MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY APRIL 23, 1998 (3)
OIL & GAS
Oil Creeps Higher But Market Lacks Direction
LONDON, April 23 - Oil prices rose slightly on Thursday but the gains lacked conviction as traders scouted in vain for signs of the next big market move.
Benchmark Brent blend for June loading was trading at $14.15 a barrel at 14.54 GMT, up five cents over the day.
The rise was largely seen as a reaction to heavy losses on Wednesday when U.S. stock data painted a bearish picture for the enormous American gasoline market.
But they gave little clue about short term direction for oil markets which have drifted aimlessly through April.
Brent prices have scarcely ventured out of a range between $14 and $15 a barrel this month, taking a breather after a spell of extreme volatility in the first quarter of this year.
Brent sank to a nine-year low of barely $12 in March before regaining some life after a groundbreaking pact between OPEC and non-OPEC producers secured pledges to cut back at least 1.5 million barrels per day of output.
Oil traders -- sceptical after OPEC's history of pumping above quota levels -- are now scrutinising crude loading schedules to see if producers are actually sticking to their word.
''The market is searching for clear directional signals,'' said a report by London's Centre for Global Energy Studies (CGES).
''A price disaster has been averted, but OPEC should not become complacent, for it is not yet out of the woods,'' said the report.
Signs that yet another flare-up between Iraq and the United Nations over their weapons inspections could be in the offing are also figuring in traders' calculations.
The Iraqi leadership has warned of a ''new crisis'' if the United Nations does not soon complete its weapons inspections programme, a prerequisite for lifting the seven and a half year trade embargo on Iraq.
''The current round of oil-for-food exports ends in June and (Iraq President) Saddam Hussein may once again decide to disrupt oil exports,'' said the CGES report.
But numerous false alarms have diminished the bullish impact of Iraqi headlines. This has put extra emphasis on the U.S. gasoline market - which devours more than 10 percent of all world oil supply - as a pointer to renewed price rises.
The U.S. Department of Energy has said that this summer could see the biggest seasonal demand growth for a decade, at 2.8 percent.
But hopes of strong U.S. summer driving season were dampened by data from the American Petroleum Institute showing a steep 1.35 million barrel rise in gasoline stocks.
NYMEX Crude Drops Further On Gasoline's Weakness
NEW YORK, April 23 - NYMEX crude futures weakened, dragged down by gasoline's downslide Thursday on continued trade selling.
''There's very little support to the market now that we know there's an increase in inventories,'' said a NYMEX trader noting the latest weekly data showing builds in crude, gasoline and distillates. The market also dropped on Wednesday because of the bearish data.
NYMEX June crude closed down 35 cents at $15.19 a barrel as the front-month contract hit a low of $15.03, just a cent above last week's $15.02 low.
The front-month contract traded off lows, first at $15.30 after breaking below $15.40, and then $15.20, but recovered a bit after hitting the day's low at $15.03. It hit a high of $15.68 early, but quickly pulled back.
''We may be headed lower,'' the trader said, noting pressure on crude amid a continuing oversupply.
Another NYMEX trader said the high spread in the cash crude market may have been an influence in the market's drop on the day.
Lending credence to this was a report that a May/June spread was done at minus $1.85 on Thursday as the contango in the cash crude market reached at least a 10-year high, accoridng to a trader for a U.S. major oil company.
The minus $1.85 spread was done amid the lack of storage space at Cushing, Okla. On Tuesday, the American Petroleum Institute reported that PADD 2, a region that includes Cushing, had stockpiles of around 80 million barrels.
''In the last 10 years, it has not been this negative,'' the trader said, who added that the previous maximum was minus $1.50.
Gasoline continued to lose ground, with the May contract settling off 0.32 cent at 50.29 cents a gallon.
Gasoline's fortune has changed to bearish this week from bullish last week, after stocks inventory data showed a build of anywhere from 800,000 barrels to 1.351 million barrels. The lower figure is API's estimate, the larger one is by the Department of Energy.
Last week, gasoline rallied on a slew of refinery outage hitting half a dozen U.S. refineries.
May heating oil ended at 42.82 cents a gallon, off 0.22 cent, just a bit up from its low of 42.50 cents on the day. The contract was steady earlier in the day, climbing to a h igh of 43.50 cents, before going the way of gasoline and crude.
In London, June IPE Brent crude broke below its first line of support before recouping some of the losses at the close, but still looks technically weak with a potential to break lower in the coming days, brokers said.
June Brent closed down 12 cents at $14.00 a barrel after dipping earlier to a low of $13.84.
NYMEX May Natural Gas Ends Sharply Lower But Holds $2.30
NEW YORK, April 23 - NYMEX Hub natgas futures settled several cents lower Thursday after some early commodity fund selling dug a deeper retracement, industry sources said.
May finished seven cents lower at $2.328 per mmBtu after crashing early to a low of $2.30. Comparatively, May settled last Thursday at $2.479. June ended down 7.5 cents today at $2.368, while other deferred months in 1998 also settled about three to eight cents lower.
As a result, the 12-month strip fell five cents to $2.471.
Following the sharp retreat, technical ranges remained very tight into this afternoon, leading some traders to question whether the liquidation was over.
Although $2.33 was broken this morning, support at $2.30 held, leaving further support at $2.25, $2.21, $2.18 and the $2.135 low from March 16 untouched.
Resistance was still seen at the session high of $2.41, and then at previous support around $2.435, $2.48, $2.519, where the 14-day and 18-day trendlines meet, $2.53-2.54 and $2.585.
However, the 306 bcf storage surplus to year-ago inventories, as evidenced by the American Gas Association's weekly report, weighed heavily on the market. Sources noted that because of this factor more downside momentum was still possible.
The data showed a 54 bcf increase in gas stocks last week to 1,135 bcf, or 36 percent full. This pushed the year-on-year surplus to 306 bcf. In the East, 33 bcf of gas was injected, while the Producing Region showed a gain of 27 bcf. However, western stocks were off again by six bcf to 157 bcf.
Dwindling demand and a significant retracement in futures put heavy downward pressure on cash, with Henry Hub quoted late in the high-$2.20s. Midcontinent prices by late morning down in the low-$2.20s, while Chicago city-gate slumped into the low-$2.50s. New York city-gate gas prices followed a similar pattern to the low-$2.60s.
An estimated 124,516 Hub contracts traded, down from Wednesday's revised tally of 130,721. Open interest for April 22 slid 6,994 to 259,753.
Forecasts are calling for much above normal temperatures across much of the U.S. early next week, with warmer than normal weather expected to cover the western half of the U.S. through next week.
On KCBT, May settled seven cents lower at $2.23, while physical gas at Waha fell to about $2.30.
U.S. Spot Natural Gas Prices Dive Amid NYMEX Decline
NEW YORK, April 23 - U.S. spot natural gas prices plunged more than 10 cents Thursday following a sell-off in futures and a weak weather-related demand, industry sources said. Cash prices at Henry Hub plummeted to the mid-$2.30s per mmBtu following a sharp decline in futures over the last two days. Deals were reported done today anywhere from $2.28 to $2.40. These prices were down about 12 cents from week-ago levels.
In the Midcontinent, gas traded off an equal amount to the low-to-mid $2.20s. Chicago city-gate was pegged mostly in the low-$2.40s, though late deals were reported done as low as $2.31.
In the West, where cooler weather dampened demand, southern California border prices fell an average of 14 cents to the low-$2.50s.
Permian prices also turned weaker to about $2.20-2.25, while San Juan values similarly dropped to about $2.10.
In the Northeast, New York city-gate prices retreated with Gulf values to the low-$2.60s, and Appalachian values on Columbia were down an average of 17 cents to the high-$2.40s to about $2.50.
American Gas Association said Wednesday storage inventories rose 54 bcf last week to 36 percent of capacity, stretching the year-on-year surplus to 306 bcf.
Canadian Spot Natural Gas Prices Fall With NYMEX
NEW YORK, April 23 - Canadian spot natural gas prices continued to decline Thursday, flattened by the downward spiral on NYMEX and a weak weather-related demand, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.01-2.02 per gigajoule (GJ), down from C$2.22-2.23 on Wednesday, as temperatures in southern Alberta were forecast to hit a high of 20 degrees Celsius today.
May prices were talked at C$1.95-1.98, while summer business was reported done at C$1.92-1.95.
Also, one-year AECO was pegged lower at C$2.37.
Field receipts totaled about 12.3 billion cubic feet per day, though that number was expected to grow by this weekend when a number of small outages come to a close on NOVA's system, one Calgary-based trader said.
He said about 300-400 million cubic feet per day (mmcfd) of gas would likely return to the market.
Also, injections in the west on Wednesday tallied 355 mmcfd.
''Injections may rise to 700-800 (mmcfd) by this weekend when field receipts return,'' he added.
At the export points, Sumas prices followed Alberta values lower to the high-US$1.60s per million British thermal units (mmBtu), down about 20 cents from Wednesday.
Eastern export prices at Niagara fell about 22 cents to $2.41-2.50 per mmBtu as NYMEX's May contract dove to a low of $2.30.
References:
Charts: oilworld.com
NYMEX Reference quotewatch.com
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