NYMEX Oil Review: Crude, Products Slip on Profit-Taking
By Melanie Lovatt
New York, March 7 (BridgeNews) - Following a choppy session where they hovered back and forth between positive and
negative territory, crude and products futures finally surrendered gains and succumbed to profit-taking. Players were
forced to take profits when the complex failed to see much of an extension to Wednesday's strong gains, said brokers.
Apr crude settled down 61 cents at $28.39 per barrel, Apr heating oil settled down 84 points at 73.30c per gallon and Apr
gasoline settled down 128 points at 90.36c per gallon.
"Crude sat at $29.15 for most of the afternoon and when they couldn't take it through its highs, profit-taking ensued,"
said one broker. Noting that heating oil and gasoline were mostly dragged lower by crude, but were also running into
resistance. Mid-session, Apr crude was able to claw its way to a 10-day high of $29.15, while Apr gasoline scraped its
way to a 92c, just managing to exceed Wednesday's one-month high of 91.90c. Apr heating oil made a three-day high of
74.90c.
Brokers said that they expected sessions ahead of the March 16 OPEC ministerial meeting in Vienna to see similar push and
pull action. Crude and products had slipped in early trade Thursday, but few appeared to want to short crude ahead of
the OPEC meeting, especially now that many are expecting a OPEC will announce a production cut.
Venezuelan President Hugo Chavez said Thursday that "it seems that there is a consensus" among OPEC nations to cut
output to keep oil prices in the desired $22-28 dollar per barrel range, but he declined to indicate how much OPEC would
reduce its production quota by (Story .19576).
"I think that OPEC is deathly afraid of an oil glut and their concern is that the economic slowdown will hurt oil demand,"
said Phil Flynn, senior market analyst at Alaron Trading. He expects OPEC to cut production by more than 1.0 million
barrels per day. Most estimates are however, leaning towards a 0.5 million bpd cut, although there appears to be
uncertainty in the marketplace. A Venezuela source said Thursday that the cuts will be more than 500,000 bpd and that
OPEC is eyeing a 1.0 million bpd cut.
Flynn noted that there is still concern about supplies, following the reports of the drawdowns in U.S. inventories earlier
this week. "The big picture is that with supplies tight conditions are still supportive," he noted.
Brokers also noted that concern over tensions between Palestinians and Israelis is worrying some energy pundits because
they fear other Arab nations could be dragged into the crisis.
Meanwhile, heating oil climbed midday as the Apr-May spread settled Wednesday at 98 points, which was "too cheap," in
the words of one broker. He said that the spread should have been closer to the 115-point level. "This strength in April
helped the whole complex," he noted, pointing out that forecasts for snow in the Northeast Friday is providing heating oil
with some support.
For gasoline, brokers said that it is expected to remain nervous until problems are sorted out at Tosco's Bayway, N.J.,
catcracker. The technical problems forced Tosco to buy up to 500,000 barrels of gasoline earlier this week in the cash
market and led to gasoline's sharp rally. Sources said that repairs at the refinery, which is still operating, are expected to
completed at the weekend.
OUTLOOK: Market attentions are now firmly focussed on what OPEC's going to do at its March 16 ministerial meeting in
Vienna. Players will be reluctant to sell ahead of the OPEC meeting, especially given most players are now anticipating an
output cut. In fact the consensus forecasts appear to be moving higher, which could help keep crude prices robust.
End
UPCOMING: --Apr crude futures expire March 20; options March 15. Apr products futures expire March 30; options March
27.
--IPE Apr Brent crude futures expire March 15, Apr options expire March 12.
--OPEC next meets March 16 in Vienna. |
