OIL AND NATURAL GAS PRICING SCENE - PART 2
Some OPEC States Ready For Further Oil Cut - Oman
Oman said on Tuesday that several OPEC states were prepared to propose an oil output cut when OPEC meets in November if world prices remained low.
"Kuwait and the rest of (the) OPEC members will once again propose additional production cuts if prices continue to drop," Oman's Oil and Gas Minister Mohammad bin Hamad bin Seif al-Ramhi told the official Kuwait News Agency (KUNA) in an interview.
Ramhi told KUNA that if prices improved in the coming weeks there would be no need for a third round of cuts this year.
But "there are OPEC states which are ready for further cuts to boost the market including Kuwait, Qatar, Iran and Algeria."
Non-OPEC Oman last month attended a meeting in Kuwait along with Iran, Algeria and the United Arab Emirates to discuss measures needed to boost world oil prices.
Ramhi expressed hope that oil producers would "adopt a new strategy to deal with the current crisis before OPEC's November meeting" when they gather in South Africa later this month for an international oil conference.
He said that an improvement in world oil prices "depends on a positive reaction from OPEC states in their next meeting."
He expressed the hope that Omani crude prices would reach $14-$15 a barrel "in the remaining months of this year", a rise of between $2-$3 a barrel.
Oman produces about 910,000 barrels per day (bpd).
The Gulf Arab state participated in previous rounds of production cuts this year which pledged to reduce supply to the market from OPEC and non-OPEC states by around three million bpd.
US Crude Outlook - Oversupply Turns Market Bearish
The U.S. crude oil market will feel the pressure of several ships of foreign oil heading to the U.S., particularly since U.S. demand for crude is not very strong, traders and analysts said on Wednesday, after the release of the latest U.S. inventory data.
"I think we are heading down. There is a significant upswing in (crude) imports," Ritterbusch said, pointing to a fleet of ships carrying Brent towards the U.S. market.
One U.S. trader is said to be bringing four Ultra Large Crude Carriers (ULCCs) of the light sweet European crude towards the Gulf Coast, while other traders are also said to be showing November Brent in the U.S. Gulf at discounts around 75 cents under December West Texas Intermediate. Each ULCC carries more than 300,000 tons, or more than two million barrels of crude.
While imports are said to be streaming in, few companies are keen to build stocks any higher given the relatively narrow "roll" between November and December prices of U.S. benchmark WTI.
"The roll is coming off at the moment, but you're not going to see anyone rushing to build stocks with this contango," said one Gulf Coast crude trader. November crude is now trading between 20-18 cents a barrel lower than December crude, not enough incentive to store barrels.
News of production disruptions in Nigeria is not proving especially supportive of crude markets, traders said, noting that there were still ample early November barrels and still some October barrels of West African crudes as yet unsold. A series of community disturbances in Nigeria have stopped one fifth of the country's production, but traders said they were still monitoring the situation.
The latest U.S. inventory figures released earlier this week are not much help either, and traders dismissed the odd figures, saying they reflected short-term disruptions caused by hurricane Georges. While the American Petroleum Institute (API) figures showed a sharp drawdown of 3.8 million barrels, the U.S. Department of Energy report showed a build of 2.7 million barrels in U.S. stocks of crude oil.
"The statistics were neutral to bearish," said Nizam Sharief of Hornsby & Co., adding that the the disparity in the weekly reports reflected the disruptions caused by hurricane Georges, the fourth storm to pound the Gulf of Mexico in as many weeks.
"In the very near term, we are going to drop below $15," Sharief predicted. The front-month November contract on the New York Mercantile Exchange settled 44 cents lower at $15.06 on Wednesday, and touched a low of $15.02 in intraday trading.
Analysts pointed bearishly to the relatively high product inventories, especially in distillate stocks, which include stocks of heating oil. While U.S. stocks of gasoline are 9.75 million barrels higher than last year's levels, those of distillates are 16.86 million barrels higher than last year.
On the demand side, the picture is also bearish in the short-term, since Sun's cuts of 177,000 barrel per day (bpd) at its two-refinery complex in Philadelphia, Pennsylvania are expected to continue until the end of the month. Similarly, Tosco's 110,000 bpd refinery in Bayway, New Jersey is not expected back up until the second half of October.
Also, the crude unit at British Petroleum's 250,000 bpd Belle Chase refinery in Louisiana still hasn't been brought back on stream after a fire broke out in the unit last week. The crude unit is expected to remain shut for another week or so, according to a company statement.
Expectations are that Chevron's Pascagoula refinery in Mississippi will be shut even longer after it suffered flooding when Hurricane Georges pounded the area late last month.
U.S. Product Outlook-Firm On Extended Outages
Extensive unplanned refinery shutdowns due to Hurricane Georges last week boosted U.S. Gulf Coast gasoline prices, and the rally is expected to continue as two major plants were affected, traders said on Monday. "Looking at the fundamentals as far as refining is concerned, the shutdowns will put more buyers in the market than anticipated,"a Gulf Coast trader said.
The hurricane which hit the Gulf Coast a week ago took down at least seven refineries in Louisiana and Mississippi. Five of them escaped any damage but the precautionary shutdowns took out around a week's worth of 928,000 barrel-per-day of production, traders said.
But what sent buyers into the market and prices soaring in "refining row", was the longer lasting mayhem the hurricane brought at Chevron Corp's <CHV.N> and BP's <BP.L> plant.
Hit by floods, Chevron's 295,000 bpd refinery at Pascagoula, Miss. had some five feet of silt and would take at least a month to begin its start up process, traders said.
More pessimistic sources said the plant will be shut until the end of the year but the company declined to comment on the duration of the shutdown.
Although largely unscathed by the hurricane, a fire broke out at BP's 250,000 bpd Alliance refinery at Belle Chasse, LA. during its start up process on Wednesday. It restarted its 100,000 bpd catalytic cracker and 37,800 bpd reformer and other secondary units on Sunday but its crude unit will remain shut for another seven to ten days.
"Chevron is quite a large producer on the Gulf Coast and I think it will keep the market supported," a trader said. "Gasoline will and can climb even higher...I wouldn't be surprised if the conventional gasoline will go into a premium...it is near enough."
Gasoline outright prices on the Gulf Coast rose nearly 3.00 cents per gallon last week to around 45.00 cents. Its differential to the NYMEX rose from a 3.75 cent discount to the NYMEX before the hurricane hit, to 0.25 cent premium on Monday.
With the cut in output, traders expected another drawdown in gasoline stocks which fell 1.8 million barrels to 21 million in the week ending Sept. 25 according to the American Petroleum Institute (API).
Both BP and Chevron were amongst the aggressive buyers seeking mainly the gasoline, jet fuel and low sulphur diesel.
But high stocks of heating oil capped any rallies in both the Gulf and the northeast, and prices in both hubs slipped by around 1.5 cents per gallon to around 40 cents per gallon.
The API reported weekly stocks grew 2.5 million barrels to 15.3 million, around 16.7 million higher than last year's build.
While an influx of Russian gas oil was also putting a lid on New York Harbor heating oil prices, gasoline arbitrage cargoes were also going to depress Harbor prices.
"Give it five to six days...then prices will be slaughtered," a trader said on the expected arrival of cargoes.
But other traders were more skeptical.
"There is a lot of talk of incoming cargoes but until I see them will I believe it. You won't be seeing these sort of premiums if the market wasn't tight," a trader said.
Harbor outright gasoline prices have actually fallen a quarter cent to around 45.60 cents per gallon, but reformulated grades differentials have risen by nearly 1.75 cents, climbing into a premium of around 1.25 cent to the NYMEX on Monday.
Conventional differentials on Monday also flipped to 0.25 cent over the NYMEX from a discount as low as 0.50 cent.
World Oil Stable On Nigeria, But Glut Persists
Enfeebled oil markets ticked higher on lengthening disruption to Nigerian output on Monday but crude futures ended lower, looking fragile without further producer willingness to curb supply, dealers said.
Brent crude futures closed at $13.11 a barrel -- 16 cents lower, and some $1.80 down from the start of the month after a rally from 10-year lows stalled at $14.90.
Dealers said Nigerian turmoil now in its second week and firmer world stock markets helped dull the impact of a gloomy demand outlook published last week by the International Energy Agency (IEA).
"The broad feeling is that better stock markets mean less recession and that means better than expected oil demand," said Christopher Bellew of Prudential Bache Securities.
Sharp gains on Asian stock markets and an early surge on Wall Street inspired European stock markets, sending shares soaring across the continent.
The equity gains helped counter the IEA's bearish view that oil prices battered by oversupply for almost a year would only recover when ailing Asian economies recover and restore once booming petroleum demand.
That forecast unleashed a 60-cent per barrel price slide last week.
"Oil came down too much last week and in view of today's stock market gains the dire demand predictions by the IEA may turn out to be exaggerated," Bellew said.
Markets have drawn strength from protests by Nigerian youths demanding greater political power and amenities in the Niger delta that have shut in more than a quarter of Nigeria's output.
But strong doubts remain about prospects for better prices.
Washington D.C.-based Petroleum Finance Company said it expected crude oversupply to persist this month in the United States, the world's largest oil market, with prices squeezed both by very high stock levels and particularly low demand.
More gloom came from a newsletter's estimation that Iranian exports grew sharply in September in violation of an agreement among OPEC and some non-OPEC members to restrict supply.
The Middle East Economic Survey said Iranian exports grew by 305,000 barrels per day (bpd), helping boost output by the Organisation of the Petroleum Exporting Countries (OPEC) and reduce its overall compliance with cut pledges.
At the weekend United Arab Emirates Oil Minister Obaid bin Saif al-Nasseri said that all options were open at the next OPEC meeting in Vienna in November to review low prices.
But he declined to say whether he backed further output cuts to support prices.
And in Beirut, an official of Venezuela's state oil company said his country would be hard pressed to undertake further output cuts to help the market if prices remained soft.
Jorge Zemella, managing director of Petroleos de Venezuela's (PDVSA) London office, said political and economic factors would make it difficult for Venezuela to reduce output.
Venezuela, fellow OPEC member Saudi Arabia and non-OPEC producer Mexico, orchestrated two rounds of oil producer output cuts earlier this year which together aim to remove three million barrels per day (BPD) from world markets.
Prices in dollars per barrel:
.........................................................Oct 12.......... Oct 9
.........................................................(close).........(close)
IPE November Brent........................$13.11.........$13.27
NYMEX November light crude........$14.41.........$14.58
North Sea Brent Drifts In Late U.S. Trade
North Sea Brent slipped a cent lower in late U.S. trading, dealers said Monday.
November Brent was valued at $13.10 a barrel after finishing the day at $13.11 a barrel on the International Petroleum Exchange in London.
Dealers said no full cargoes of November Brent changed hands in a slow start to the week, leaving only a few partial lot deals to define the market. A total of 500 lots changed hands in three separate deals at $13.10 a barrel.
Also, the Brent November-December spread traded at minus 28 cents in Monday's aftermarket, dealers said.
NYMEX Crude, Products End Lower On Dull Day
Crude oil futures ended lower in light trading Monday on the New York Mercantile Exchange (NYMEX), resuming the market's slide on bearish sentiment over brimming supplies.
There was little news to stir the market and a bank holiday in celebration of Columbus Day slowed the day's business, traders said.
"People were just getting ready for tomorrow, volume was very light and there was no hot news," said a NYMEX floor trader, noting that the market was awaiting the weekly U.S. inventory data from the American Petroleum Insttitute, due out late Tuesday.
The Department of Energy said its own inventory report, which it normally issues on Wednesday morning, will instead be released on Thursday at the usual 0900 EDT/1300 GMT.
Monday's session almost wiped out Friday's small gains, posted on a short-covering rally that's normal for end-of-the-trading-week business.
NYMEX November crude settled at $14.44 a barrel, down 14 cents from Friday. The contract traded between $14.54/$14.69 for most of the session, but slipped near the close to a session low of $14.41.
November heating oil fell 0.77 cent at 38.60 cents a gallon, just above its session low of 38.50 cents. The contract traded as high as 39.50 cents.
November gasoline lost 0.29 cent at 43.50 cents a gallon, trading between 43.40/43.95 cents.
Traders kept watch on news from Nigeria and Colombia, where domestic troubles are affecting oil produdction.
In Nigeria, protesting youths threated on Monday to escalate their attacks against multinational oil companies, after they succeeded in shutting down about a quarter of the country's 2.0 million barrels-per-day (bpd) oil production.
The youths are complaining that they do not see a fair share of the oil wealth pumped from beneath their land.
Royal Dutch/Shell Group said it resumed loadings at its Forcados terminal late on Friday after youths, who had occupied it, demanding compensation money, departed after negotiations.
But the Italian oil company, Agip, could not say when things would return to normal at their Brass terminal.
One trader noted that about half of Nigeria's output is exported to the U.S., but said that because of current oversupply, the Nigerian situation so far had little effect on NYMEX prices.
A public-sector strike in Colombia, including oil workers at the state-run oil company Ecopetrol, entered its sixth day on Monday after overnight clashes between demonstrators and riot police, according to union leaders.
The Colombian Labor Minister, Hernando Yepes had declared the strike illegal on Friday, but representatives of the 700,000 state employees said they would defy the ban and stay off the job indefinitely.
On the same day, soldiers took over the country's second largest oil refinery, operated by Ecopetrol in the Caribbean port city of Cartagena, after militant oil workers refused to let nonunion workers enter the complex.
U.S. Cash Crude - Sweet Crude Under More Pressure
U.S. cash crude prices slipped Monday, with the market's main light, sweet crude leading the way down on concerns about rising competition from foreign suppliers.
Light Louisiana Sweet/St. James started the day trading at 24 cents below West Texas Intermediate/Cushing, but later fell to a 30 cent discount to the benchmark. Cash crude traders said the fall was triggered by a widening spread between North Sea Brent and WTI prices, which could start another round of incremental imports of light, sweet crude moving from Europe to the U.S.
In New York, November futures prices settled 14 cents a barrel lower at $14.44 a barrel, while the December futures contract lost 12 cents to settle at $14.62 a barrel.
With an exchange-for-physical premium of three to four cents, U.S. crude benchmark West Texas Intermediate/Cushing was talked between $14.45 to $14.50 per barrel by the close of trade Monday.
Heavy Louisiana Sweet/Empire changed hands at 85 and 90 cents below WTI/Cushing, as refinery closures continued to leave it well-supplied on the Gulf Coast. Eugene Island was talked at -$1.15/-$1.05; West Texas Intermediate/Midland at -28/-25 cents; West Texas Sour/Midland changed hands at $1.45 and $1.43 a barrel below the benchmark.
Meanwhile, the sharp drop in LLS/St. James came even as exports from Nigerian continued to suffer from interruptions because of unrest in the area.
So far, protests have shut down about a quarter of the country's two million barrels per day of oil production.
U.S. Foreign Crude - Light Action On Columbus Day
The market for foreign crude oils into the United States was listless on Monday, joining the U.S. domestic side in light activity.
Many of the Latin American traders were not in their offices on Monday in observance of Columbus Day.
In Venezuela, the state-run oil company said that it is not likely to go for any more oil production cuts as long as the prices of oil are low.
"From both an economic and political point of view, I think it will be very difficult to implement additional cuts," said Jorge Zemella, managing director of Petroleos de Venezuela's (PDVSA) London office.
Zemella predicted that world oil prices will remain soft for another year.
In Nigeria, a fourth of the nation's oil output was blocked by protesters. The protesters, from the oil-rich Niger River Delta, say they don't benefit from the sale of oil from the region.
Oil production from the Ekofisk field in the North Sea off Norway was shut down Monday after a fire. Oil production is seen back a full capacity on Tuesday, said officials from Phillips Petroleum Co. <P.N>
A recent Reuters survey found that Norway's oil production fell by 845,000 barrels per day (bpd) in August to 2.4 million bpd. This was Norway's lowest monthly production in four years.
The dip was blamed in part on the switch from the Ekofisk to the Ekofisk II fields in the North Sea.
Production from the Ekofisk and surrounding regions was 167,000 bpd in August, down from 394,000 bpd in July.
Norweigan Gullfaks production fell by a third to 226,000 bpd in August. Production from the three Statfjord fields were down nearly 50% to 238,000 bpd.
Crude Oil Futures Steady In U.S ACCESS Trade
U.S. November crude oil futures held steady in fairly active after-hours trading on Monday and were little changed from their close on NYMEX.
At 8.30 pm EDT, the November crude contract was trading at $14.45 a barrel, a gain of one cent on its NYMEX close where it finished the session with a loss of 14 cents at $14.44.
Dealers said this indicated that the majority of operators did not want to see crude slip any further for the time being.
"We've had some decent size traded tonight...some of it is coming off the spread (against the December contract) and someof it is outright," said one dealer.
The December crude contract was trading at $14.63 a barrel, also one cent up on its NYMEX close.
Volumes in the heating oil and unleaded gasoline contracts were thin, though heating oil, which had taken the biggest tumble in percentage terms on NYMEX underwent a mild recovery.
The November heating oil contract closed 77 cents lower on NYMEX at 38.60 cents a gallon, but gained 15 cents to 38.75 in ACCESS trade.
Dealers said the stabilization of the crude contract on ACCESS, following its losses late in the NYMEX session, could pave the way for an attempt to reach higher levels on Tuesday.
"I think you'll see it open up at these levels and hopefully it will go higher from there," said one.
NYMEX Natural Gas Ends Down
NYMEX Hub natural gas futures ended mixed Monday in a lackluster session, with crumbling physical prices and mild weather forecasts this week continuing to weigh on the paper market, industry sources said.
November tumbled 10.2 cents to close at $2.089 per million British thermal units, very near the low of the day at $2.08. December settled 6.8 cents lower at $2.382. Other deferreds ended down by one-half to 5.6 cents.
"Physical prices are weighing like an anchor on futures, and as long as the weather stays mild and storage remains high, we're going to see more of the same," said one Midwest trader, noting cash was at a 40-cent discount to the screen today.
In addition, technical traders noted key support points were broken last week, further adding to the pressure.
Early injection estimates for Wednesday's weekly AGA storage report range from 40 bcf to 75 bcf. For the same week last year, stocks gained 77 bcf.
WSC expects normal to slightly below normal temperatures in the East this week. Midwest readings should range from normal to slightly above normal through Friday. Texas will range from normal to six degrees F above for the period. In the Southwest, early week temperatures will vary on either side of normal, then cool to three to six degrees below later in the week.
Chart traders agreed November's break of key support last week, including the 40-day moving average, turned the technical picture decidedly bearish, possibly projecting a move to the mid-$1.90s. But interim support was pegged first at the October expiration at $2.031 and then at $2.015. Interim resistance was seen at today's $2.16-2.18 gap and then in the $2.40 area. More selling was likely at the Oct 1 high of $2.53.
In the cash Monday, Gulf Coast swing quotes slipped six cents to the low-$1.70s. Midwest pipes were down a nickel to the mid-to-high $1.60s. Gas at the Chicago city gate was five cents lower in the high-$1.80s, while New York was talked in the mid-$1.90s, also down about a nickel. In the West, El Paso Permian was little changed in the low-to-mid $1.60s.
The NYMEX 12-month Henry Hub strip lost 2.6 cents to $2.242. NYMEX said an estimated 44,392 Hub contracts traded today, down from Friday's revised tally of 52,241.
U.S. Spot NatGas Prices Soften Early, Then Recover
U.S. spot natgas prices began Monday morning's trading lower but recovered slightly by nomination deadlines, weighed down early by bearish fundamentals like mild weather and ample storage supplies, sources said.
''It was a pretty crazy day. There was a really wide range in prices -- lower early, but then there was a squeeze at the end,'' one Midcontinent trader said.
Swing gas prices at Henry Hub dropped to $1.73-1.77 per mmBtu, down about four cents from Friday, with many deals reported done at $1.74-1.75.
Midcontinent prices were quoted widely at $1.64-1.73, while Chicago city-gate quotes softened by a similar amount to the high-$1.80s on average.
In west Texas, El Paso Permian prices slumped to a low of $1.60 early but bounced back to as high as $1.71 by late morning. Waha values were quoted at $1.63-1.72.
At the Southern California border, prices gained an average of seven cents to $2.03-2.12, and San Juan gas traded at $1.57-1.64, sources said.
On the East Coast, New York city gate prices were quoted mostly in the mid-$1.90s.
This week's forecast shows most temperatures close to normal, with temperatures in the Chicago area expected to hover between the 40s and 60s.
DIARY - Today In The Energy Markets - Oct 13
TUESDAY, OCTOBER 13
NEW YORK, UNITED NATIONS - Security Council briefed by executive chairman of U.N. Special Commission (UNSCOM), Richard Butler, on his latest report on disarming Iraq.
BUDVA, Montenegro - International seminar on natural gas and production technology (To October 17).
BUDAPEST - East European Refining Roundtable at Hilton Hotel. Organised by the World Refining Association.
VIENNA - Trading and Transportation of Oil and Gas in the CIS and adjoining markets conference sponsored by Le Boeuf, Lamb, Greene and MacRae, organised by the Adam Smith Institute
LUXEMBOURG - EU research ministers meet. Agenda includes: energy, environment and sustainable development; joint research in nuclear power.
AMSTERDAM - CoalTrans conference of world coal industry (Second day).
PHOENIX - National Mining Assoc.'s annual convention. (Second day).
BRUSSELS - Intertanko Brussels Tanker Event (Second day).
ABU DHABI - Abu Dhabi International Petroleum Exhibition and Conference (Third day).
ABU DHABI - Middle East Gas Summit '98 (Fourth day).
BEIRUT - 12th annual energy conference organised by APS Conferences (Final day).
LONDON - UK Competitive Electricity Market conference (Final day). |
