OIL AND NATURAL GAS PRICING SCENE - PART 2 WEDNESDAY AM 10/21/98
10/20 15:58 FOCUS-Oil greets winter with another price slide
LONDON, Oct 20 - World oil prices were back in the bargain basement on Tuesday after a severe slump on Monday which caught dealers by surprise.
London December futures for benchmark British Brent blend crude oil last traded down three cents at $12.36 a barrel at the close on London's International Petroleum EXchange.
Brent is now within a dollar of mid-August's 10-year low, in a market which has foiled the efforts of the major producing countries who this year sliced exports to raise prices.
"It must be very disappointing for producers to see the opening of the winter consuming season greeted by such a firm thumbs down from the market," said Peter Gignoux at Salomon Smith Barney.
"The depth of Monday's sell-off caught most people by surprise."
Bulging world oil inventories have eased from their summer peak but still remain well above year-ago levels. Nevertheless, oil's September recovery, which took Brent to $14.90 a month ago, had been expected to hold prices at steady or slightly higher levels into the northern hemisphere winter months.
Instead, said dealers, the investors who might have been attracted to buy oil futures in the approach to winter will view the latest price slump as a danger sign.
"Seasonality is thrown out of the window," said Gignoux.
For oil companies which welcomed the improved market in September the latest price retreat means bad news. Shares in Europe's two biggest oil companies, Royal Dutch/Shell <RD.AS> <SHEL.L> and British Petroleum <BP.L>, were downgraded on Monday by stockbrokers Dresdner Kleinwort Benson.
For besieged oil producers, who have already twice this year executed export reductions, it appears to be a case of back to the drawing board.
But analysts said the policy rifts which the exporters were able to overcome earlier in the year to agree some three million barrels a day of output cuts were beginning to reemerge.
While some Gulf oil nations like Kuwait are keen to embark on further supply reductions, key exporters like Saudi Arabia and its Latin American rivals in the U.S. market, Venezuela and Mexico, are not prepared to take further action.
"Clearly, the adverse effects of low oil prices are taking their toll on oil exporters, and domestic political consideration could start to take precedence over OPEC commitments," said Washington's Petrofinance in a report.
"I can't imagine the Saudis doing any more in the way of cuts without the Venezuelans and the Mexicans on board," said a senior oil trader in London. "And they've made clear they're not interested."
Oil prices remain low despite OPEC's good record of compliance with the 2.6 million barrels a day of output cuts its members have pledged.
Producers are expected to compare notes on the market in a week's time on the sidelines of an international energy conference in Cape Town, South Africa.
OPEC's main producers and non-OPEC suppliers Mexico and Norway will be represented at ministerial level in Cape Town.
10/20 16:35 NYMEX Nov exits on plus side, Dec ends off a penny
NEW YORK, Oct 20 - A combination of short covering on the outgoing November crude and buying of the incoming December crude pushed NYMEX oil prices higher at the close on Tuesday, traders said.
November crude, which expired at the end of the session, settled at $13.43 a barrel, gaining eight cents as it surged to positive territory about half an hour before the close.
The front month recovered from $13.07, a fresh contract low that it fell to following forecasts of another build in crude stocks, ahead of the American Petroleum Institute's weekly inventory report due out later Tuesday afternoon.
December crude ended at $13.52, down a penny but recovering from a $13.28 contract low that it hit in the afternoon. The contract traded as high as $13.70 in the flurry of buying near the close.
"There was some late unwinding of the November crude, but mostly crude activity focused on the December contract. It's hard to tell if the closing reflects the API forecast of a build, but overall, the market remains bearish," said a NYMEX floor trader.
November gasoline wiped out the day's losses and settled at 42.95 cents a gallon, up 0.87 cent. The contract traded as high as 43.05 cents. In the early going, the contract dipped to a session low of 41.75 cents.
November heating oil was marginally higher, ending at 37.75 cents a gallon, up 0.03 cent. The contract traded between 37.15/37.90 cents and moved along with crude.
In London, December Brent retraced most of its losses, ending narrowly lower, drawing support from late short covering in New York, traders said. The contract finished at $12.36, down three cents from Monday.
Ahead of the weekly API report, traders and analysts forecast a build of 4.125 million barrels in crude stocks for the week ended Oct. 16.
In a poll by Reuters, the forecasters said they based their prediction on rising imports and improved weather in the U.S. Gulf, allowing normal tanker offloadings at the Louisiana Offshore Oil Port.
But the build projection appeared not to include refineries coming out of turnaround.
The poll participants also predicted a small build of 800,000 barrels in distillates and 1.875 million barrels in gasoline. But forecasters noted that in gasoline, the build could easily turn into a small draw if demand increased to about 8.5 million barrels per day or higher.
They said demand at this point was not seasonally high although in the week ended Oct. 2, there was a surprise stockdraw of more than 7.0 million barrels implying a demand of 8.9 million barrels.
10/20 16:41 U.S. cash crudes trim gains, but still close up
NEW YORK, Oct 20 - U.S. cash crude differentials trimmed their gains toward the close of trade Tuesday, though prices were still pulled higher by a strong finish to the futures contract on the New York Mercantile Exchange (NYMEX). U.S. cash crude traders said that differentials for several grades, including West Texas Sour/Midland, climbed by as much as 15 cents a barrel thanks to a run of short covering early Tuesday afternoon.
But cash crudes subsequently handed back a bit of those gains, and most grades finished only slightly stronger than where they began the day.
Light Louisiana Sweet/St. James was one of the most volatile grades Tuesday, trading anywhere from 30 to 37 cents below West Texas Intermediate/Cushing, the cash crude benchmark. LLS/St. James closed at between 35 and 30 cents below the benchmark, several cents below Monday's value, traders said.
But its sister grade, Heavy Louisiana Sweet/Empire, appeared to rise in value. HLS/Empire was done as strong as 58 cents under WTI/Cushing.
Also stronger were West Texas Sour/Midland, West Texas Intermediate/Midland and WTI/Cushing postings plus.
WTS was done on Tuesday as strong as $1.44 under WTI/Cushing, but ended at $1.55 to $1.50 under WTI/Cushing.
Meanwhile, outright values for cash crudes were pulled higher by stronger front-month futures on the NYMEX.
The November contract, which expired at the end of Tuesday's session, settled up eight cents at $13.43 a barrel. The December contract settled a cent lower at $13.52, cutting the spread between months to less than 10 cents.
November WTI/Cushing will be used as a guide to cash crude prices through the week, with adjustments based on the movement of the December futures contract.
The narrow spread between months propped up postings-plus, which closed at $2.35 from $2.32 a barrel midday.
Eugene Island crude was done at minus $1.13 to the benchmark.
Many cash crude traders were also trading December barrels. LLS was said done at 22 cents under the December benchmark. WTS was reported done $1.53 under WTI/Cushing using December NYMEX as a jumping-off point.
Meanwhile, the American Petroleum Institute's (API) stock report will be released late Tuesday, and should help set the tone for the remainder of the week. A Reuters survey of oil analysts taken Tuesday morning showed that they expect the report to show a crude oil build of 4.2 million barrels, which could put additional pressure on prices. Last week, the API reported that crude oil stocks rose 8.2 million barrels, which caused an immediate dip in the domestic and international oil markets.
10/20 22:25 U.S. West Coast crude discounts flat in slow trade
LOS ANGELES, Oct 20 - U.S. West Coast spot crude oil differentials were flat Tuesday with trade slow to resume after an industry golf event.
With differentials unchanged, outright prices rose in line with slight gains for NYMEX oil futures.
The last deal for Alaska North Slope (ANS), the primary grade on the West Coast, was done Oct. 9 at a discount of $1.025 a barrel to the benchmark U.S. crude, West Texas Intermediate (WTI).
The notional price for West Coast ANS at the same discount climbed to $12.34/51 a barrel from $12.28/45.
No fresh trades were reported.
Several major oil firms cut their posted prices for West Coast crudes by 50 cents to 75 cents a barrel Monday, bringing their prices in line with a 80-cent slide in oil futures that day.
NYMEX natural gas ends higher with firm cash, weather
NEW YORK, Oct 20 - NYMEX Hub natural gas futures ended higher Tuesday in a fairly active session, with a sharp jump in cash amid much cooler weather forecasts this week driving the spot-November contract through key resistance, sources said.
November climbed 5.9 cents to close at $2.202 per million British thermal units after trading today between $2.145 and $2.215. December settled 6.3 cents higher at $2.483. Other deferreds ended up by one-half to 5.9 cents.
''The cash jumped today on the weather, and November settled above the gap (at $2.18), which was obviously bullish, but next week is going to be warmer than normal and storage is going to be near full,'' said one Midwest trader.
Despite improved technicals and some early cold, many remained skeptical of the upside, adding only a sustained bout of winter-like weather could spike prices much higher.
Injection estimates for Wednesday's weekly AGA inventory report range from 38 bcf to 65 bcf. For the same week last year, stocks gained 63 bcf.
WSC expects slightly above normal East Coast temperatures Tuesday to drop to as much as 16 degrees F below normal Thursday and Friday before moderating to just several degrees below normal by the weekend.
Cool Midwest readings of as much as 16 degrees below normal will climb to near normal by Saturday. Texas at midweek will dip to seven to 14 degrees below normal, then warm to near normal by Friday and Saturday. The Southwest will average two to 10 degrees below normal for the period.
While the NWS six- to 10-day forecast released late Tuesday called for normal to above normal U.S. temperatures, at least one private forecaster disagreed, expecting another push of cold air from Canada into the Midwest and East.
Chart traders said November's close today above the $2.16-2.18 gap likely signaled more upside, particularly with ACCESS trading tonight above the 40-day moving average in the $2.215 area. Next resistance was seen at $2.25, with further selling likely in the $2.40 area. Major support was still pegged at $2.03, with more buying expected at $2.015 and then in the mid-$1.90s, a measurement from last Monday's gap.
In the cash Tuesday, Gulf Coast swing quotes on average jumped 20 cents or more to the low-$1.90s. Midwest pipes scored similar gains to the $1.90-1.95 area. In the West, El Paso Permian firmed almost 20 cents to the low-$1.90s.
Gas at the Chicago city gate rallied another 15 cents to the mid-teens, while New York was more than 20 cents higher in the mid-to-high teens.
The NYMEX 12-month Henry Hub strip gained 2.8 cents to $2.289. NYMEX said an estimated 69,463 Hub contracts traded today, up from Monday's revised tally of 48,827.
Colder weather boosts U.S. spot natural gas prices
NEW YORK, Oct 20 - U.S. spot natural gas prices jumped an average of 20 cents Tuesday after this season's first spurt of cold weather triggered new buying, industry sources said.
Swing gas prices at Henry Hub rose about 21-22 cents to $1.94-1.96 per mmBtu, with deals reported done anywhere from $1.75 to $2.02.
In the Midcontinent, prices similarly gained another 21 cents to the low-$1.90s, while Chicago city-gate prices were quoted mostly at $2.15-2.17.
In west Texas, El Paso Permian gas traded widely at $1.82-1.955, with most business reported done near $1.90. Waha values were quoted at $1.88-1.95, and the San Juan market was seen at $1.82-1.93, with the bulk of the trades seen closing in the high-$1.80s.
The five-day outage on the San Juan lateral is scheduled to begin next Monday, affecting about 625 million cubic feet per day (mmcfd) of gas out of a total of 800 mmcfd. The San Juan lateral runs from Ignacio, Co., to Blanco, N.M.
On the East Coast, New York city gate prices followed Gulf values higher again to $2.17-2.23.
This price rally may be short-lived, sources said, as next week's forecast shows above-normal temperatures across most of the U.S., excluding the East and Gulf Coasts where seasonal weather is expected.
Canadian natural gas rises on border demand
NEW YORK, Oct 20 - Canadian spot natural gas prices continued to strengthen Tuesday, helped by a sustained heating demand from the U.S., less supply in Alberta and a firmer futures market, industry sources said.
Field receipts in Alberta as of Monday evening stood at 12.534 billion cubic feet per day.
Day prices at Alberta's AECO storage hub were quoted at C$2.57-2.64 per gigajoule (GJ), indicating a gain of about six cents from Monday.
For the rest of the month, prices were discussed at C$2.63-2.64, while November business was reported done about three to four cents higher at C$2.77-2.78.
In the export market, prices also moved higher. At the Sumas / Huntingdon export point, prices rose by about 10 cents to the low US$1.90s per million British thermal units (mmBtu).
In the East, Niagara prices were similarly talked higher at US$2.07-2.13 per mmBtu.
NYMEX's November contract jumped to a high of $2.215, up 7.2 cents, in Tuesday's session.
10/20 22:54 Crude oil futures rise in U.S ACCESS trade
LOS ANGELES, Oct 20 - U.S. December crude oil futures edged up from their NYMEX close in active after-hours trading on Tuesday.
By 1930 PDT, the new front-month December crude contract was trading at $13.58 a barrel, a gain of six cents from its NYMEX close where it finished one cent lower at $13.52.
Dealers said this indicated that traders wanted to buy crude after a surprising drop in U.S. supplies.
A weekly report, which gauges supply trends, showed an unexpected decrease of 290,000 barrels in crude oil.
Analysts surveyed by Reuters expected a gain of four million barrels in the report.
The declines signalled that traders should buy back futures in case inventory drops further.
"It's an initial reaction to API data," one dealer said. "People ... did a little buying," on ACCESS.
Volumes in crude oil were heavy, with 1,837 lots traded in all futures months, and 1,272 in the front-month.
November heating oil also traded actively, with 580 lots exchanged for all futures months. On ACCESS, heating oil rose 0.25 cent from its NYMEX close. Trader attributed the rise to a surprising fall in distillate inventories, with levels down by 2.4 million barrels. Traders had forecast stronger gains.
"Maybe we'll see a little support with shorts buying back tomorrow," a dealer said.
November unleaded gasoline eased 0.10 cent a gallon after rising to 42.95 cent on NYMEX trade.
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